New Enhancements to FNMA Selling Guide

Here are again some new enhancements to the FNMA Selling Guide, which are already effective as of July 29.  I trust they will keep it coming! There is certainly more stuff to change! 🙂

Alimony Income is Getting a Face Lift:

 Lenders will now have the option of reducing the borrower’s monthly qualifying income by the amount of the monthly alimony payment in lieu of including it as a monthly payment in the calculation of the debt-to-income (DTI) ratio. Going forward, lenders may choose to use either option – reducing income or treating it as a debt – when qualifying borrowers.

Simplifying the Student Loan Guidance:

In April, Fannie simplified their policy and changed how to handle student loan payments on the credit report with a missing or $0 payment amount. That policy stated the lender could use either 1% of the outstanding balance, or a calculated payment that would fully amortize the loan based on the documented loan repayment terms.

With this update, we are further updating this policy and providing lenders with some additional options. If the lender obtains documentation to evidence the actual monthly payment is $0, the lender may qualify the borrower with the $0 payment as long as the $0 payment is associated with an income-driven repayment plan. This policy change is effective immediately.

Disputed Accounts:

The risk assessment and messaging for loan case files with disputed trade-lines will be simplified. DU will assess the loan considering any disputed trade-lines, and determine whether or not any investigation of the disputed trade-lines is required. The DU Underwriting Findings report will specify the steps the lender must take to investigate and document the disputed information, if required. The Selling Guide has been updated to reflect the details of the requirements.

(note: previously any “disputed” items on the credit report had to be rectified one way or the other, or abandoned, otherwise the loan was put in suspense)

Timeshare Accounts

Timeshare accounts may be identified in a borrower’s credit report as being installment debt or mortgage-related debt, depending on the individual timeshare. With this update of the Selling Guide, we are clarifying that timeshares are to be treated as installment loans rather than mortgage debt, even if they are identified as mortgage debt on the credit report

All the best,

Don