FNMA Guidelines For Conventional Loans And Changes By FHFA

This BLOG On FNMA Guidelines For Conventional Loans And Changes By CFPB Was UPDATED And PUBLISHED On November 21st, 2019

There are FNMA Guidelines Changes for mortgage loan borrowers for Conventional Loans.

• Fannie Mae and Freddie Mac are the two mortgage giants in the United States that set mortgage requirements for Conventional Loans
• Conventional mortgage borrowers need to meet the minimum Fannie Mae and/or Freddie Mac mortgage standards in order to qualify
• Conventional mortgages are also called Conforming Loans
• This is because they need to conform to the Fannie Mac and/or Freddie Mac Lending Standards
• Conventional Loan Guidelines changes without notice
• Just because a borrower thinks they qualify for a Conventional Loan at one time does not mean that they will qualify at a later date
• There have been Guidelines Changes recently by the FHFA, the regulatory agency that monitors Fannie Mae and Freddie Mac
• We will cover those changes on this blog
• There have been changes to Conventional Loan Foreclosure Waiting Period

In this article, we will cover and discuss FNMA Guidelines Changes and updated agency guidelines on conventional loans.

Wait Period On FHA Versus Conventional Loan Foreclosure Waiting Period

All mortgage programs have a mandatory waiting period to qualify for a mortgage loan after a borrower has had a prior bankruptcy, foreclosure, deed in lieu of foreclosure, and short sale.

• FHA requires borrowers to wait two years from the discharged date of a Chapter 7 Bankruptcy in order to qualify for FHA Home Loans
• There is no mandatory waiting period to qualify for an FHA Loan after a Chapter 13 Bankruptcy discharged date
• However, if the Chapter 13 has not been seasoned for two years after the Chapter 13 discharge date, then it needs to be manually underwritten
• There is a two-year waiting period to qualify for a conventional home loan after Chapter 13 discharged date
• There is a three year mandatory waiting period to qualify for a FHA Loan after the recorded date of a foreclosure and/or deed in lieu of foreclosure
• There is a three-year mandatory waiting period to qualify for a FHA Loan after the date of a short sale
• FHA requires the same mandatory waiting period of three years after foreclosure, deed in lieu of foreclosure, and short sale
• Conventional Loans are different
• Fannie Mae and Freddie Mac have separate waiting periods after foreclosure and deed in lieu of foreclosure and/or short sale

Foreclosure Guidelines For Conventional Loans With Prior Mortgage Included In Bankruptcy

Another groundbreaking Fannie Mae change is new foreclosure guidelines for conventional loans with prior mortgage part of bankruptcy .

• With the new FNMA Guidelines, there is a four-year waiting period after a Chapter 7 Bankruptcy discharged date to qualify for a Conventional Loan if borrowers had mortgage included in Chapter 7 Bankruptcy
• Per foreclosure guidelines for conventional loans, if the mortgage was included in Chapter 7 Bankruptcy and the foreclosure was recorded at a later date after the discharge Chapter 7, they can qualify
• As long as the deed of the property has been transferred out of name at a later date, the four-year waiting period time clock starts from the date of Chapter 7 discharged date
• This is different on FHA Loans
• FHA Loans, if the mortgage was included part of Chapter 7 Bankruptcy, then there is a three year mandatory waiting period from the recorded date of the foreclosure after the Chapter 7 discharge date
• If the deed of the property has not been recorded three-year after the Chapter 7 Bankruptcy discharged date, then the three-year waiting period will start from the recorded date of the foreclosure
• This new FNMA Guidelines on the waiting period on having a mortgage included in Chapter 7 Bankruptcy opens up many doors for borrowers
• With mortgage included in Chapter 7, borrowers who cannot qualify for an FHA loan can qualify for Conventional Loans
• Conventional guidelines apply with regards to credit scores, debt to income ratios, and other conforming lending requirements

FNMA Guidelines On Qualifying For Conventional Loans After A Housing Event

There are major changes with the waiting period after deed in lieu of foreclosure and short sale with the new FNMA Guidelines.

• Before, a borrower can qualify for a Conventional Loan after two years out of a deed in lieu of foreclosure or short sale with 20% down payment
• However, this rule is no longer in effect and under the FNMA Guidelines
• There is a four year waiting period after a deed in lieu of foreclosure and/or short sale to qualify for a Conventional Loan
• The good news is that a borrower can qualify with a 5% down payment on a home purchase after a deed in lieu of foreclosure and/or short sale after meeting the 4 year mandatory waiting period
• This is the new rule instead of the old FNMA guidelines after two year waiting period after deed in lieu or short sale where 20% down payment was required

FNMA Guidelines On FHFA Increases Conforming Loan Limits

The Federal Housing Finance Agency (FHFA) is the government regulatory agency that regulates Fannie Mae and Freddie Mac. The FHFA has increase conforming loan limits to $484,350 due to rising home prices nationwide. The increase of conforming loan limits by the FHFA was the second increase two years in a row. Rising mortgage rates did not make a dent in the increase and demand of home prices. There seems to be a major imbalance of demand versus supply. Homes are selling like hotcakes and there are not too much inventory. Home Builders are having record revenues and growth despite the highest mortgage rates in 10 years.

Chapter 13 Guidelines On Conventional Loans

As stated earlier, borrowers who had a Chapter 13 Bankruptcy discharge can qualify for a Conventional Loan two years after a Chapter 13 Bankruptcy discharged date as long as they meet all other Fannie Mae and/or Freddie Mac mortgage guidelines.

If you had prior credit issues and are looking for a Conventional mortgage lender with no overlays, please contact us at Gustan Cho Associates at 800-900-8569 or email me at gcho@gustancho.com. Text us for faster response. My staff and I are available 7 days a week to take borrowers phone calls or email inquiries and answer any questions they may have.