WASHINGTON, DC — Fannie Mae (FNMA/OTC) today issued Selling Guide Announcement SEL-2010-11, which clarifies that lenders are not required to obtain a second credit report just before loan closing. Rather, Fannie Mae is reminding lenders to have processes in place to facilitate borrower disclosure of changes in financial circumstances throughout the origination process.
"This is an important update, because every mortgage loan delivered to Fannie Mae has to be underwritten to establish that the borrower is able to repay the debt," said Deborah Slade-Horsey, Vice President for Single-Family Risk Policy. "Our primary objectives are to support borrowers' ability to sustain homeownership and to strike a reasonable balance between requirements that may reduce loan repurchases and requirements that might over-burden lenders' origination processes."
The updated policy reminds lenders that Fannie Mae expects them to have processes in place to facilitate borrower disclosure of changes in financial circumstances throughout the origination process. It also provides an expanded debt-to-income (DTI) ratio tolerance that will lead to fewer loans having to be re-underwritten.
Lenders will only be required to re-underwrite a loan after the initial underwriting decision has been made if the borrower discloses or the lender discovers changes that cause the debt-to-income (DTI) ratio to exceed 45% or to increase by 3 percentage points or more.