Desktop Originator/Desktop Underwriter Release Notes

DU Version 7.1 April Update

February 4, 2009

During the weekend of April 4, 2009, Fannie Mae will update Desktop Underwriter® (DU®) Version 7.1 to implement the following enhancement and policy change:

DU Refi PlusTM, which will leverage DU to extend underwriting flexibilities, including expanded eligibility criteria and reduced documentation requirements, on eligible loan casefiles for borrowers who are refinancing an existing Fannie Mae loan.

Updated Property Fieldwork Requirements, for purchase transactions where the transaction is the result of the sale of a real estate owned (REO) property, or the last transaction on the property being purchased was a foreclosure.

What do you think of these changes?

Hard to say until we see some results back from the new submissions.  I remain less than impressed based on their other moves over the new year.

sounds vaguely reminiscent of Wells Conforming Streamline from several months ago.

I'll look for the email.

one nice thing about vista is the search indexer.  aka, i found it quickly.  Below is from Mid-December:

A.: GENERAL REQUIREMENTS (10/06/08)

Streamlined refinances are refinance mortgages originated for the purpose of an interest rate reduction, or a monthly payment reduction, with special eligibility and reduced documentation requirements.

Eligibility Requirements

Loans that meet the following requirements are eligible for streamlined refinance documentation:

Wells Fargo Broker Guides (101369) / Prime Broker Guide / CONVENTIONAL UNDERWRITING / SECTION 400: ELIGIBLE TRANSACTIONS / SECTION 415: STREAMLINED REFINANCE TRANSACTIONS - LTV/CLTV <= 90% (10/06/08) / B.: DOCUMENTATION REQUIREMENTS (10/06/08)

B.: DOCUMENTATION REQUIREMENTS (10/06/08)

Application

A new residential mortgage application (FNMA 1003/ FHLMC 65) is required.

Income/Employment

Income/employment is verified with:

Assets

Verification of assets is not required; however, the application must indicate sufficient assets to close.

Credit Report

A new "in-file" credit report is required. The report must establish that the Borrower(s) has an acceptable credit history and must meet the requirements for in-file credit reports outlined in Section 230.

Mortgage History

A mortgage payment history for the existing first mortgage is required. The mortgage payment history must show:

Appraisal Options

Options for Wells Fargo Serviced Loans:

Conforming Loans:

Non-conforming Loans:

Options for Non-Wells Fargo Serviced Loans:

Conforming Loans:

Non-conforming Loans:

See Appraisal Report Forms (refer to Section 310).

Looks like I got an email on Freddie from Wells too.  (this one from today).

• Must be Serviced by Wells Fargo
• Must be Owned by Freddie Mac (complete the attached form and fax to servicing..24-48 turntime)
• 12 mos seasoning required on mortgage
• Max ltv is 80% or ltv of original mortgage (lesser of)
• Max loan amount is Original Note amount or payoff + closing costs (lesser of)
• Ratio..No qualifying ratios... (Salaried borrowers need no documentation/S/E 1 yr taxes)... follow Direct Express for income documentation
• Assets stated on 1003 must be sufficient to cover closing and must be verified
• Appraisal...must follow Direct Express findings
• Run Direct Express.... In Special Program box, click "Freddie Owned Streamline". In Doc type click "No Doc".
• Admin Free is $350!

**Complete guidelines below.  Please use Submission Checklist above when submitting and processing file**

A.: GENERAL INFORMATION (02/02/09)

The Freddie Mac-Owned Streamlined Refinance program is a conventional conforming loan program for rate-term refinance transactions designed to streamline the loan origination process for Freddie Mac-owned and WFHM-serviced loans. For loans that do not qualify for the Freddie Mac-Owned Streamlined Refinance program refer to:

The following conforming products are eligible for Freddie Mac-Owned Streamlined Refinance:

40 year products are not eligible.

Note: Freddie Mac-Owned Streamlined Refinance option is not permitted for "A-minus" eligible loans.

