Fannie Mae increases credit requirements
Fannie Mae has increased the minimum borrower credit score from 580 to 620. Brian Faith, a spokesperson at Fannie, confirmed the minimum hike, adding that the adjustment reflects a careful analysis of borrowers ability to repay their mortgage obligations over the life of the loan. Our experience with recently delivered loans with credit scores below 620 is that they reached a level of serious delinquency at a rate approximately nine times higher than other acquisitions during the same period, Faith said in a statement. Fannie also reduced the allowable debt-to-income (DTI) ratio to 45% when executing loss mitigation efforts under the Home Affordable Modification Program (HAMP). Under HAMP, the US Treasury Department provides allocated capped incentives to servicers for the modification of loans on the verge of foreclosure. Faith said that high DTI ratio loans also have higher levels of serious delinquency. Its not enough to help borrowers buy a home w
e must also ensure that they can stay in the home over the long term, Faith said.
Eric, This is going to be hard coded into DU now.... but the 620 was already there since no lenders would do a conventional loan below 620 anyway. The 45 can be pushed to 50 where there are STRONG compensating factors. But NOT 50.01... I am guessing 49.99 with Huge reserves, Little to no payement shock and high credit scores.
This all just cracks me in one regard....it's like the snowball rolling down the hill...and it just keeps getting bigger and bigger.
I will say, all these tightening of rules REALLY means you need to have buyers pre-approved before they go out looking.
Like the Buyer I am working with right now...just did not tell the loan officer he was laid off twice in the past two years (union, so they say he's still "employed") which now makes his income all wacky....thank goodness that he has a REALTOR that negotiated a longer financing window and does not have any money on the table...as the table might get pulled out from under us...we await word from Underwriting!
Oh the love of real estate!
Eric - Thank you for spreading the word on this.
I agree with Wendy - spreading the word is the key. I am re-blogging this one in an attempt to get the word spreading. Thanks,