UnThreaded | Threaded | Whole Thread (7) | Ignore Thread Prev Thread | Next Thread
Author: kahunacfa Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 127262  
Subject: Current Underwriting Standards? Date: 2/5/2014 5:24 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
What are current underwriting standard ratios for the re-Finance of a perfectly performing first mortgage loan?

Kahuna, CFA
Investment Professional
1974 - Present
Print the post Back To Top
Author: Dwdonhoff Big gold star, 5000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 126789 of 127262
Subject: Re: Current Underwriting Standards? Date: 2/5/2014 6:23 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 1
Hi Kahuna,
Current conforming back-end ratios (housing and consumer debt) are tight at 45%
Portfolio guidelines allow for 50%, with at least 20% down.

Cheers,
Dave Donhoff
Leverage Planner

Print the post Back To Top
Author: kahunacfa Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 126790 of 127262
Subject: Re: Current Underwriting Standards? Date: 2/5/2014 10:08 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
Merci beaucoup.

Kahuna, CFA
Kailua-Kona, HI

Print the post Back To Top
Author: crackdclaw Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 126791 of 127262
Subject: Re: Current Underwriting Standards? Date: 2/6/2014 12:40 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
Current conforming back-end ratios (housing and consumer debt) are tight at 45% Portfolio guidelines allow for 50%, with at least 20% down.


Surprised by this answer Dave. I'm working with the understanding that Fannie / Fredie guidelines for a QM (Quality Mortgage) has a hard stop back end ratio of 43%. As you mention, non-QM loans held for investment allow for a higher DTI with compensating conditions.

I did not believe the QM rato of 43% was my bank's overlay guideline, but an industry wide guideline. Are you still originating conforming Fannie / Freddie with a 45 DTI?

Print the post Back To Top
Author: Dwdonhoff Big gold star, 5000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 126793 of 127262
Subject: Re: Current Underwriting Standards? Date: 2/6/2014 1:14 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 1
Hi Crackd,

Surprised by this answer Dave. I'm working with the understanding that Fannie / Fredie guidelines for a QM (Quality Mortgage) has a hard stop back end ratio of 43%.
NO... YOU ARE ABSOLUTELY CORRECT!!!!!

I could claim phat-phinger typos, or lack of coffee, or both... but I just wasn't paying detailed attention in my response... sorry, and good catch.

Dave Donhoff
Leverage Planner

Print the post Back To Top
Author: CCinOC Big gold star, 5000 posts Top Recommended Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 126798 of 127262
Subject: Re: Current Underwriting Standards? Date: 2/7/2014 12:47 AM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
Conforming DTI ratios can go as high as AU (automated underwriting) will accept provided that you can find a lender that will accept AU findings with no overlays.* In other words, just because Fannie/Freddie will approve a 48% DTI doesn't mean a lender will.

* About underwriting overlays.
http://blogs.har.com/262/31258/Mortgage-Lenders--Underwritin...

Print the post Back To Top
Author: CCinOC Big gold star, 5000 posts Top Recommended Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 126799 of 127262
Subject: Re: Current Underwriting Standards? Date: 2/7/2014 1:03 AM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
I'm working with the understanding that Fannie / Freddie guidelines for a QM (Quality Mortgage) has a hard stop back end ratio of 43%. As you mention, non-QM loans held for investment allow for a higher DTI with compensating conditions. ~crackdclaw

If you get an "approve/eligible" at any DTI, a lender will accept it provided that the lender doesn't have an overlay. Most lenders are running scared per QM, so they usually have an overlay of 43%.

Why?

Because the QM rules are written in such ambiguous and convoluted language that no one knows which end is up. From the lender's POV, better to err on the side of caution at 43% than push what is perceived to be the envelope and be wrong. Here's the so called final rule language from Consumer Finance Protection Bureau. If you can make sense of it, you're a better (wo)man than I.

SUMMARY OF THE ABILITY-TO-REPAY AND QUALIFIED MORTGAGE RULE AND THE CONCURRENT PROPOSAL
http://files.consumerfinance.gov/f/201301_cfpb_ability-to-re...

The final rule also establishes general underwriting criteria for qualified mortgages. Most importantly, the general rule requires that monthly payments be calculated based on the highest payment that will apply in the first five years of the loan and that the consumer have a total (or “back-end”) debt-to-income ratio that is less than or equal to 43 percent. The appendix to the rule details the calculation of debt-to-income for these purposes, drawing upon Federal Housing Administration guidelines for such calculations. […]

The Bureau also believes that there are many instances in which individual consumers can afford a debt-to-income ratio above 43 percent based on their particular circumstances, but that such loans are better evaluated on an individual basis under the ability-to-repay criteria rather than with a blanket presumption. In light of the fragile state of the mortgage market as a result of the recent mortgage crisis, however, the Bureau is concerned that creditors may initially be reluctant to make loans that are not qualified mortgages, even though they are responsibly underwritten. The final rule therefore provides for a second, temporary category of qualified mortgages that have more flexible underwriting requirements so long as they satisfy the general product feature prerequisites for a qualified mortgage and also satisfy the underwriting requirements of, and are therefore eligible to be purchased, guaranteed or insured by either (1) the GSEs while they operate under Federal conservatorship or receivership; or (2) the U.S. Department of Housing and Urban Development, Department of Veterans Affairs, or Department of Agriculture or Rural Housing Service. This temporary provision will phase out over time as the various Federal agencies issue their own qualified mortgage rules and if GSE conservatorship ends, and in any event after seven years [doesn't say seven years from when].

Here's how an underwriter answered my question about QM and DTI:

CC: Thanks for helping me with my question, which is… I thought, under the new QM rule, that the maximum DTI for conforming loans is 43%. However, someone told me that if DU or LP generates an approve/eligible finding, borrower’s DTI can exceed 43%; even go as high as 50%. Would you please confirm what the QM rule actually is with regard to DTI? I have two loans where the DTI exceeds 43% but every other lender I’ve asked has said 43% is absolute max, no matter what the AU findings are.

Response: CC, this is what our underwriters have told me: “[Lender's] conforming products are all FNMA/FHLMC or VA/FHA except for Jumbo [over $625,500]. These products are considered GSE/Agency products and are exempt from the 43% max DTI stated in QM rule until 2021 unless something changes before that. In other words, as long as you received DU approve/eligible, it is okay to have DTI exceeding 43%.”

Most lenders are not so brave.

Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post Back To Top
UnThreaded | Threaded | Whole Thread (7) | Ignore Thread Prev Thread | Next Thread
Advertisement