B.: PROGRAM ELIGIBILITY REQUIREMENTS (02/02/09)

Borrower

The borrowers on the new mortgage and title must be the same as on the existing mortgage and title, except:

C.: PROPERTY TYPE / OCCUPANCY TYPE (02/02/09)

The following property and occupancy types are acceptable for Freddie Mac-Owned Streamlined Refinance:

Occupancy Change

If the occupancy has changed, ALL product parameters, including LTV, must be met for the new occupancy type. The new loan pricing must be based on the new occupancy type.

Seasoning Requirements

At least 12 months of payment history for the mortgage being refinanced.

D.: UNDERWRITING REQUIREMENTS (02/02/09)

For a Loan Prospector refinance mortgage, the Risk Class must be "Accept". Any loan that receives a "Caution" or "A-minus" Risk Class is ineligible for the Freddie Mac-Owned Streamlined Refinance program, and may not subsequently be manually underwritten for the Freddie Mac-Owned Streamlined Refinance program.

Loans that have not received a Loan Prospector Risk Class may use Direct Express or be manually underwritten. These loans must meet the following requirements:

The mortgage being refinanced must have been underwritten to Wells Fargo conforming, conventional guidelines.

Credit Report

A credit report is required. The underwriter must analyze any derogatory credit related to liens, judgements, bankruptcies, and foreclosures. See Underwriting Requirements above for minimum Loan Score and mortgage history guidelines.

Bankruptcy / Foreclosure

Any borrower with bankruptcy or foreclosure proceedings initiated after the date of the mortgage being refinanced is not eligible for the Freddie Mac-Owned Streamlined Refinance program.

Liens And Judgments

WFWL requires any outstanding liens or judgments which appear on the title to be cleared by, or at, closing. Proceeds of the new mortgage must not be used to satisfy those liens or judgments.

Qualifying Ratios

There are no qualifying ratio requirements for this program.

Temporary Buydowns

Temporary buydowns are not allowed.

Interest-Only

Not allowed with the Interest-Only feature.

P & I Increases

Payment (P&I) increases of 20% or less are allowed when the payment increase is due to a change in product or reduction in loan term.

E.: CALCULATION OF NEW LOAN AMOUNT (02/02/09)

At closing up to 2.0% or $2000, whichever is less, can be disbursed to the borrower as incidental cash back (not permitted on owner occupied, homestead property in Texas).

Please Note: Refer to Section 435 for Texas Rate/Term Refinance guidelines for owner-occupied homestead properties in Texas.

The new mortgage's loan-to-value (LTV) may not exceed the lesser of the following:

The LTV is based on:

F.: MORTGAGE INSURANCE (02/02/09)

Not required. LTV cannot exceed 80%.

G.: SUBORDINATE FINANCING (02/02/09)

When subordinate financing is present, the following two options are available:

If the borrower has no current subordinate financing, new subordinate financing is not allowed.

Copies of the Mortgage Note and Deed for the existing subordinate loan are not required.

H.: DOCUMENTATION REQUIREMENTS (02/02/09)

Application

A new complete residential mortgage application (FNMA 1003/FHLMC 65) is required.

Income/ Employment

The borrower's monthly income amount and employment must be stated on the application, but verification of the borrower's income and employment is not required. The borrower's stated income and employment must be considered stable.

Self-employed Borrower: Federal income tax returns(s) for the previous year (individual and business).

Assets

The borrower's assets stated on the application must be sufficient to cover cash-to-close (closing costs, principal reduction, debt payoff, etc.). Verification of the assets listed on the application is required.

Freddie Mac-Owned Streamlined Refinance Form

A completed and signed "Freddie Mac-Owned Streamlined Refinance Checklist" must be included in the file.

Leaseholds

Allowed. A copy of the ground lease is required to verify that the term of the lease extends at least 5 years beyond the term of the mortgage. No additional review is required

I.: APPRAISAL REQUIREMENTS (02/02/09)

All loans will require a minimum appraisal.

