The mortgage industry is in a state of flux right now as it is coming to terms with a housing market now on the grow and new government rules.

Coming September 1st there are some changes as conforming mortgage approvals get tougher. Fannie Mae is imposing strict new lending guidelines that should slow down purchase and refinance activity in some areas of underwriting.

There are 15 areas of underwriting to be effected, In a public announcement, Fannie Mae defends its pending changes, citing high levels of unemployment, a surge in mortgage fraud, and general market fluctuations.

Here are some of the more salient points for the changes;

• Credit, income and asset documentation can’t be more than 90 days old. The former guidelines allowed for 120 days.
• Lenders must compare actual federal tax returns from the IRS to a borrower’s supplied income documentation. Previously, this review step was at the lender’s discretion.
• “Tip” income for service persons must be documented and verified.
• Trailing secondary wage earning is now prohibited. (expected income cannot be used)
• Stocks, bonds and mutual funds are “worth” 70% of their current market value as reserve funds. Formerly, securities were taken at 100% of value.
• Retirement assets are counted at 60% of their current market value. Formerly, retirement assets were taken at 70% of value.
• Refinancing owners and new buyers of 2-unit homes now face higher minimum FICO requirements and lower maximum LTVs. (Meaning stricter guidelines for what was before treated as a single family home)

These changes will of course mean that underwriters will kick back many loans – so this is big news! Those who are dawdling with their application are advised to get moving and get it into underwriting!

Also according to the Mortgage Reports, as the U.S. economy appears to be recovering from recession it could mean that mortgage rates fall in the next few weeks.

Agents are instrumental in conveying such information about up coming changes to their clients to help them to get moving with getting loan pre-approval.

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