Updated Fannie Mae Guidelines And Changes On Conforming Loans

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This BLOG On Updated Fannie Mae Guidelines And Changes On Conforming Loans Was UPDATED And PUBLISHED On March 24th, 2020

As updated Fannie Mae guidelines and changes regarding compatible loans

Fannie Mae has made some recent changes to their guidelines.

There are three changes that will open up lending in the Fannie Mae Conforming Market
  • They account for a high market share of loans originated in the last ten years
  • The first change is when a buyer chooses to purchase an owner-occupied home while keeping their current home as a second home
  • The updated Fannie Mae Guidelines required they show six months reserves
  • Reserve requirements are both on the mortgage, and second on the home they still have
  • This made qualifying for homes difficult as some fell short of the amount verified
  • This was put in place during the financial crisis as many homeowners could not sell their current home due to lack of demand
  • Or they had  a tough time renting it out to cover the mortgage and taxes

Some even chose to let the old home go into foreclosure as they were buying a new one at a discounted price, in some cases in the other spouses’ name who was not on the current loan.

Second Change In Fannie Mae Guidelines

The second change with the new updated Fannie Mae Guidelines is the removal of proof a borrower is liquidating any retirement account or investments to secure down payment.
  • The process is and has always been challenging and time-consuming
  • They now need just to show proof they have the funds
  • The other calculation is a reversal of the old rule, which would only use 70% of the fund’s value
  • Should the mortgage loan borrower now have 20% or ore funds of what is necessary for the down payment, then they will not have to show proof of liquidation

They will receive 100% credit for the full value of the account, hence giving them ore assets than before per underwriter’s viewpoint.

Final Changes And Updates On Fannie Mae Guidelines

What are the final changes and updates of the Fannie Mae guidelines

The final change is currently unreimbursed employee expenses, otherwise known as 2106 expenses.
  • This pertains to the borrower having unreimbursed expenses as a W2, such as gas, food, etc. 
  • These items would traditionally reduce the borrower’s net income, hence making it harder to qualify for a mortgage
  • New rule: if the client receives bonus or overtime, so long as their salary is 75% of total income, and bonuses are 25% or less than this will not be counted against them
Fannie Mae is losing market share to FHA.
  • They also see the current market as safer, and will slowly increase risk tolerance
  • The changes will be slow
  • But expect more so long as the job market stabilizes and grows, and incomes begin to rise above inflation rates

About The Author: Ron Granado

This article was written and published by Ron Granado, an expert title officer with Plymouth Title Guaranty Corporation.  Ron Granado is an expert in all fields of real estate and has been an expert title officer for many years. Many real estate professionals such as real estate attorneys, realtors, and mortgage loan officers seek the expertise of Ron Granado.  Ron Granado is a guest writer and consultant for Gustan Cho Associates.

Ron Granado

Account Executive | Plymouth Title Guaranty Corp

1301 W. 22nd Street | Ste 505 | Oak Brook, IL 60523

630-300-3900

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