During the weekend of December 12, 2009, Fannie Mae will implement Desktop Underwriter® (DU®) Version 8.0. This release will include changes to the DU credit risk assessment and a number of eligibility guidelines.
The changes included in this release will apply to new loan case files submitted to DU on or after the weekend of December 12, 2009. Loan case files created in DU Version 7.1 and resubmitted after the weekend of December 12 will continue to be underwritten through DU Version 7.1.
Some of the changes this enhancement will bring are as follows:
Total Expense Ratio
With this release, the maximum allowable total expense ratio in DU will be revised to 45 percent; with flexibilities offered up to 50 percent for certain loan case files with strong compensating factors.
If current debts exceed the maximum allowable total expense ratio, the loan case file will receive an Ineligible recommendation. DU will no longer return a Refer recommendation on loan case files that would have otherwise received an Approve recommendation but had exceeded the maximum allowable total expense ratio.
DU Refi Plus™ loan case files submitted to DU Version 8.0 will continue to be subject to the maximum allowable total expense ratio currently applied to DU Version 7.1 DU Refi Plus loan case files.
Minimum Credit Score Requirement
As stated in Announcement 09-29, Fannie Mae is modifying the minimum “representative” credit score requirement for all loans delivered to Fannie Mae to 620. With the exception of DU Refi Plus, loan case files that are underwritten through DU Version 8.0 with a minimum representative credit score below 620 will receive an Ineligible recommendation.
Revised Mortgage Insurance (MI) Coverage Level Requirements
As stated in Announcement 09-29, loans with a loan-to-value (LTV) ratio greater than 80 percent will now be subject to the following simplified MI coverage requirements.
Simplified Mortgage Insurance Options
Reduced MI and Lower-Cost MI will no longer be offered with DU Version 8.0;
Age of Credit Documents
The DU documentation expiration will be updated to reflect a credit report expiration of 90 days from the date of the credit report for purchase and refinance transactions, and 120 days from the date of the credit report for construction and construction-to-permanent transactions
Verification of Stocks, Bonds, Mutual Funds, and Retirement Accounts
The Verification messages issued when stocks, bonds, or mutual funds are entered on the application will be modified to remind customers that only 70 percent of the value of the account should be entered if such funds will be used as reserves. The message will also state that if the funds will be used for the down payment or closing costs, receipt of the funds realized from the sale or liquidation of the assets must be verified, and that stock options or non-vested restricted stock may not be used for reserves.
The Verification message issued when retirement funds are entered on the application will be modified to remind customers that only 60 percent of the value of the account should be entered if such funds will be used for reserves. The message will also state that if the funds will be used for the down payment or for closing costs, receipt of the funds realized from the sale or liquidation of the assets must be verified.
Retirement of DU Version 7.0
When DU Version 8.0 is implemented, DU Version 7.0, which went into production in June 2008, will be retired. Therefore, effective the weekend of December 12, 2009, customers will no longer be able to resubmit loan case files to Version 7.0; however, users will continue to be able to view the online loan applications and the DU Underwriting Findings reports that were created under Version 7.0. To obtain an updated underwriting recommendation after the weekend of December 12, the user must create a new loan case file and submit it to DU.
Outlined below are the two links for the announcements:
https://www.efanniemae.com/sf/guides/duguides/pdf/current/rndodu80.pdf
https://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2009/0929.pdf
Also provided are the FAQ’s some of which are as follows:
Why is Fannie Mae raising the minimum credit score to 620 for all loans delivered?
Raising the minimum credit score will support prudent risk management and better ensure sustainable homeownership.
Why is Fannie Mae lowering the maximum total expense (debt-to-income or DTI) ratio in DU?
The updates to the maximum allowable total expense (debt-to-income) ratio in DU to 45percent, with flexibilities up to 50 percent for certain loan case files with strong compensating factors, are designed to support sustainable homeownership for borrowers and to better align DU with Fannie Mae’s current manual underwriting requirement.
Because the DU credit risk assessment considers multiple risk factors when evaluating the overall risk of a loan, we elected to offer certain loan case files additional flexibilities to exceed 45 percent based on the overall risk of the transaction.
https://www.efanniemae.com/sf/guides/ssg/relatedsellinginfo/pdf/0929faqs.pdf
Wednesday, September 23, 2009
Friday, September 4, 2009
Employment Report and Interest Rates
Today’s employment report, BLS report here, weighed on interest rates. The 10 Yr Treasury closed at 3.44%, after being as low as 3.29% on Wednesday. Yields on the Treasuries may have put in an important short term low on Wednesday. Testing the July low in yields (3.26%), but failing to break below the July low in yield. Not a great sign at this point. I would submit that incrementally moving into a hedge against higher rates makes sense right now, see TBT at at 47.70 close….Technically, the 10 Yr T note is at the bottom of the Rsi range, closing at 35.03 on Wed, not below the official oversold point at 30.00, but it marks a divergence with the July lows. Higher low in price, lower low in momentum.
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