Blog of the Mortgage

7.0 Changes and Announcement 08-16

My counterparts and I just spent 3 sweltering and humid days cooped up inside a hotel in the Dallas area (thank god for air conditioning!) meeting with others on the sales team in the Western Division and talking to our executives and our various industry partners about the direction of our company and a state of the state of our business overall. I only wished we’d have had a representative from HUD there to talk to us.
What we got was the next best thing: A former HUD higher up whose wife actually envisioned and created the Neighborhood Watch program that we can all use to see how much HUD business is going through which HUD channels. This gentleman is part of a two person consulting team - Potomac Partners - that produces the great legislative updates that I forward to you. FHA is here to stay and its variations and special features aren’t likely to be altered too much going forward as the current administration and likely which ever group takes over in January will really tremendously on HUD to help support the housing market and by extension our business.
The other person we spoke to was a representative from FNMA. Well now that was interesting.I’ve never seen someone whose company was propped up by the federal government the two days before her presentation act as calm and collected as she did.
I can only hope this is a good thing.
Last month early on I sent you a notice about the use of DU 7.0 and the requirements and changes coming with this new release. 5.6 is officially retired now and 5.7 is being phased out from usage going forward. You need to make sure that you’ve run your loans through 7.0 beginning August 1st with us. Some of my competitors might let you run 5.7 until sometime until mid-August or September 1st.
Bottom line is that 7.0 is going to push about 20% more loans from Approve Eligible into EA world (which is NOT good), considering that MI is impossible to gain on this business and many of us have discontinued these products due to their inherent risk you’ll have less options for these borrowers.
The representative from FNMA did clarify for us that 7.0 is still an asset and equity position driven engine (not credit score – I bet you didn’t know that) so the borrower with 10% equity and $5k in the bank might not get the same approval as the same equity borrower with $25k in the bank. FHA is really going to be a way for us to keep more loans going forward.
  Also, many of you have noticed that there is a new policy that is officially effective August 1st (see the link above) with respect to borrowers moving up from their current residence.
FNMA now requires that people moving up have the following pieces in place in order to qualify for a lateral/move-up purchase:
For properties being turned into 2nd Homes

• Qualify with both housing payments
• 6 Months of PITI for BOTH properties

• Lease agreement for the property being rented out
• Canceled Check for the deposit.
• 70% LTV (30% Equity) in the residence that is being rented out

• Both payments must be used to qualify (no rental offset)
• 6 Months of PITI for BOTH properties