Fannie Mae issued Selling Guide Announcement SEL-2017-06 (Announcement), setting forth updates to the Selling Guide. As outlined in the Announcement, Fannie Mae made substantial changes to their fidelity bond and errors and omissions insurance requirements (which have not been materially updated for almost 20 years). The Selling Guide updates also set forth adjustable-rate mortgage (ARM) enhancements, including the addition of a 5/5 ARM plan, and alignment of the maximum allowable LTV, CLTV and HCLTV (LTV ratios) for ARMs to that of LTV ratios for fixed-rate mortgages (95% maximum allowable LTV). In addition, the Selling Guide updates: no longer require specific, additional compensating factors outside of Desktop Underwriter’s standard risk assessment to support a debt-to-income ratio above 45%; permit delivery of the loan to Fannie Mae prior to the borrower starting new employment under an employment offer or contract (in limited circumstances); amend requirements regarding risk assessment and messaging for loan casefiles with disputed loan tradelines; clarify that timeshares must be treated as an installment loan rather than a mortgage loan, even when identified as mortgage debt on a credit report (or other documentation); remove duplicate content with respect to document custody, and rewrote, reorganized and streamlined remaining document custody content; provide lenders additional options with respect to handling student loan payments that have a missing or $0 payment amount on the borrower’s credit report; provide flexibility regarding the treatment of alimony by allowing lenders the option of reducing a borrower’s monthly qualifying income by the amount of the monthly alimony payment in lieu of including it as a monthly payment obligation in the calculation of the DTI ratio; and clarify requirements for excluding non-mortgage debts from the DTI ratio when monthly payments are paid by a party other than the borrower.The updates generally went into effect July 25, 2017. However, the ARM enhancements are effective September 1, 2017, December 11, 2017 and January 1, 2018. The fidelity bond, and errors and omissions insurance updates are effective October 1, 2018 (however, sellers/servicers are encouraged to implement the changes immediately).
Click here to view the Fannie Mae Selling Guide Announcement