An appraisal or inspection report and underwriting review are required whenever a borrower requests cancellation of MI and the current loan has not amortized down to less than or equal to 80% LTV based upon the original appraised value or sales price, whichever is less.

All Transactions

Refer to Section 310 for required appraisal forms.

Operating Income Statements and HOA 921 forms, as applicable are required. Refer to Broker Guide Section 210 D for rental income requirements on 2 unit properties and Section 332A for condo requirements.

Matthew Graham:

Looks like I got an email on Freddie from Wells too.  (this one from today).

 

• Must be Serviced by Wells Fargo
• Must be Owned by Freddie Mac (complete the attached form and fax to servicing..24-48 turntime)
• 12 mos seasoning required on mortgage
• Max ltv is 80% or ltv of original mortgage (lesser of)
• Max loan amount is Original Note amount or payoff + closing costs (lesser of)
• Ratio..No qualifying ratios... (Salaried borrowers need no documentation/S/E 1 yr taxes)... follow Direct Express for income documentation
• Assets stated on 1003 must be sufficient to cover closing and must be verified
• Appraisal...must follow Direct Express findings
• Run Direct Express.... In Special Program box, click "Freddie Owned Streamline". In Doc type click "No Doc".
• Admin Free is $350!

**Complete guidelines below.  Please use Submission Checklist above when submitting and processing file**

A.: GENERAL INFORMATION (02/02/09)

The Freddie Mac-Owned Streamlined Refinance program is a conventional conforming loan program for rate-term refinance transactions designed to streamline the loan origination process for Freddie Mac-owned and WFHM-serviced loans. For loans that do not qualify for the Freddie Mac-Owned Streamlined Refinance program refer to:

•	See Section 410 - Rate/term Refinance Transactions.

The following conforming products are eligible for Freddie Mac-Owned Streamlined Refinance:

•	Fixed rate products

•	5/1 ARM, 7/1 ARM and 10/1 ARM products

40 year products are not eligible.

Note: Freddie Mac-Owned Streamlined Refinance option is not permitted for "A-minus" eligible loans.

B.: PROGRAM ELIGIBILITY REQUIREMENTS (02/02/09)

•	Maximum LTV cannot exceed 80%.

•	The mortgage being refinanced must be currently owned by Freddie Mac.

•	The mortgage being refinanced must be currently serviced by Wells Fargo Home Mortgage. Wells Fargo Home Mortgage must have the original mortgage file for the mortgage being refinanced.

•	The nine digit Freddie Mac loan number of the mortgage being refinanced must be obtained from WFHM servicing and recorded on the Freddie Mac-Owned Streamline Refinance Eligibility Checklist and retained in the file.

•	The mortgage being refinanced may never have been an "A-minus" loan.

Borrower

The borrowers on the new mortgage and title must be the same as on the existing mortgage and title, except:

•	Borrower(s) may be added to the new mortgage and title.

•	Surname(s) may be changed due to marriage.

C.: PROPERTY TYPE / OCCUPANCY TYPE (02/02/09)

The following property and occupancy types are acceptable for Freddie Mac-Owned Streamlined Refinance:

Y = Allowed

N = Not Allowed

Property Type	Primary	Second/Vacation	Investor
Single-family detached or attached	Y	Y	N
2 units	Y	N	N
3-4 units	N	N	N
PUD	Y	Y	N
Condominium	Y	Y	N
Cooperative	N	N	N
Manufactured Home	N	N	N

Occupancy Change

If the occupancy has changed, ALL product parameters, including LTV, must be met for the new occupancy type. The new loan pricing must be based on the new occupancy type.

Seasoning Requirements

At least 12 months of payment history for the mortgage being refinanced.

