Monday Morning Mortgages ~ Sonoma County Home Loans Newsletter for Real Estate Professionals
Monday Morning Mortgages is a brief week-opening report on mortgages in our area. This is a tool to assist my realty partners on loan trends, rates, program changes, and problem solutions.
Current rates available at https://www.sonomacountyhomeloans.com
Fannie Mae Upcoming Changes to DTI
Fannie Mae manages the automated underwriting system called DU (Desktop Underwriter). This is the system that loan officers use to run a potential borrower's financial data to achieve a pre-approval. In the past, total expense ratios (debt compared to income or DTI) could go as high as 69% and still get an approval. To go over 55%, the system is acknowledging some compensating factors such as reserves and credit history. The old FHA limit used to be 43% to give some perspective here. Many lenders have put their own "overlays" on DTIs. For example, Sierra Pacific Mortgage will not take a loan over 50% DTI even though DU gives the loan an approve rating. But many other lenders available to brokers will accept whatever the DU system accepts. I like those lenders. Big changes are upcoming to how Fannie Mae approves a loan.
Here is the link to live Fannie Mae Guidelines: https://www.efanniemae.com/sf/guides/ssg/sg/pdf/sg0309.pdf
Well, December 12, 2009 Fannie Mae will usher in a major change in the new DU version 8.0. Fannie Mae is now limiting the DTI to 50%. This change will make for more conservative lending, but also make it difficult for borrowers with non-traditional income to get approved. One of the hardest sectors to get approvals seems to be retirees. Although they can have sizeable investment income and enough assets to buy the property outright, the lending industry is gun shy of stock portfolio values and income. This is in reaction to the volatility in the market in the last 18 months.
Another Fannie Mae change will also make 620 FICO the absolute maximum. Only 60% of retirement account funds can be used on an application, and 70% of stock, bonds or mutual funds. If an asset will be liquidated for downpayment, this will have to be done and documented prior to underwriting approval.
Other news...
Loan-Mods-R-Us Fees
Among the real estate legislation signed into law 2 weeks ago by Governor Schwarzenegger is Senate Bill 94 banning foreclosure and modification companies from collecting any fees prior to completion of the services contracted. That means no non-refundable deposits.
New Laws
Unless you are living under a rock (where I will admit I sometimes spend my weekends) you know it is now a felony to commit loan fraud on a mortgage loan application punishable by 1 year in prison (SB 239). And AB 957 eliminates buyers from being forced to use those Escrow and Title companies selected by the RE) banks and assets managers. Finally! That was a nightmare. They just do things DIFFERENTLY in Southern California...
Rates
The 10-year Treasury note hit 3.5% this morning before setting down to 3.48%. This is an indication of slowing rising rates for the past couple of days. The Fed's mortgage backed securities purchase program, which many mortgage bankers believe is still the only thing keeping mortgage rates as low as they are, still has the capability to absorb close to $15 billion a week through the end of the first quarter of 2010.
Today's Rates (see current days throughout the day with APR calculations at
