Fannie Mae changes help some, hurt some borrowers.

29 11 2010

Fannie Mae’s new lending guidelines, which will take effect Dec. 13, will make getting a mortgage easier for some borrowers and more difficult for others.

These new rules will allow buyers to use gifts and grants from nonprofit groups for their minimum 5 percent down payment. Freddie Mac is also considering similar new guidelines, according to spokesman Brad German. Borrowers previously were required to contribute a minimum 5 percent down payment from their own funds, with additional down payment money permitted from a gift.

At the same time, debt-to-income ratios will be lowered from 55% to 45% maximum.  Fannie Mae is also increasing its scrutiny of payment histories on revolving debt, and buyers who have missed a payment will have 5 percent of the total balance added to their ratios.

Borrowers who have gone through foreclosure will be excluded from obtaining a Fannie-backed loan for seven years, an increase from the previous limit of four years.

What do you think about the new changes?  Are they needed?  Or are they hurting borrowers and the economy?

For the full NYTimes article please click HERE.



2 responses

29 11 2010

I believe it will expecially hurt buyers in the lower end of the market. There may not be a lot of cash for down pmts and the 45% debt ratio will be a killer for some families that have good credit. Also, there are people out there that filed BK for legitimate reasons with today’s economy. They may recover rather quickly and have money but no credit. Due to not being able to provide a home for their families for seven years, maybe sticking with higher interest rates in this situation would be more fair to the buyer and lender. It would provide the buyer with a chance to lower their rate after 7yrs by refinancing.

30 11 2010

You’re right. I think the loans that are going onto investors’ books this year are some of the most airtight loans ever funded. The loan performance issues at this point are either mainly from old, sub-prime loans, or borrowers losing their jobs. We need increased employment to float our economy and our housing industry, not just making it tougher for those who have good credit and jobs to finance homes. I’m all for clean, well-underwritten loans, but we’ll be stuck in the same place until jobs bounce back.

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