D.: UNDERWRITING REQUIREMENTS (02/02/09)

For a Loan Prospector refinance mortgage, the Risk Class must be "Accept". Any loan that receives a "Caution" or "A-minus" Risk Class is ineligible for the Freddie Mac-Owned Streamlined Refinance program, and may not subsequently be manually underwritten for the Freddie Mac-Owned Streamlined Refinance program.

Loans that have not received a Loan Prospector Risk Class may use Direct Express or be manually underwritten. These loans must meet the following requirements:

•	A minimum Loan Score of 620, and

•	The payment history of the mortgage being refinanced must indicate • No delinquencies in the most recent 90 days • A maximum of one 30-day late and no 60 day lates in the most recent 12 months. • At least 12 months of payment history.

The mortgage being refinanced must have been underwritten to Wells Fargo conforming, conventional guidelines.

Credit Report

A credit report is required. The underwriter must analyze any derogatory credit related to liens, judgements, bankruptcies, and foreclosures. See Underwriting Requirements above for minimum Loan Score and mortgage history guidelines.

Bankruptcy / Foreclosure

Any borrower with bankruptcy or foreclosure proceedings initiated after the date of the mortgage being refinanced is not eligible for the Freddie Mac-Owned Streamlined Refinance program.

Liens And Judgments

WFWL requires any outstanding liens or judgments which appear on the title to be cleared by, or at, closing. Proceeds of the new mortgage must not be used to satisfy those liens or judgments.

Qualifying Ratios

There are no qualifying ratio requirements for this program.

Temporary Buydowns

Temporary buydowns are not allowed.

Interest-Only

Not allowed with the Interest-Only feature.

P & I Increases

Payment (P&I) increases of 20% or less are allowed when the payment increase is due to a change in product or reduction in loan term.

E.: CALCULATION OF NEW LOAN AMOUNT (02/02/09)

•

The new loan amount may not exceed the lesser of: • Conventional conforming loan limits, • The original loan amount of the mortgage being refinanced, • The amount needed to pay off the current mortgage (principal balance plus accrued interest only; other costs such as late fees and past-due amounts may not be paid with the new loan) plus related closing costs up to 2.5% of the new loan amount.

At closing up to 2.0% or $2000, whichever is less, can be disbursed to the borrower as incidental cash back (not permitted on owner occupied, homestead property in Texas).

Please Note: Refer to Section 435 for Texas Rate/Term Refinance guidelines for owner-occupied homestead properties in Texas.

The new mortgage's loan-to-value (LTV) may not exceed the lesser of the following:

•

80%, or

•	Original LTV of the mortgage being refinanced.

The LTV is based on:

•	The original appraised value when a new appraisal is not obtained.

•	The new appraised value when a new appraisal is obtained. See Appraisal Requirements later in this section to determine whether a new appraisal is required.

F.: MORTGAGE INSURANCE (02/02/09)

Not required. LTV cannot exceed 80%.

G.: SUBORDINATE FINANCING (02/02/09)

When subordinate financing is present, the following two options are available:

•	Re-subordinate the existing financing. Existing subordinate financing may not be paid off or paid down with proceeds of the first mortgage

•	Payoff the existing subordinate financing with the borrower's own funds.

If the borrower has no current subordinate financing, new subordinate financing is not allowed.

Copies of the Mortgage Note and Deed for the existing subordinate loan are not required.

H.: DOCUMENTATION REQUIREMENTS (02/02/09)

Application

A new complete residential mortgage application (FNMA 1003/FHLMC 65) is required.

Income/ Employment

The borrower's monthly income amount and employment must be stated on the application, but verification of the borrower's income and employment is not required. The borrower's stated income and employment must be considered stable.

Self-employed Borrower: Federal income tax returns(s) for the previous year (individual and business).

Assets

The borrower's assets stated on the application must be sufficient to cover cash-to-close (closing costs, principal reduction, debt payoff, etc.). Verification of the assets listed on the application is required.

Freddie Mac-Owned Streamlined Refinance Form

A completed and signed "Freddie Mac-Owned Streamlined Refinance Checklist" must be included in the file.

