Fannie And Freddie Lowering Underwriting Barriers

[Mike Kennedy]

Fannie and Freddie Lowering Underwriting Barriers

Oct 24 2016, 1:27PM
Fannie Mae and Freddie Mac each announced what appear to be essentially identical changes in their loan underwriting programs - Fannie calls its new offering "Day 1 Certainty" while Freddie was less poetic, referring simply to new capabilities added to its Loan Advisor Suite.

Fannie Mae President and Chief Executive Officer, Tim Mayopoulos, described Day 1 Certainty today as a way to give lenders "freedom from representations and warranties and greater speed and simplicity when delivering loans to Fannie Mae." He said this will help transform the way lenders do business by moving a paper-based process to an automated one through the company's underwriting software.

We assume there are technical differences in the changes to Fannie Mae's Desktop Underwriter and Collateral Underwriter and Freddie Mac's Loan Advisor, but two of the principal changes outlined their respective press releases cover the following.

• New optional validation service for income. Lenders will be able, with borrower consent, to access borrower income data and validate the income amount entered into the underwriting systems. They will thus have immediate certainty that their calculation and documentation of income is acceptable. This validation service will give lenders new process efficiencies, and representations and warranties relief related to the validated income.
• A no-cost automated appraisal alternative. This will waive the appraisal for eligible refinance transactions, up to 90% LTV on limited cash-out refinances, and lower LTVs on cash-out refinances. This will offer rep and warrant relief on property value, condition, and marketability.

There were some differences in the announcements from the GSEs, possibly because some of the changes had already been made to underwriting by one firm but not the other. Freddie Mac said it will also be offering automatic borrower asset verification and automated assessment of borrowers without credit scores. Fannie Mae announced it is removing the project review requirements for site condos -- a particular type of detached condo project; updating some Fannie Majors and MBS pooling parameters requirements; changing its policy on garnishments; and no longer requiring lenders to document or evaluate co-borrower's self-employment or tax returns if that income is not used for qualifying purposes.

"These powerful enhancements are indicative of the dramatic changes happening in financial services globally," said David Lowman, executive vice president of Freddie Mac's Single-Family Business. "As the cost of originating a mortgage has more than doubled since before the financial crisis, we're collaborating with lenders to create innovative tools that reduce the costs of producing and selling high-quality loans to us."

Fannie Mae said its income validation update became effective on Monday and the additional changes to Desktop Underwriter will be made the weekend of December 10. Freddie Mac plans to bring its changes online in early 2017.

 

[djd09]

They can do whatever they want it is their money with a tax payer back stop.

 

[Tim The Enchanter]

Must be why we are jumping so many silly hoops / err doc requests,
to rate and term refi w/ <50% LTV and good credit scores.

I suppose it's the self employed thing.
What? Call me up I will verify I work for myself.

 

[Elliott]

So how is the "V" determined.... "90% LTV"? The lender? The HO? Zillow?

 

[J Grant]

sounds like it will reduce refinance volume of appraisals.

 

[J Grant]

• A no-cost automated appraisal alternative. This will waive the appraisal for eligible refinance transactions, up to 90% LTV on limited cash-out refinances, and lower LTVs on cash-out refinances. This will offer rep and warrant relief on property value, condition, and marketability.

What is their criteria for eligible refinance transactions?

 

[djd09]

The hybrid appraisal is coming to a store near you.

 

[djd09]

Now they get free appraisals without paying for it with the UAD system appraiser keep filling.

And with a computer generated time adjustment, presto the beginning of the new world appraisals.

 

[Deleted member 134708]

@jGrant

Get it yet? See the path?

CU is just for 2x appraisals....sure it isn't.

 

[Deleted member 134708]

I worked with Department of Consumer affairs in CA on a certain project. Automotive related. (I used to work for Ford Motor Company.)

Everything comes down to "helping the consumer". It doesn't matter if it actually does. It just needs the headline.

This has the perfect headline of "no-cost to borrower" in turn helping the consumer. These types of legislation pass so easy it is not even funny. Or in the least, they have massive, massive support from everyone....and then passes