Fannie Mae has announced changes in underwriting for loans submitted to its Desktop Underwriter (DU), Version 10.1.  The new DU version will be implemented on or after the weekend of July 29. The changes are outlined in release notes issued on Tuesday and will apply to new loan casefiles submitted to DU on or after the weekend of July 29, 2017. Loan casefiles created in DU Version 10.0 and resubmitted after the weekend of July 29 will continue to be underwritten through DU Version 10.0.
Among the more significant changes accompanying the new version are the following.
  • The maximum allowable debt-to-income (DTI) ratio that can be submitted in DU will be 50%. For DTIs between 45 and 50 percent, certain additional compensating factors will no longer be required. Cases exceeding a 50 percent DTI will receive an "ineligible" recommendation.
  • The criteria that determines the documentation required to verify a self-employed borrower's income will be updated and the number of DU loan casefiles eligible for the one year of personal and business tax return documentation requirements will increase.
  • The maximum allowable LTV, CLTV, and HCLTV ratios (LTV ratios) for adjustable-rate mortgages will be aligned with fixed-rate mortgage LTV ratios for all transaction, occupancy, and property types, up to a maximum of 95%. Additional information on the effective dates of this change will be available in the Selling Guide.
  • A loan casefile with a disputed tradeline that is approved with that information will no longer require further action. If such a loan casefile does not receive an Approve recommendation, the lender must determine the accuracy and completeness of the tradeline information. If the borrower is responsible and the information accurately and completely reports the account, then the lender may manually underwrite the loan if it is eligible. Tradelines reported as medical debt will continue to be excluded from the disputed tradeline identification and lenders are not required to investigate disputes.
  • DU is regularly reviewed to determine if its risk analysis is appropriate. Version 10.1 will include an update to this risk assessment and it is expected to increase the percentage of Approve/Eligible recommendations received by lenders, particularly those with DTI rations between 45 and 50 percent.
The new DU version will also contain changes in or will generate new messages about underwriting issues in the following areas:
  • Income and Employment Updates
  • Property Inspection Waivers
  • Student Loan Cash-Out Refinance
  • Employment Offers
  • Multiple Financed Properties
  • Site Condo Reviews
  • Timeshares
  • Homebuyer Education


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