Leaseholds

Allowed. A copy of the ground lease is required to verify that the term of the lease extends at least 5 years beyond the term of the mortgage. No additional review is required

I.: APPRAISAL REQUIREMENTS (02/02/09)

All loans will require a minimum appraisal.

An appraisal or inspection report and underwriting review are required whenever a borrower requests cancellation of MI and the current loan has not amortized down to less than or equal to 80% LTV based upon the original appraised value or sales price, whichever is less.

All Transactions

•	Manually underwritten, non-Loan Prospector • 1-unit property: FHLMC Form 70 dated March 2005. • 2-unit property: FHLMC Form 72 Small Residential Income Property Appraisal Report.

•	Loan Prospector • The minimum appraisal requirement as reflected on the Feedback Certificate.

Refer to Section 310 for required appraisal forms.

Operating Income Statements and HOA 921 forms, as applicable are required. Refer to Broker Guide Section 210 D for rental income requirements on 2 unit properties and Section 332A for condo requirements.

You broke my scroll button!  Do you have any other monster emails you can post here?

I think that even more than 4.5% rates we need streamlined options like this.  The problem with all the focus on low rates is that no one pays attention to the real Hairy Potter issue that will defeat "It That Shall Not Be Named"- (couldn't resist) which is guideline qualifications.

Every day I see applications that I can't get approved even with good borrowers (and heaven help the self employed!).  The elimination of any reduced doc programs for self employed people presents an immense problem with the coming arm resets as well as setting the stage for an even more epic foreclosure scenario but I digress...  Historic low rates are great- but only if you can qualify for them.  And then all the rate adjusters we have now baiscally eliminate the low rates or cheap refi options because you can't even go up in rate to absorb the hits anymore or you're back into the 6's or forced into an FHA loan to avoid them.

Releasing the stranglehold on guidelines will go much further towards fixing the housing problems then giving low rates to only those who can qualify under the stringent guidelines we have now.  I'm not advocating the "liar loans"- but lenders and Fannie/Freddie need to address the real underlying problems with getting a refi. boom underway and that's earnstly allowing people to qualify to refinance and stave off future foreclosures.  It also strengthens client retention too, so I would think there ought to be a strong case for streamlined loans again.  When I was a retail LO at Countrywide during the last refi boom, nearly every loan I did-and I locked 10 a day just sitting at the desk taking calls- was a streamlined refi. from a current customer calling us and everyone loved those loans.  Those days are needed again.

A streamlined option could go a long way.  Funny how my account rep's constantly tell me they don't have one available (even Wells) so maybe lenders are holding it for their retail or correspondent avenues?  Or my account rep's are behind the times, and who could blame them I guess these days with all the flux...

This is a step in the right direction toward helping self employed people with good credit.  Now is the time to inform tax professionals and gain some referrals!!!!

On the one hand they are loosening up some, which is good, but then on the other they raise there fees with the new LLPA adjustments.  Feel bad for the consumers with sub 740 scores cause the hits are brutal.

Victor Burek:

On the one hand they are loosening up some, which is good, but then on the other they raise there fees with the new LLPA adjustments.  Feel bad for the consumers with sub 740 scores cause the hits are brutal.

I find it isn't too bad until you drop below 700. 

At least those SE borrowers with good credit won't have to go back and refile 2007 taxes because they just need 1 years worth under the new guidelines.  Hopefullt the lenders won't impose an overlay killing that benefit.

The following great article on the web is from

http://activerain.com/blogsview/888629/New-Fannie-Mae-Loan-Level-Price-Adjustment-Fees-Make-Getting-a-Mortgage-More-Expensive

There's no doubt about that this is a period of historically low mortgage interest rates. When Freddie Mac published its weekly mortgage rate survey last Thursday, we saw that the "average" 30-Year fixed mortgage rate is now at 4.96% - the lowest since the survey started in 1971.

However, the cost of getting these low rates is increasing. While mortgage rates are falling, the number of points required to lock in those rates is rising.

