Both of the GSE’s continue to review and revamp their guidelines on a number of topics, today’s blog we will go over the changes that now make it easier for a non-occupant co-borrower to help out your borrower with Fannie.
In the past when you had to use a non-occupant co-borrower (going forward lets call this person the N.O.C.) the vast majority of those types of loans went to Freddie. This was due to the restriction that FNMA had which would not allow the income to be credited to the borrower to help them qualify. In other words, the borrower had to qualify on their own income when using Fannie Mae, but Fannie Mae did allow the boost of assets and credit to the borrower to help qualification. On the opposite end of the scale, Freddie Mac did allow the N.O.C.’s income to help out but had a restriction that the borrower must have 5% to contribute to the transaction unless the down payment was 20% or greater. In my years underwriting the bigger problem I have seen is the borrower needing a N.O.C. due to debt issues more than needing credit or asset boosts. Now with FNMA SEL 2015-10 this has opened up the market to borrowers who don’t have their own down payment AND maybe getting a gift or using the N.O.C.’s assets to qualify.
Fannie Mae SEL 2015-10 states that in an effort to simplify and provide greater access to credit DU will now consider the income and liabilities on all borrowers on the loan! Fannie further goes on to clarify that this rule change applies to all primary residences including 2-4 family properties. Bottom line this guideline change is easy, just add up all the income and all the debts for all borrowers and if the loan has a DTI of 45% or less (in most cases, some will approve higher, and some lower) run your loan with DU and see the new results. This is good news for your borrowers who may have had a DTI issue with nowhere to turn. If you are in sales I would recommend you go back and talk to some of the following people :
- New college graduates who were impacted by the stricter student loan payment 1% minimum rule
- Borrowers who just missed the mark due to a recent job change and were not able to use bonus, overtime, or commission income
- Self Employed borrowers who might have a down year in 2014-2013 who don’t want to wait for the 2015 tax’s to be filed
- Couples that may have had either spouse recently laid off (or downsized) and need income help to qualify
The changes keep rolling out here, we still have lots to review week by week on these blogs just to cover the changes in the last 90 days. So stay tuned next week as we discuss more news and provide clear explanations to the guideline changes. As a quick reminder to make sure you can qualify every possible borrower with the most accurate income and debt tool we invite you to check out Uberwriter! With the most recent version of Uber-Writer V1.4 you will be sure to get the most accurate income review for any borrower, all following exact agency guidelines to calculate income, we invite you to a free trial (no credit card needed) just come on over to www.uber-writer.com to see the tool.
Until next week…