Critical Underwriting Update | Effective Aug 16, 2014

Filed under: Fannie Mae

updateMajor changes are in store for Fannie Mae underwriting guidelines beginning August 16, 2014.  This will drastically effect buyers with recent short sales.

The primary changes beginning 8/16/14 will be:

  • Four years of seasoning required regardless of down payment amount following a short sale. This is an increase from the current seasoning requirement of only two years with 20% down or 3 years with 10% down.
  • Four years of seasoning required for all pre-foreclosures. There are no specific guidelines for the seasoning on this. But it’s noteworthy that the majority of short sales and foreclosures first started as a pre-foreclosure, which means the bank started foreclosure proceedings and reported it to the bureau.

The most drastic effect of this change:

Many buyers and buyer agents are working with pre-approvals based on the current guidelines and may not even know it.  These buyers will be subject to the new rules on 8/16 and will find themselves ineligible for loan qualification if they do not meet the new seasoning requirements.  It is imperative that any buyer with a short sale less than 4 years ago have a property identified and have DU/DO approval prior to 8/16.

Like all changes from Fannie Mae or Freddie Mac, there will be a period of interpreting these new changes. During this time, it’s my recommendation that you protect your pipeline and do everything possible to educate your pre-approved buyers and get them in contract before 8/16.

I would encourage all agents to forward this information to the entire database and to other agents in their office.  Contact me if you have further questions.

Click here to download the full Fannie Mae update.

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