Fannie Changes Make Borrowing Harder
Additional changes in underwriting guidelines apply to a borrower’s tax returns. As a result of “ongoing concern with fraud and misrepresentations” Fannie Mae is making new requirements concerning lenders obtaining transcripts of a borrower’s tax returns. The new guideline will require the lender to obtain written permission from the borrower, both at application and closing, to obtain the borrower’s tax transcripts to verify income documentation provided by the borrower with their loan application.
Verification of employment guidelines are also being made. Previously a lender, if underwriting a loan that has received an approve/eligible through DU, was required to obtain a verbal Verification of Employment (VOE) within 30 days of the closing date. Since many large corporations have complex and cumbersome Human Resource systems that can take up to 3 weeks to respond to a request for verification of employment, the new guidelines are going to present some serious issues since they require the VOE to be obtained by the lender not more than 10 days prior to closing.
Whether a borrower is applying for his/her first mortgage or fifth, the tightening of underwriting guidelines across the board are making lending more difficult. Borrowers with superior credit rating are not given any ‘exemptions’ from these underwriting guidelines. As the holidays approach and fears of recession continuing well into 2010, borrowers are left wondering if getting a new mortgage is even possible.
There have been numerous cases recently in my own experience where highly qualified borrowers were denied financing based on unreasonable guidelines or a lack of ‘common sense’ underwriting. When borrowers with superior credit and significant assets can not get financing due to lack of a common sense approach to underwriting then it’s safe to say those less qualified are doomed. If borrower’s from all walks of life are unable to buy homes, the economic recovery that everyone is desparately seeking will be a long time in coming.