New Conventional and FHA Guidelines

Here we go again! There are several more changes in the works in the mortgage pipeline.

Many lenders are making changes to FHA, Fannie Mae and Freddie Mac loans. Usually when one lender adopts one of these guidelines, they all follow.

CONVENTIONAL LOANS

We have several lenders who have stated that on any Freddie or Fannie loan with less than 20% down payment or equity they will only go to a DTI (debt Ratio) of 41%. This will result in a great many loans no longer being eligible for financing. With the size of the loans as well as the taxes and insurance today many borrowers will not qualify for conventional financing.
FHA

One lender has set the max DTI on FHA to 45-50. If the DTI is over 45 there will need to be a compensating factor.

We have one lender who will not take any loan if the borrower has a credit score under 660. FHA states the minimum is 620 but the lender says 660. Another lender will only take an FHA loan if the borrower has a credit score of at least 640.

If you read my last blog it stated how big the price adjustments are already for Fannie and Freddie loans if the borrowers credit score is under 740

NO CONSISTENCY

As you can see there is no consistency from one lender to another which makes it very difficult to foresee what is needed. This also very much applies to other underwriting parameters. What one lender accepts another lender will reject
This is the mortgage business in 2009

THE END OF MORTGAGE BROKERS?

The politicians in their infinite wisdom are in the process of trying to eliminate mortgage brokers altogether. Of course this will be a huge benefit to the banks with the big lobbyists and we all know what that means.

1st Metropolitan Mortgage saw the handwriting on the wall and that is why we are in the process of becoming a direct lender within the next several months. We will have our own in-house underwriters and this will also help in our turn around time.