It happened the day before Thanksgiving, so no one would blame you if you missed it. Okay, at least I won’t blame you.
On Nov. 25, 2015, the Federal Housing Finance Agency, (FHFA) set the 2016 maximum conforming loan limits for Fannie Mae and Freddie Mac. The timing of the announcement works out extremely well and not because of its relationship to Thanksgiving.
The reason it worked out so well this year is the announcement happened just a little over two weeks before the release of Fannie Mae’s Desktop Underwriter® (DU®) Version 9.3, which occurred during the weekend of Dec. 12, 2015.
Among the many changes included in the DU release, and there are a good number, are enhanced features available on high-balance mortgage loans.
Let’s take a quick look at both of these items — new maximum conforming loan limits in certain counties and Fannie’s updated high-balance loan features — and, more specifically, the opportunities they represent.
Maximum Conforming Loan Limits
The FHFA sets the maximum conforming loan limits for mortgages acquired by Fannie Mae and Freddie Mac. Now for most of the country, that limit was $417,000 for one-unit properties, and for most of the country, it is going to remain at that amount in 2016.
Of course there are areas, known as high-cost areas, that are allowed to exceed that amount. For 2016 most high-cost areas will remain the same; however, the loan limits for 39 high-cost counties will increase. You can find a list of those counties on FHFA’s website.
A recent Zillow article estimates that the changes will impact about 61,000 homes nationwide.
Fannie Mae High-Balance Mortgage Loans
With the release of DU version 9.3, Fannie Mae has aligned the eligibility of high-balance mortgage loans with its standard requirements for LTV, CLTV and HCLTV ratios up to 95%.
Fannie Mae has removed many of the overlays that previously applied to only high-balance mortgage loans and implemented a new policy that will require all high-balance loans be underwritten through DU.
A few highlighted changes include:
- The 5% minimum borrower contribution no longer applies, meaning that gifts, grants and Community Seconds® may be used to fund all required down payment and closing costs
- Appraisals no longer need to include two comparable sales from outside of the subject project when the loan is secured by a condominium
- Loan amounts greater than $625,500 with an LTV, CLTV or HCLTV ratio greater than 80% no longer require a field review of the property
There are some overlays that will still be in place; for example, properties valued at $1,000,000 or more with an LTV, CLTV or HCLTV ratio greater than 75% require a field review and that all borrowers have traditional credit.
If you are interested in additional details or other changes happening with Fannie Mae’s DU release, you can find them in Fannie Mae’s Selling Guide announcement SEL-2015-10. You may also want to visit Fannie Mae’s County Limit Lookup Tool.
Lenders operating within those 39 counties in Washington, Tennessee, New Hampshire, Massachusetts, Colorado and California, where high-balance mortgage loan limits have been implemented will see expanded opportunities for expanding agency-eligible loan originations and managing their risk.
Don’t forget that 234 counties across the country have high-balance limits, and MGIC’s Go! Underwriting Requirements (and our expansive policy on gifts toward the down payment) will work in perfect harmony with Fannie Mae’s high-balance loan solutions up to 95% LTV.
For additional information on MGIC Go! and gifts toward the down payment, talk to your local MGIC Account Manager or visit our website.
Desktop Underwriter®, DU® and Community Seconds® are registered trademarks of Fannie Mae.Tags: Loan Officer, Loan Origination, Mortgage Industry