Fannie, Freddie Tighten Some Mortgage Standards
Fannie Mae and Freddie Mac announced Tuesday that they’re offering several “loan processing flexibility” – but will also tighten other lending standards.
For example, the two government-sponsored enterprises are changing the date requirements for income and asset documentation required in processing loans that they purchase. All income and asset documentation must now be dated no more than 60 days from the date of the mortgage note. Previously, that was 120 days.
The change was “to ensure that the most up-to-date information is being considered to support the borrower’s ability to repay,” Fannie Mae said in a statement.
Fannie Mae and Freddie Mac also announced changes to income verification requirements for self-employed borrowers – one that is significantly tighter for reporting income than previously. A lender used to be able to verify a borrower with self-employed income no more than 120 days prior to the mortgage note date. That period has been moved up to just 10 days.
“Due to the impact the COVID-19 pandemic and the various social distancing measures implemented by different jurisdictions are having on many businesses across the country, sellers must now take additional steps to confirm that the borrower’s business is open and operating within 10 business days prior to the note date,” Freddie Mac wrote in its guidance.
The GSEs also made changes to their policies on stocks, stock options and mutual funds on how they can be considered as assets for a down payment or closing costs.
Fannie Mae and Freddie Mac said the new timelines and rules are temporary underwriting requirements that will be effective for mortgages with application dates starting on April 14 and ending on May 17.
On the flipside, Fannie Mae and Freddie Mac earlier announced some easier lending standards in several cases in light of the COVID-19 pandemic. They’re now permitting desktop appraisals on new construction loans, an expansion of the use of power of attorney and remote online notarizations, and a moratorium on evictions and foreclosures.
Freddie Mac offers seller guidance on its website.
Fannie Mae issues Lender Letters. One offers advice on changes for single-family home sellers; a second explains recent changes to appraisal requirements.
Source: Florida Realtors®
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