Conventional Guidelines

Posted on March 22, 2010. Filed under: Guidelines | Tags: , |

Conventional (those following guidelines from Fannie Mae or Freddie Mac) Mortgage Loans that are run through Decision Engines to determine whether a loan is “acceptable” are now facing more stringent guidelines if the decision engine returns a “refer”.  It was previously allowed that a loan could be manually underwritten in cases of “refer” if the borrowers total debt made up no more than 38% of their gross income.  Beginning March 27th Fannie and Freddie have tightened that requirement.  For new originations after March 27 that receive “refer”, allowable ratios will now dictate that the new Mortgage Payment alone can make up no more than  28% of the the gross income (called front end ratio) AND total debt will be required to make up no more than 36% of gross income (back-end ratio).  Previously, the back-end ratio allowed was 38% and no front-end was established.


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