Just when we think we might get settled into the Mortgage Changes; out comes something else. Of course I no longer have to worry about making sure I am up-to-date with the underwriting guidelines as some do, as I guess you could say that I am retired. At any rate all mortgage personnel and you who are interest in the mortgage changes can read my articles and blogs as I try to keep up with what is going on so that we are all informed. If you have been reading all the good stuff lately; you are aware that FHA, Fannie Mae and Freddie Mac have made drastic changes within the mortgage industry.
Well, just to let you know; it is not all bad and in fact most of it is for the good of the nation and future of Americans who want to live in a stable environment, once again. No, it isn't going to happen over night and there will be other problems that will surface as "life goes on."
I don't know how many people have realized that applying for a mortgage loan has really never been the easiest process. There have always been certain quality control methods in place; some prior to closing and some after. This means that each loan usually gets a verbal verification of employment to make sure the mortgage applicant is still employed when the loan closes. This is changing to make it the date closer to loan closing. Fannie Mae has issued another announcement to further explain this. Freddie will more than likely follow.
Previously FHA issued several letter to get everyone ready for the most important changes they have made for awhile. As you may have read; they will change the down-payment requirements based upon the credit score. This means that if the score is less than 580 (among other criteria) they will have to have a down-payment of 10%; instead of the 3.5% for higher scores. Please let me mention here, that some banks/lenders have their own minimum credit score. FHA has also raised the upfront MIP to 2.25% and the annual or monthly amount you pay to 1.50%. Just so that you understand; the upfront MIP is financed into you loan amount and you are paying interest on this amount. A full article is here. The 1.50% is a part of your payment each month.
Among these changes in Mortgage; there are numerous other guidelines regarding appraisal reviews, underwriting and due diligence/quality control. The investors are trying to make sure there are no loopholes in the process to set them up for failure again. To mention only a few of the major changes; Fannie Mae will no longer allow the expanded approval loans which carry a title of EA11 and EA111. These are the loans which helped put them over the edge in acquiring loans that did not meet the stricter guidelines. FNMA's minimum credit score is listed as 620 but this again will depend upon the strength of the file otherwise regarding, assets, income ratios and loan to value. Again, lenders have their own guidelines for minimum scores and some may be higher than this.
Bankruptcy and foreclosure guidelines have change with regard to new financing. If an applicant has a foreclosure date of more than 5 years but within 7 years; the down-payment must be 10% and a minimum credit score of 680. A second home or investment property will not be allowed.
Chapter 13 Bankruptcy: If an applicant has a discharged Chapter 13 within the last 24 months; dismissed within the last 48 months or filed but neither discharged nor dismissed within the last 48 months, present a cause to decline the loan. A dismissed bankruptcy means that a bankruptcy was started but dismissed by the borrower and not completed. There can be several reasons for this. This would have to be verified and an explanation given if there is dismissed bankruptcy and a discharged bankruptcy. A discharged bankruptcy of course means that the term of the chapter 13 has ended and the debts have been paid as agreed and completed.
I will try to give you changes as they come across my deskâ€¦Please note that if I miss the latest information; it is because I haven't seen it yet.