Announcement 18-0009: Fannie Mae Desktop Underwriter DU Version 10.3 Updates

Overview

The Carrington Mortgage Services, LLC (CMS) Fannie Mae Underwriting Guidelines are being updated to include changes announced in the DU/Desktop Originator® Version 10.3 Release Notes, including:

  • risk factors evaluated by DU;
  • new six month minimum reserve requirement for cash-out refinance transactions for borrowers with DTI ratios exceeding 45%;
  • changes to how loans are underwritten if a borrower has a credit score, based only on non-traditional credit; and
  • appraisal waiver changes:
    • messages for disaster impacted areas,
    • properties valued at $1,000,000 or more are not eligible for an appraisal waiver offer for refinances.

Please note: these changes apply to new loans submitted to Desktop Underwriter on or after December 8, 2018.

DU Risk Assessment

Fannie Mae will make adjustments to the DU credit risk assessment to account for 2018 market conditions (rising interest rates, waning refinances and High LTV lending). Changes made to the DU risk factors are:

  • Because judgment and tax lien information are no longer reported to the credit agencies due to the National Consumer Assistance Plan, this information will no longer be used in the DU risk assessment.
  • A new housing expense ratio factor has been added. Loans with a lower housing expense ratio will be considered a lower risk while those where the housing expense ratio is higher will be considered higher risk. There will be no change to the risk factors evaluated by DU for these loans.

Debt to Income Ratio

Cash out refinance transactions for borrowers with a DTI ratio exceeding 45% must have at least six months of reserves. If there are not at least six months of reserves, the loan with receive an Ineligible recommendation.

Borrower without Traditional Credit

Fannie Mae will make adjustments to the DU credit risk assessment to account for 2018 market conditions (rising interest rates, waning refinances and High LTV lending). Changes made to the DU risk factors are:

  • Because judgment and tax lien information are no longer reported to the credit agencies due to the National Consumer Assistance Plan, this information will no longer be used in the DU risk assessment.
  • A new housing expense ratio factor has been added. Loans with a lower housing expense ratio will be considered a lower risk while those where the housing expense ratio is higher will be considered higher risk. There will be no change to the risk factors evaluated by DU for these loans.

Appraisal Waivers

Disaster Impacted Areas

If a loan receives an appraisal waiver offer prior to the disaster and upon resubmission to DU continues to meet all other appraisal waiver eligibility requirements, DU will continue to offer the appraisal waiver. A new message will be issued directing the lender to take prudent and reasonable actions to determine if the property condition has been materially impacted; and that the loan must comply with all property eligibility requirements that pertain to properties affected by a disaster.

Properties Valued at $1,000,000 or More

Appraisal waivers will no longer be offered on refinance transaction when the estimated value of the property (as provided to DU) is $1,000,000 or more.

Contacts

Please contact CorrespondentRM@carringtonms.com with any questions.

Carrington thanks you for your business.