Friday, June 3, 2011

Fannie Mae's policy on student loans and retirement accounts for a Kentucky Mortgage

Fannie Mae Clarifies and Updates Underwriting Guidelines for a Kentucky Mortgage

Fannie Mae Mae has just issued an update to the Selling Guide (SEL-2011-04) that affects underwriting of loans as follows:

Deferred Student Loans

While it has been Fannie Mae's policy to include payments for deferred student loans in the DTI, Fannie Mae has required verification of the payment amount. Effective immediately, if the payment is not documented in the file, Fannie Mae will allow lenders to use 2% of the balance as the qualifying payment.

Retirement Accounts

Fannie Mae is no longer requiring lenders to verify the terms of withdrawal from a retirement account in order to use the asset as reserves, however it appears lenders are still required to verify the conditions under which withdrawals may be made. If the retirement account does not allow for withdrawal for reasons other than termination, retirement (unless borrower is of retirement age) or death, then lenders may not use the account for reserves. Fannie Mae has not changed their policy regarding using only 60% of the vested balance for qualifying purposes to account for taxes and penalties of early withdrawal. Evidence of liquidation of the retirement account is not required unless the funds are needed for closing. This update is effective immediately and may be manually applied until the DU related message is updated on a future release.

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