Fannie Mae will implement
a new version of its Desktop Underwriter (DU) after the weekend of March 13.
Version 11.0 apply to loan casefiles submitted on or after that date, but casefiles
created in the previous version.
The
changes in this release include modifications to DU risk assessment which Fannie
Mae says it regularly reviews and updates based on the latest market and loan
performance data. The new DU version "will include an updated risk assessment
that will finetune DU's ability to assess risk while fostering homeownership
sustainability." The company said it expects DU 11.0 to yield only minimal change
in the overall percentage of loan casefiles receiving an Approve/Eligible
recommendation, but each lender's results may vary depending on their overall
mix of business.
DU will continue to view loan casefiles as having
lower associated risk when the borrower's debt-to-income ratio (DTI ratio) is
low and will also evaluate the composition of the borrower's debt, specifically
looking at how revolving debts and student loan debts make up the borrower's
total monthly expenses. Borrowers whose
revolving debt makes up a smaller percentage of their monthly expense will
represent less risk, and borrowers with student loan debt will represent less
risk than those with only revolving debt.
DU will no longer view self-employment as representing
increased risk but will now evaluate the
composition of borrower income. Where borrowers' total annual income is made up
of a higher percentage of variable income such as overtime, commissions, and
bonuses, that income will be viewed as representing increased risk.
The
new version will not mandate any changes to other risk factors listed in the Selling
Guide's section B3-2-03.
DU Version 11.0 will also contain some changes which
bring it into alignment with the Selling Guide. It will no longer evaluate
a loan case file for eligibility for an appraisal waiver when rent from an
accessory unit is used for income qualification. This reflects the Selling
Guide's requirement that an appraisal must be ordered if rental income is used
to qualify, including income from an accessory unit.
The DU also contains an update to reflect Selling Guide Announcement SEL-2020-07 which
updated requirements related to the use of retirement, government annuity, and
pension income. Also, when a gift of equity is being used DU will check the
source. If it comes from one other than a relative or unmarried partner, the
loan casefile will receive an Ineligible recommendation.
Finally, with the release of DU
Version 11.0, DU Version 10.2 will be retired and resubmitted casefiles using
that version will no longer be accepted after the weekend of March 13, 2021. Customers
will be able to view online loan applications and DU Underwriting Findings
reports that were created under DU Version 10.2, but a new casefile must be
created and submitted to obtain an updated underwriting recommendation.