When homeowners started defaulting on their mortgages beginning in late 2007, Fannie Mae (FNMA) created a loss-offsetting fee-generating scheme called "loan-level pricing adjustments" (LLPAs). The concept was basic: For mortgage applicants with higher risk profiles, there will be additional up-front payments to offset potential long-term losses.

This is similar to the auto insurance model where younger drivers pay higher premiums. Basically, the riskier the applicant, the higher the fee. At the beginning of the program, FNMA defined "risk" as a combination of borrower credit score and home equity percentage. In general, those who have lower FICO scores and higher loan-to-values paid more in costs than those who have higher credit scores and who had more equity in the home.

Thanks to FNMA's new LLPAs, lenders are now requiring an average of 0.7 point for you to get that 4.96% rate. (1 "point" is a fee equal to 1 percent of the loan size. For a $200,000 mortgage, 1 point will be $2000.) Therefore, to get a 4.96% interest rate on a $200,000 home loan, today's lender will require an extra $1400 in closing costs - that's an additional $1,400 over and above the "typical" closing costs normally associated with a purchase of a home or refinance of a mortgage.

The new fees do not apply to 15-year fixed rate mortgages or "My Community Mortgages" They also do not apply to most government loans. They do apply to virtually all other mortgages. In addition, FNMA's definition of risk has expanded. The following is a sample of what the LLPA means to you:

• For a 2-unit property - up to 1.0% in additional fees;
• For a condo/co-op with less than 25% equity - up to 0.75% in additional fees;
• For an interest only mortgage - up to 1.0% in additional fees;
• For a 1st mortgage with a subordinated 2nd mortgage or home equity line of credit - up to 0.50% in additional fees; and
• For a "cash out" refinance - up to 3.0% in additional fees.

But it doesn't stop there. FNMA has also adjusted its original FICO-LTV matrix. Nearly everyone with a mid-FICO credit score of less than 720 will also face higher closing costs on their home loans.

With the new LLPAs, any number of traits in your mortgage could increase your closing costs, such as:

• Your credit score;
• Your downpayment / equity percentage;
• Your home's property type (owner-occupied primary home, 2nd or vacation home, or investment (rental) property);
• Your reason for wanting a mortgage (purchase, rate/term refinance, cash-out refinance); and
• Your loan type.

To make matters worse, virtually all LLPAs are cumulative. For more information about the new LLPA fees, visit FNMA's web site at http://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2008/0838.pdf.

Mortgage rates and loan fees often move in opposite directions. To get lower rates, you would pay more in points. But, if you wanted to pay less in fees, then you must accept a higher interest rate. It's a trade-off.

This is FNMA's 5th risk-based pricing update in the last 15 months. And it probably won't be the last adjustment either. Therefore, if you're torn between buying a home now or later, consider that the cost of waiting may outweigh the benefits of falling prices or falling rates.

Hey Dana!  Long time no see.  We spoke ages ago...  Good find on the article.  I like it.

Curt Sandfort:

You broke my scroll button!  Do you have any other monster emails you can post here?

And you copied the entire thing in your post???  lol

Adam Quinones:

Desktop Originator/Desktop Underwriter Release Notes

DU Version 7.1 April Update

February 4, 2009

During the weekend of April 4, 2009, Fannie Mae will update Desktop Underwriter® (DU®) Version 7.1 to implement the following enhancement and policy change:

I heard that the 4 property limitation was going to be lifted - anyone else heard that???  I can not find it anywhere...I did find the following:

Update Date: 2/6/2009
Fannie Mae – Desktop Originator/Desktop Underwriter Version 7.1 Release Notes
Desktop Originator/Desktop Underwriter Release Notes (02/06/09)

akaagassi:

I heard that the 4 property limitation was going to be lifted - anyone else heard that???  I can not find it anywhere...I did find the following:

You gotta look here: https://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2009/0902.pdf

Thank you sir!!!