Friday, March 7, 2008

Fanie Mae's new conforming loan guidlines

Here's Fannie Mae's new rules for conforming loans. (from Calculated Risk). In case you didn't read about it in the Press Enterprise they did raise the conforming loan limit for Riverside to $500k. The based that on a median of $400k. I don't know why they did that other than pressure from NAR or the government. It makes no sense since the actual median is closer to $300k which would have meant no change for the IE.

1. Fixed rates can be sold to Fannie on or after April 1; ARMs on or after May 1. The loan has to be closed on or after March 1 to be subject to the following rules; inventory loans (closed from last July to March) have to be subject to a "negotiated commitment."

2. No AUS approvals. It seems they plan to update Desktop Underwriter (their automated underwriting system) before the year is out, but they haven't done so yet and they're rollin' without it.

3. For principal residences, fixed-rate loans are limited to 90% LTV/CLTV for a purchase, and 75% LTV/95% CLTV for a no-cash-out refi. ARMs are limited to 80%/80% on a purchase and 75%/90% on a no-cash-out refi. CASH OUT REFIS ARE NOT ALLOWED.

4. For second homes and investment properties, the maximum LTV/CLTV is 60% in all cases for purchases and no-cash-out refis.

5. Minimum FICO for any loan is 660, with a minimum of 700 for LTVs greater than 80%.

6. One-unit properties only.

7. On a primary residence, existing subordinate liens must be resubordinated. The new loan cannot "cash out" an existing subordinate lien.

8. No late mortgage payments in the preceding 12 months.

9. 45% maximum DTI, with ARMs qualified at fully-amortizing fully-indexed rate.

10. Full doc only.

11. For purchases, the borrower must make at least 5% of the down payment from his or her own funds.

12. A full appraisal with interior inspection is required on all loans; if the property value is more than $1 million, a field review appraisal is also required.

13. Loans are subject to all current pricing adjustments, plus another .25 for FRMs and .75 for ARMs.

What does all this mean? I'm sure a few people will benefit from this. Those will be higher income families that have a down payment and can qualify (full doc) for a loan. I doubt it will help more than a handfull of people refi since hardly anyone that purchased in the last 5 years has 25% equity in their home.


smokingcrackmakespricesgohigher said...

Too bad these people won't benefit...
(yes, it's a snark).

I think there is a giant, stinking fish here imported from an EU country disparaged for bad smelling deals.
How did this house nearly double in price from August to December 2007? Did it come with a large cannabis farm? A goose that laid golden eggs? This sale reeks of corruption or unbelievable stupidity.

Peppermint Hippo said...

Besides the bogus median values, the guidelines actually seem reasonable if they can be enforced. I think the plan will have minimal effect in slowing the drop in values, but it may help a few responsible homeowners who have equity (avoided the serial refinancing), and first time buyers (if they're brave enough to buy in this market).

golfer_X said...


definitely something fishy there. I know those houses, they are small and sit on small lots. There are several in that tract listed for under $300k. I think those down near $200k at the bottom. To think that a bank would give a loan for $710k for one of those, it's crazy.

FairEconomist said...

Fannie Mae didn't want to get stuck with all those toxic refi's. Appraisal fraud is still an issue. With a new purchase they have a defense in that the buyer won't want to pay an excessive prices but if it's already been paid it should be possible to find an appraiser will to support a price above current market (especially given the steepness of the decline and the paucity of fresh comps).

BrianH said...

That is the link I copied from above and got nothing. Am I missing something?

Anonymous said...

Where you link ends with /ext, replace it with this.


Anonymous said...

i am interested in talking about corona-riverside real estate. i am interested in buying properties.

anyone interested in chatting can
contact me at

SpicyMcHaggis said...

The new limits dont mean bollocks. Here's some first hand experience in trying to get a loan. Me and my sweet bride were trying to buy a home and went through the process of trying to find financing. This started in late Nov. We made a lowball on an REO in Murrieta and it was accepted in late Dec. (asking $589 we offered $460). This meant we needed to get a jumbo. We had 10% to put down and our credit rating is 760 and we make just over $120k, (fully documented income). Think we could find a loan? They wanted 20% down or they wanted to see 12 months of reserves in the bank. The interest rates we were quoted were out of sight. Oh yea you can buy the rates down if you have a big fat check. I found the entire process just wore me down. Banks just don't want to lend the money any more. They are spooked. I thought we would have no problem. Then the appraisal came in at $435 and that sealed the lid on the coffin. No house for Spicy. I will wait till the end of the year, save a bit more and try again. It wouldnt suprise me to see the same house we tried to buy still for sale.

golfer_X said...

Great name dude!

I was out Sunday at a few open houses and talk to one realtor about a similar situation. He said he was working a deal where his buyer was having a really hard time getting a loan. He said the reason was that the lenders were all asking for at least 30% down because there were no recent comps in the area. No recent comps meant they had no idea what the value of the home was. He seemed a little shocked I was laughing my ass off inside. (He was actually a fairly nice guy so I was not too hard on him, even though his house was hella overpriced).