Danny Salas

Tighter Guideline Announcements From Fannie Mae

Harder To Qualify

Fannie Mae announced that it will tighten lending requirements for its interest-only loans (I.O.)and adjustable rate mortgages (ARM).  If a borrower wants an Interest Only mortgage through Fannie Mae, for example, he or she will have to make down payments of 30% of the sale price. For Adjustable Rate Mortgage’s, Fannie Mae will only buy those underwritten to ensure that borrowers could still afford payments even if their interest rates reset to the higher of either; 1) the loan’s initial interest rate plus two percentage points or, 2) the maximum the interest rate the loan can rise to, known in the industry as the cap rate.

Examples:

As an example, for a loan with a beginning rate of 5% and a cap rate of 9% borrowers would have to demonstrate they could still keep up payments even if the rate rose to 9%.   For an ARM with a fixed period (for example 5 years) any initial period with 5 years or less qualify at greater of note rate +2% or fully indexed rate, and I.O. loans will have a maximum LTV 70% and a minimum FICO of 720 with 24 months minimum reserves.

Bye-Bye Balloons

Loans With Balloon Payments

Balloon Loans, unless they receive special approval, are going away entirely with Fannie Mae. Fannie Mae is giving the industry some lead time:  All loans not meeting the new guidelines must be purchased as whole loans on or before August 31, 2010.

For More Info.

Fannie Mae’s News Release

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This entry was posted on Wednesday, May 5th, 2010 at 8:34 am and is filed under Chico Home Loans, Home Buying, Mortgage Industry Updates. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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