New Fannie Mae Guidelines Allow Verification of Assets in Lieu of Income

Late Friday Fannie Mae gave borrowers
and lenders an alternative to documenting income for Refi Plus loans where
payment increases will be under 20 percent. 
Rather than requiring that at least one of the borrowers has a documented
source of income, Fannie Mae will now accept verification of liquid financial
reserves equal to at least 12 months of the new mortgage payment (PITIA).  Documentation can be through one or more
recent statement of liquid reserves in bank accounts, money markets, stock
accounts, retirement savings accounts, or certificates of deposit.  Fannie Mae is also providing streamlined
documentation requirements for other underwriting criteria for these loans.

Earlier this week Acting Director of the
Federal Housing Finance Agency (FHFA) released new requirements which granted relief
from reps and warrantees to lenders when a purchase money mortgage had
established a 36 month record of on-time payments or when Fannie Mae’s Refi
Plus and DU Refi Plus loans had established 12 months of on-time performance.  In this latest Selling Guide Announcement Fannie
Mae expanded this relief for both types of Refi Plus loans to include a
relaxing of appraisal rules.

Under the new guidelines, effective
immediately the lender is not required to make any representation or warranty
at to the value, marketability of condition of the subject property where a new
appraisal is obtained:

  • Lenders
    may deliver loans on properties with a condition rating of C6 and a quality
    rating of Q6 completed on an “as-is” basis with no requirement for the
    appraisal to be completed subject to completed repairs.
  • The
    lender is not responsible for the following requirements in the Selling Guide
    B4-1.1-01 General Information on Appraisal Requirements (Lender
    Responsibilities.)
  • Accuracy and completeness of the appraisal and
    its assessment of the marketability of the property;
  • Underwriting
    the completed appraisal report to determine whether the subject property
    presents adequate collateral for the mortgage;
  • Ensuring
    that the appraiser uses sound reasoning and provides evidence to support the
    methodology used for the opinion, particularly in cases not covered by Fannie
    Mae Guidelines;
  • Ensuring
    that the appraiser provides an accurate opinion, an adequately supported value,
    and an accurate description of the property.

Today’s release, which can be read in
its entirety here

also provides an alternative qualification method when a borrower is being
removed through refinancing, and streamlines verification of rental income for
investor owned properties.

It is expected that a similar set of
guidelines will be forthcoming from Freddie Mac.

Article source: http://www.mortgagenewsdaily.com/09142012_underwriting_standards.asp

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