Effective June 1st- changes to Fannie Mae

GSE Fannie Mae has announced changes in their automated underwriting program effective 06/01/08 that will be making it more difficult to qualify borrowers. Although there is some good news. The "declining market" policy is being scrapped as of that date, to be replaced by a "National Down Payment Policy" that will allow some 95% and 97% loans. However, until the Mortgage Insurance companies agree to follow suit, we are still stuck in the status quo. To read the press release from Fannie Mae follow this link:

http://www.fanniemae.com/newsreleases/2008/4370.jhtml;jsessionid=2UKPM1NUU3VAJJ2FECISFGQ?p=Media&s=News+Releases

Some of the other changes are:

-Foreclosures will have to be 5 years old. Exceptions will be made down to three years but those files will have to be manually underwritten and thus receive none of the debt ratio relief from automated underwriting. For refinances, foreclosures will have to be 7 years old.

-All loans will have to have 580 or better credit scores except streamlined refinances or non-traditional credit manual underwrites.

-Debt to income ratios allowed are expected to be "more conservative". This can be huge!

In summary we will likely be getting better approvals from Freddie Mac until/unless the make similar changes. Unfortunately it does appear the credit market is still contracting. Thankfully we still have FHA and other government loan programs to pick up the slack.

Good luck all!