Late Friday Fannie Mae gave borrowers and lenders an alternative to documenting income for Refi Plus loans where payment increases will be under 20 percent. Rather than requiring that at least one of the borrowers has a documented source of income, Fannie Mae will now accept verification of liquid financial reserves equal to at least 12 months of the new mortgage payment (PITIA). Documentation can be through one or more recent statement of liquid reserves in bank accounts, money markets, stock accounts, retirement savings accounts, or certificates of deposit. Fannie Mae is also providing streamlined documentation requirements for other underwriting criteria for these loans.
Earlier this week Acting Director of the Federal Housing Finance Agency (FHFA) released new requirements which granted relief from reps and warrantees to lenders when a purchase money mortgage had established a 36 month record of on-time payments or when Fannie Mae's Refi Plus and DU Refi Plus loans had established 12 months of on-time performance. In this latest Selling Guide Announcement Fannie Mae expanded this relief for both types of Refi Plus loans to include a relaxing of appraisal rules.
Under the new guidelines, effective immediately the lender is not required to make any representation or warranty at to the value, marketability of condition of the subject property where a new appraisal is obtained:
- Lenders may deliver loans on properties with a condition rating of C6 and a quality rating of Q6 completed on an "as-is" basis with no requirement for the appraisal to be completed subject to completed repairs.
- The lender is not responsible for the following requirements in the Selling Guide B4-1.1-01 General Information on Appraisal Requirements (Lender Responsibilities.)
- Accuracy and completeness of the appraisal and its assessment of the marketability of the property;
- Underwriting the completed appraisal report to determine whether the subject property presents adequate collateral for the mortgage;
- Ensuring that the appraiser uses sound reasoning and provides evidence to support the methodology used for the opinion, particularly in cases not covered by Fannie Mae Guidelines;
- Ensuring that the appraiser provides an accurate opinion, an adequately supported value, and an accurate description of the property.
Today's release, which can be read in its entirety here also provides an alternative qualification method when a borrower is being removed through refinancing, and streamlines verification of rental income for investor owned properties.
It is expected that a similar set of guidelines will be forthcoming from Freddie Mac.