Written By: Frankie Lacy
In response to policy changes relating to the Ability to Repay and Qualified Mortgage regulations, Freddie Mac (LP) and Fannie Mae (DU) have made updates to their AUS systems. LP’s changes were made effective October 27, 2013 and DU’s changes will be effective November 16, 2013.
LP’s changes are focused on enhancing their feedback messages to become more loan specific. In the past, LP generated very broad income requirement messages around base, child support/alimony, variable, and self-employed income. Now, the feedback messages will be specific to the type of income submitted on the loan application. Previously, there was no feedback message for military, social security, foster care, and several other non-wage earner income sources. LP has enhanced its findings to include recommendations for documentation on all income sources.
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Freddie Mac’s goal with these enhancements is to exclude unnecessary verbiage on the feedback certificate. This will result in succinct, easy to read feedback messages on all loans. In addition, Freddie Mac is striving to include key requirements to provide better guidance for underwriters. When reading the Loan Prospector Underwriting Feedback Enhancements (see the link at the end of this article) click on the link to the pdf document entitled “new income feedback messages”. This is a comprehensive list of all the new verbiage and messaging LP will now include.
DU’s changes are more regulation focused with alterations that eliminate some loan programs and enhance documentation requirements. DU has a new LTV/CLTV/HCLTV ratio cap of 95%. Loans exceeding this maximum must be committed to Fannie Mae by 6/30/2014 and purchased by 7/31/14.
DU version 9.1 will retire interest only features, 40 year loan terms, and the Expanded Approval Recommendations. All loans will now only receive one of 5 recommendations:
• Approve/Eligible
• Approve/Ineligible
• Refer with Caution
• Out of Scope
• Error
In addition, DU Refi Plus findings will now contain a message stating “This loan casefile appears to meet the expanded risk assessment and eligibility guidelines offered on DU Refi Plus loan casefiles.”
DU will now issue a new message on all DU Refi Plus mortgages indicating the lender’s responsibility for determining higher-priced mortgage loan (HPML) status. If the loan falls within HPML limitations, a maximum DTI of 45% and minimum FICO score of 620 must be manually applied to the loan underwrite. In other words, DU cannot analyze HPML, so a manual overlay of DTI and FICO score limitations must be applied.
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DU has also clarified its inability to analyze the reporting dates on mortgages tradelines where deed-in-lieu of foreclosure (DIL) or preforeclosure sale (PFS) activity is present. If DU identifies a DIL or PFS tradeline on the credit report, a message will be issued requiring the lender to manually verify the accuracy of the information and the relevant dates. Lenders will be required to document that the event was completed two or more years from the credit report date.
Along the same lines, the following identifiers on the credit report will be considered foreclosure activity:
• Current MOP of “8”
• Maximum delinquency of “8”
• An “8” in the MOP history grid
• Any remarks code that indicates a foreclosure
For the full release notes for Fannie Mae’s and Freddie Mac’s updates, please see the following:
Loan Prospector Underwriting Feedback Enhancements>
Desktop Originator / Desktop Underwriter Release Notes Version 9.1>
About The Author
Frankie Lacy - As an active NAMP® member and a NAMU®-CMMU designee, Ms. Frankie Lacy is a 13-year mortgage industry veteran with extensive conventional mortgage underwriting experience. Frankie is also a mortgage instructor for Mortgage Underwriter University (www.MortgageUnderwriter.org). Topics of Frankie's expertise include: Fannie Mae, Freddie Mac, USDA Rural Housing, underwriting to investor overlays, self-employed borrowers, personal and business tax return analysis, rental income, condos/co-ops/PUDs, and more. Frankie is a Davenport University graduate with a degree in Business Administration. If you're interested in becoming a writer for NAMP®, please email us at: contact@mortgageprocessor.org.
