Saturday, November 20, 2010

New Fannie Mae Lending Guidelines

by Calculated Risk on 11/20/2010 02:14:00 PM

UPDATE: Good news. These are not seller-funded Down payment Assistance Programs (DAPs). From Fannie Mae:

Interested Party Contributions (IPCs) [include] ... funds that flow from an interested party through a third-party organization, including nonprofit entities, to the borrower ... Fannie Mae does not permit IPCs to be used to make the borrower’s down payment, meet financial reserve requirements, or meet minimum borrower contribution requirements.
Lynnley Browning at the NY Times mentions some of the changes: New Lending Guidelines From Fannie Mae
The rules, effective on Dec. 13, will allow buyers to use gifts and grants from nonprofit groups for their minimum 5 percent down payment, which is the threshold set by Fannie Mae, the government-owned company that sets lending standards and buys mortgages from lenders.
Fannie Mae is getting tougher on debt-to-income ratios, or the amount of a borrower’s gross monthly income that goes toward paying off all debts. The maximum ratio for those seeking a conventional mortgage will drop to 45 percent from 55 percent under the new guidelines.
But perhaps the toughest news from Fannie Mae concerns borrowers who have gone through foreclosure. They will be excluded from obtaining a Fannie-backed loan for seven years, up from four.
The lower back end debt-to-income (DTI) ratio makes sense. I'd prefer 31% for the front end DTI1 (the HAMP goal), and 40% for the back end DTI.

Hopefully I just missed it and Fannie has made it clear that the "gift" can't be from the seller.

1 Front end DTI includes Principal, Interest, Taxes and Insurance (PITI) plus any homeowners association fees. The back end DTI includes PITI and HOA, plus installment debt, alimony, 2nd liens, and other fixed payments.