Written By: Joel Palmer, Op-Ed Writer
Fannie Mae announced updates to its Selling Guide last week, including changes related to area median income (AMI) limits for HomeReady mortgage loans.
Last month, Fannie announced AMI changes on HomeReady, designed to help lenders serve low-income and moderate-income borrowers. It offers reduced mortgage insurance costs and lower loan-level price adjustments for loans with low down payments (compared with similar non-HomeReady loans).
HomeReady requires a 3 percent downpayment, and that money can come from gifts, grants and other sources. There is no minimum requirement for using personal funds for downpayment or closing costs.
HomeReady also allows the borrower to cancel mortgage insurance once their home equity reaches 20 percent. And there are no geographic restrictions on loan amounts.
Currently, to be eligible for a HomeReady loan, the borrowers’ total annual qualifying income may not exceed 100 percent of the area median income (AMI) for the property’s location. There is no income limit for properties located in low-income census tracts where the median income is not greater than 80 percent AMI.
Fannie is changing the income limit requirements to not exceed 80 percent AMI for the property’s location.
The change goes into effect and will be implemented in Desktop Underwriter the weekend of July 20, 2019.
Additional Selling Guide updates include:
•An update to A3-2-01, Compliance with Laws with additional clarifications for compliance with Department of Treasury Office of Foreign Assets Control (OFAC) Regulations regarding servicing loans.
•Removal of the requirement for a signed IRS Form 4506-T for any borrower whose income is not being used to qualify for the loan.
•Changes to the definition of relocation loans. This was done in response to the transition to the Uniform Mortgage-Backed Securities as well as to align with Freddie Mac. The update provides consistency for lenders when determining whether a relocation loan is subject to the de minimis pooling requirements for TBA-eligible UMBS securities. A relocation loan is now defined as an owner-occupied purchase money loan, originated pursuant to an established employee relocation program, administered by the employer (or its agent), where the employer relocates employees as part of its normal course of business.
•Clarification that energy-related improvements are permitted on a cash-out refinance but are not considered HomeStyle Energy loans, as all standard cash-out refinance requirements apply.
About the Author
As an NAMU® Opinion Editorial Contributor, Joel Palmer is a freelance writer who spent 10 years as a business and financial reporter and another 10 years in marketing for the insurance and financial services industries. He regularly writes about the mortgage industry, as well as residential and commercial real estate, investments, and retirement income planning. He has also ghostwritten books on starting a business, marketing, and retirement income planning.