New FNMA DU Guidelines are effective Dec.12, 2009

Here is a summary of the most important changes:

TOTAL EXPENSE RATIO: Maximum (DTI) is 45%, (up to 50% with strong compensating factors).

MINIMUM CREDIT SCORE REQUIREMENT: 620

FORECLOSURES: For completion dates of more than 5 years, but within 7 years from the credit report date:

Purchase of principal residence permitted with minimum down payment 10% and minimum credit score of 680.No second home or investment property. Cash Out refinances will not be permitted for any occupancy type.

DEED IN LIEU OF FORECLOSURE: Completed more than 4 years, but within 7 years from the credit report date.

Principal residence, purchase transactions permitted with an LTV or CLTV maximum: 90%.

BANKRUPTCIES: Chapter 7 discharged is 4 years. Chapter 13 discharged is 2 years, filed but neither discharged nor dismissed is 4 years.

Less than these time frames will now receive a "Refer with Caution/IV recommendation".


EXPANDED APPROVAL (EA) ENHANCEMENTS

DU Version 8.0 will no longer issue EA-II and EA-III recommendations,except on DU Refi Plus.

High Balance mortgage loans will be ineligible with any EA recommendation.

REVISED MORTGAGE INSURANCE (MI) COVERAGE LEVEL REQUIREMENTS

Loans with a loan to value (LTV) ratio greater than 80% will now be subject to new simplified MI coverage requirements.

Reduced MI and Lower Cost MI will no longer be offered.

Financed MI is not available.


Fannie Mae will be updating Desktop Underwriter (DU) to version 8.0 the weekend of December 12, 2009. Detailed changes will be effective with all new submissions submitted to DU on or after December 14, 2009.