Simply The Best Loans

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.

Hurricane Rita has come right on the heels of Katrina and much of the disaster area has been savaged again. Relief of all types is being offered by numerous charities, agencies, businesses and individuals. Fannie Mae, the largest underwriter of home mortgages, has announced their plan for assisting the hurricane victims and their families. The following is an excerpt of Fannie-Mae’s recent press-release from PRNewswire:

With Fannie Mae’s disaster relief provisions, lenders make individual case-by-case evaluations as to the appropriate relief measures needed and can help borrowers in several ways, including suspending mortgage payments for up to three months, reducing the payments for up to 18 months, or in more severe cases, creating longer loan payback plans. Such assistance is designed to meet the individual needs of borrowers.

“The gulf coast has been hit very hard by these two storms and homeowners in these areas will need assistance and flexibility as they face difficult and uncertain financial circumstances,” said Donald M. Remy, the Fannie Mae senior vice president and New Orleans native, who is coordinating the company’s response to the disaster. Fannie Mae’s business guidelines advise lenders to counsel borrowers on all possible mortgage payment work-out options, and to inform homeowners of disaster relief available from federal agencies. Payment relief is available for single-family mortgages (including condos) serviced by Fannie Mae lenders in areas affected by the hurricanes. Holders of Fannie Mae mortgage securities will be paid as usual during the relief period.

Mortgage lenders doing business with Fannie Mae will, according to Fannie Mae’s guidelines, determine appropriate relief steps by considering:

* any uninsured losses;

* extended unemployment; and

* extraordinary expenses related to the storms that affect a homeowner’s
ability to make their mortgage payments.

In addition, lenders are now required to temporarily discontinue reporting delinquencies to credit bureaus if they are aware that the borrower’s delinquency is attributed to hardships as a result of a natural disaster. If the servicer has any doubt about the effect of the disaster on the condition of a property or the borrower’s employment or income status, it should refrain from taking adverse action against the borrower until it can determine the true status.

For information on mortgage relief, homeowners who have experienced hardships should contact the lender to whom they send their monthly mortgage payment.

Katrina | Fannie Mae | Disaster Relief | Rita