During the weekend of July 29, 2017, Fannie Mae will implement new underwriting guidelines, which will include the changes to maximum DTI limits, ARM LTV ratios, self-employment income documentation, and other substantive changes to underwriting guidelines.
The maximum allowable debt-to-income ratio (DTI) will be adjusted and applications with a maximum DTI of 50% will now be considered. DTIs above 45% and up to 50% will no longer require certain additional compensating factors. If the DTI on a loan casefile exceeds the maximum allowable DTI of 50%, the loan casefile will receive an “Ineligible” recommendation.
The maximum allowable LTV, CLTV(Combined LTV), and HCLTV(Home Equity Combined LTV) ratios (LTV ratios) for adjustable-rate mortgages will be aligned with fixed-rate mortgage LTV ratios for all transactions, occupancy, and property types, up to a maximum of 95%.
Also, the criteria that determine the documentation required to verify a self-employed borrower’s income will be updated. Self-employment income coming from base pay, bonus, overtime, or commission will all have to be validated through an income report.
These changes are all reflected in the Desktop Underwriter Version 10.1.
Read the full Fannie Mae announcement here. 