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Guest Column

Fannie Mae Underwriting Overhauled - Fewer Borrowers Qualify

By Leslie Petersen

Fannie Mae Announcement 08-08 is 25 pages long. It's not only grueling to wade through, the new and more constrictive guidelines will be just as difficult for originators to swallow. It is effective on June 1, 2008, in conjunction with Fannie Mae's implementation of a new version of Desktop Underwriter, Version 7.0. Some of the changes, which are applicable to both manual and DU underwriting, include:

• Foreclosures: The new rule mandates five years must pass after a foreclosure before a borrower is eligible for a new Fannie Mae loan. Previously, DU would consider loans with foreclosures after two years. Now, the loan will receive a Refer or a Caution/IV if it hasn't been a full five years.

Extenuating circumstances won't be considered unless it's been at least three years after the foreclosure, and the loan will have to be manually underwritten.

What We're Hearing

By Paul Muolo

A lot of ink has been spilled about lenders working diligently with homeowners who cannot make their payments but who want to keep the house. This tale is about "James" (first name only), a loan broker who has a 2/28 mortgage with Countrywide. His loan was a no-downpayment note with an original principal balance of $330,000. James and his wife are looking at new monthly payments of $3,599 compared to a start rate payment of $2,100. (The start rate was 5.99%, the new one, 8.59%). He, his wife and two kids live in Sun Valley, a suburb of Los Angeles. His house now has negative equity but they want to stay put. They like the neighborhood, his parents are nearby. He contacted Countrywide and told them his tale. Here's the catch: his loan is not delinquent. It's current. One of the chief reasons it's current: his parents have been helping out with the payments. Nonetheless, he called Countrywide and asked to restructure the loan. Eventually, according to him, Countrywide agreed to renegotiate, promising to keep the mortgage at the original start rate, the 5.99% for five years. He was elated. Countrywide said it would send a letter confirming the details. When the letter never arrived, he called the servicer. He was told by a Countrywide rep that no such permission to keep the rate at 5.99% was granted. He said they described the permission as a "computer glitch." James is a self-employed loan broker, not a great business to be in right now. His wife just landed a new job with promise: on Monday she begins work at a collection agency. They hope to hang onto their house. But can they? Question: how many more James' are out there, people who bought homes at the top of the market, like where they live but are sitting on negative equity and note adjustments? Stay tuned...

Making the Sale

Social Responsibility is Good Strategy

By Brad Finkelstein

According to the authors of the Herman Trend Alert, many indicators point to the fact corporate social responsibility is a wise business strategy. People want to work for companies that are good corporate citizens.

Companies that are what they call an "Employer of Choice" is one that makes a difference.

"We know, when employers give their people opportunities to make a difference that the workers feel more 'bonded" to the organization. In these times of a tight (and getting tighter) labor market, it is particularly important to press whichever buttons are effective in keeping people and keeping them engaged and productive," said The Herman Group, a Greensboro, N.C.-based consulting firm.

Success with Subprime

By Brian Sacks

Brian Sacks, mortgage expert, branch manager, trainer, and speaker gives advice on how to increase sales and improve your business. This week's article: How to Work with Buyers who have had a Bankruptcy or Other Credit Issues Part One

If a person is in the position of considering filing for bankruptcy, that person's credit is probably already ruined! The person can't pay his or her debts, is behind on many payments, and/or doesn't have enough assets to cover the debts. So it's not the bankruptcy that "ruins" a person's creditworthiness; it's the situation that warrants the bankruptcy that's the problem. A bankruptcy isn't a positive thing, however. Information about a bankruptcy usually stays on a person's credit report for ten years. And a person must wait at least six years from the date of discharge before filing another bankruptcy.

So, why would you want to work with a person who has filed for bankruptcy? An example can make that clearer.

When I started my company, I decided to specialize in helping folks with a bankruptcy or foreclosure buy a home with very little down payment and without paying double-digit interest rates. When people heard what I wanted to do they were saying to me, "You're crazy. Why would you want to take these high-risk people and lend them money with not a lot of money down - in other words, without a lot of equity - and you're not really charging them high rates and points." (High risk equates to high rates in most money-lending situations.)
Read on...

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