I am beginning to see small signs the housing market is tightening up. Here is a move by Fannie Mae that will make condo loans harder to get. I highlighted the important stuff:
Fannie to tighten loan criteria for condos, refis
WASHINGTON – Oct. 4, 2012 – Starting Oct. 20, Fannie Mae will tighten some of its underwriting standards for condo buyers and homeowners who want to refinance. The changes have some in the industry concerned. The new guidelines were created to reduce Fannie Mae’s risk and force more borrowers to shop around for mortgages. Among the Oct. 20 changes:
• Condo buyers with less than a 20 percent downpayment must complete a two-page condo questionnaire about the homeowner association’s finance goals, as well as provide additional documents, such as a reserve study, by-laws and a copy of the master insurance policy. Currently, only condo buyers who put down less than 10 percent must produce the extra paperwork. Some analysts predict that the extra paperwork could lead to more loan denials under Fannie Mae’s strict condo loan underwriting criteria.
• Fannie Mae will end discretionary approvals or “Expanded Approvals” (EAs) for all Fannie Mae refinances, except for Fannie Mae’s Refi Plus Program loans or HARP loans. EAs were believed to help borderline borrowers qualify for a mortgage when they didn’t have a perfect combo of loan-to-value and debt-to-income ratios, creditworthiness and financial reserves, according to a Realty Times report.
• Self-employed borrowers also may face more hurdles in qualifying for a Fannie-backed mortgage. Fannie Mae will require self-employed borrowers to provide two consecutive years of federal tax returns instead of one, the current standard. Underwriters will base income on an average from the last two years of tax returns.
“Because of the new two-year average approach, one bad year out of two could sink a self-employed homeowner’s application even if the most recent year would have qualified him or her under the old rules,” San Jose, Calif., mortgage lender Shashank Shekhar writes.
Source: “Fannie Mae Tightens Underwriting Rules for Condo, Refinance Loans, Borderline Borrowers,” Realty Times (Oct. 3, 2012)
Fannie to tighten loan criteria for condos, refis
• Condo buyers with less than a 20 percent downpayment must complete a two-page condo questionnaire about the homeowner association’s finance goals, as well as provide additional documents, such as a reserve study, by-laws and a copy of the master insurance policy. Currently, only condo buyers who put down less than 10 percent must produce the extra paperwork. Some analysts predict that the extra paperwork could lead to more loan denials under Fannie Mae’s strict condo loan underwriting criteria.
• Fannie Mae will end discretionary approvals or “Expanded Approvals” (EAs) for all Fannie Mae refinances, except for Fannie Mae’s Refi Plus Program loans or HARP loans. EAs were believed to help borderline borrowers qualify for a mortgage when they didn’t have a perfect combo of loan-to-value and debt-to-income ratios, creditworthiness and financial reserves, according to a Realty Times report.
• Self-employed borrowers also may face more hurdles in qualifying for a Fannie-backed mortgage. Fannie Mae will require self-employed borrowers to provide two consecutive years of federal tax returns instead of one, the current standard. Underwriters will base income on an average from the last two years of tax returns.
“Because of the new two-year average approach, one bad year out of two could sink a self-employed homeowner’s application even if the most recent year would have qualified him or her under the old rules,” San Jose, Calif., mortgage lender Shashank Shekhar writes.
Source: “Fannie Mae Tightens Underwriting Rules for Condo, Refinance Loans, Borderline Borrowers,” Realty Times (Oct. 3, 2012)
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