Fannie Mae will be updating Desktop Underwriting (DU)
Fannie Mae will be updating Desktop Underwriting (DU) mid-August.
I have some news to share! Fannie Mae will be updating Desktop Underwriting (DU) mid-August. There are a few changes you should be aware of:
- Foreclosure Message Updates • We will be able to exclude inaccurate foreclosure information from the eligibility assessment. • We will be able to exclude foreclosures due to extenuating circumstances* from the eligibility assessment.
- Deed-in-Lieu of Foreclosure and Pre-Foreclosure Sale Message Updates • Waiting period requirement will be updated to 4 years; 2 years if caused by extenuating circumstances*. The loan to value (LTV) restrictions previously associated to different waiting periods will no longer apply.
- Mortgage Account Charge-Off Message Addition (New Policy) • Mortgage accounts that have been subject to a charge-off will require a 4-year waiting period; 2 or more years if charge-off was caused by extenuating circumstances*.
- 2014 Area Median Income Limits • DU will be updated to reflect the 2014 Area Median Incomes (AMIs) used to determine eligibility for MyCommunityMortgage loan. MSAs to determine the AMI will no longer be used. Limits will be applied only at the county-level.
*FNMA defines Extenuating Circumstances as “nonrecurring events that are beyond the borrower’s control that result in a sudden, significant, and prolonged reduction in income or a catastrophic increase in financial obligations”. Examples include but are not limited to serious illness, death of a wage earner, job layoff, etc. Extenuating Circumstances will be considered on a case-by-case basis.
Fannie Mae Underwriter Release Notes Version 9.1 –“Kinda” Clarifying Foreclosure Waiting Periods (Effective 8-16-14)
|Lenders have been put on “notice” by Fannie that they will be changing the waiting periods if someone has had a foreclosure, a pre-foreclosure or a mortgage charge-off in the past. However, they have not totally clarified how much will be required as a down payment, either. If you are working with someone who has had a past foreclosure, please contact me right away because it’s all subject to change on 8-16-14.|
- Foreclosure message updates
- Deed-in-lieu of foreclosure and preforeclosure sale message updates
- Charge-off policy message addition
- 2014 Area Median Income Limits
- Special Feature Code Retirement
- In a previous release DU was updated to allow lenders to instruct DU to disregard foreclosure information when the account was also reported as a deed-in-lieu of foreclosure or a preforeclosure sale.
- With this update, the lender will now be able to do this same thing in two additional situations, as shown below.
- a) Inaccurate foreclosure information – when a lender determines the information is inaccurate, they can now type “Confirmed CR FC Incorrect” in the explanation field for Question C in the declarations section of the online loan application and resubmit the loan casefile to DU. This will instruct DU not to consider the foreclosure in the eligibility assessment. DU will then issue a message to require the lender to show the event was completed over seven years ago, or that the account was not subject to a foreclosure.b) Foreclosures due to extenuating circumstances – with this release, a lender now has the ability to instruct DU to disregard foreclosure information when the lender confirms that the mortgage meets the applicable timeframes and eligibility for a foreclosure due to extenuating circumstances. This is accomplished again by typing “Confirmed CR FC EC” into the explanation field for Question C of the declarations section of the online loan application. Again, DU will issue a message to instruct the lender to document that the foreclosure was due to an extenuating circumstance and that the foreclosure occurred three or more years from the disbursement date of the new loan.
- Waiting periods for borrowers who have had a previous deed-in-lieu of foreclosure or preforeclosure sale will be updated to now require a four-year waiting period.
- A two-year waiting period will still be permitted when due to extenuating circumstances.
- The LTV restrictions that were tied to different waiting periods have been removed.
- Fannie Mae will provide more clarity on this topic in an upcoming Selling Guide update.
- This update will include a new policy that requires a four-year waiting period for a mortgage account that has been charged-off.
- When the credit report identifies a mortgage account with a ‘manner of payment code’ of 9, DU will issue a message for the lender to confirm the accuracy of the information.
- If the mortgage loan was subject to a charge-off, the four-year waiting period is measured from the completion of the charged-off mortgage account and the disbursement date of the new loan.
- When a lender can confirm that the charged-off mortgage account was due to extenuating circumstances, the waiting period may be reduced to two years from completion of charged-off account to disbursement of new loan.
- These income figures will be updated in the August 16, 2014 release.
- Special Feature Code (SFC) 214 will be retired with this update.
- Special Feature Code (SFC) 127 will now be used at delivery to identify all loans underwritten through DU.
- DU will be updated so that the HPML (higher priced mortgage loan) or HPCT (higher priced covered transaction) is not issued on investment property transactions.
- When a borrower had a previous bankruptcy, foreclosure, DIL of Foreclosure, or a preforeclosure, the messaging will be updated to make it clear that the presence of same does not impact the eligibility of the casefile; the same applies to a mortgage account that was subject to a charge-off.
- When DU identifies a bankruptcy, foreclosure, deed-in-lieu of foreclosure, preforeclosure sale, or mortgage charge-off, and it is up to the lender to determine if the waiting period has been met, then:
- a. DU will instruct the lender that the waiting period is measured from the disbursement date of the new loan, not the credit report date.
- On loan casefiles where DU measures the waiting period and uses that information in the eligibility assessment, the credit report date will continue to be used, as DU does not know the disbursement date of the new loan.
- a. For loan casefiles that will have met the waiting period requirement based on disbursement date, but not credit report date, the lender may pull a new report after the waiting period has elapsed in order to receive an Eligible recommendation.
Questions, Comments or For more information you can email Christian Penner at TheMortgageTeam@ChristianPenner.com or visit us online at www.ChristianPenner.com or you can call us directly at: 561-316-6800
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