November 8, 2016
CUA 2016-04: Fannie Mae SEL 2016-08 and DU Release Notes 10.0 Update
On Monday, October 24, 2016 Fannie Mae issued announcement SEL 2016-08 and an update to Desktop Underwriter® (DU®) Release Notes Version 10.0 (effective December 10, 2016). The following is United Guaranty’s position on the topics covered within the announcement and Release Notes. Any changes required to the Credit Union Underwriting Requirements Guide and supporting documents will be made within the next update.
Effective October 24, 2016, United Guaranty aligned with or already allowed the following underwriting requirements addressed within Fannie Mae’s announcement and/or DU Release Notes. This applies to loans underwritten using CU SwiftClose® and Standard underwriting requirements.
- Allow DU Validation Services for Income to document the borrower’s income in place of standard documentation (paystubs, W-2s, Verification of Employment Form, tax returns, etc.).
- The following HomeReady® enhancements:
- Increase the maximum LTV/CLTV ratios to 97% for a rate/term refinance underwritten by DU.
- Allow a borrower who has completed one-on-one HUD-approved counseling to be considered for a maximum 50% DTI ratio when underwritten by DU.
- No longer require a project review for “site condos.”
- Allow garnishments that repay a debt through monthly reductions to the borrower’s income to be treated as a recurring monthly debt for qualifying purposes instead of requiring the debt to be repaid prior to closing.
- The clarification that co-borrower self-employed income or loss not used for qualifying purposes does not have to be documented or evaluated.
- The clarification for which properties with accessory units are eligible.
Property Inspection Waiver (PIW)
Fannie Mae announced the expansion of its PIW offering effective December 10, 2016 with the DU Version 10.0 update. A PIW is an offer to waive the appraisal requirement for certain DU refinance transaction. The expansion will allow PIWs for certain 1-unit primary residences and second homes with LTVs up to 90%. At this time, United Guaranty continues to require a full appraisal on all submissions for mortgage insurance.
DU Validation Services for Assets and Employment
Within the DU Release Notes, Fannie Mae addressed new DU Validation Services for assets and employment, which will be offered with the DU Version 10.0 update effective December 10, 2016. However, Fannie Mae did not give the details of the requirements for the use of these validation services within its announcement or Selling Guide. Although United Guaranty anticipates aligning with these requirements to allow the use of DU Validation Services for assets and employment to replace the standard documentation requirements, we will comment on the United Guaranty position once the full details of the requirements are announced by Fannie Mae.
Lender Relief from Fannie Mae Representations and Warranties
Fannie Mae announced relief for certain lender representations and warranties for three specific situations:
- When DU Validation Services are used;
- When a PIW is exercised; and
- When certain loans receive a DU Approve/Eligible and a Collateral Underwriter (CU) Risk Score of 2.5 or less.
The Fannie Mae representation and warranty relief does not change the lender’s responsibility for representations and warranties to United Guaranty under the terms of its Master Policy.
Please contact your United Guaranty Account Representative if you have questions concerning this announcement.
© United Guaranty Corporation 2016. All rights reserved. United Guaranty is a marketing term for United Guaranty Residential Insurance Company and United Guaranty Mortgage Indemnity Company, United Guaranty and CU SwiftClose are registered marks. Coverage is available through admitted company only. Desktop Underwriter, DU, and HomeReady are marks of Fannie Mae.