Wednesday, October 29, 2008

great loan

In a move that will stymie thousands of would-be home buyers and homeowners, Fannie Mae announced another round of mortgage guidelines changes a few weeks ago that will have a huge impact.
Unlike past revisions in which Fannie Mae tightened debt ratio and credit scoring requirements, however, the newest underwriting updates home equity and home buyer downpayments.
This is consistent with the emerging underwriting philosophy that Collateral is King.
No home equity, no downpayment, no loan.
Effective December 13, 2008, Fannie Mae will enforce the following single-family residence restrictions:
Primary residence, "cash out" refinances are limited to 85% loan-to-value
Second home, cash out refinances are limited to 75% loan-to-value
Investment properties cannot be refinanced without a 25% equity position
Each bullet point represents a 5 percent tightening over the previous guidelines.
Now, to be clear, Fannie Mae isn't the only source for mortgage money. The others are comprised by the FHA, the VA, and an innumerable amount of portfolio lenders. To date, these groups have yet to announce similar loan-to-value restrictions.
But, because Fannie Mae (along with Freddie Mac) guarantees almost half of the nation's home loans, it does swing a big stick. Historically, when Fannie Mae gets tight with its money, the other groups tend to follow.

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