Fannie Mae Changes Criteria for Purchasing and Securitizing Adjustable-Rate Mortgages

Fannie Mae Changes Criteria for Purchasing and Securitizing Adjustable-Rate Mortgages

Fannie Mae recently announced new standards for the purchase and securitization of adjustable-rate mortgage (ARM) products. The company is changing eligibility criteria to protect consumers from potentially dramatic payment increases and to help ensure that borrowers who hold these types of mortgages can sustain them beyond the initial interest rate period.

“Our goal is to make sure consumers can sustain their mortgages and remain in their homes over the long term, while helping our lender partners offer a range of mortgage products for qualified borrowers,” said Marianne Sullivan, Senior Vice President of Single Family Credit Policy and Risk Management at Fannie Mae. “These policy changes reflect our intention to continue providing liquidity to different market segments by ensuring that support for ARM products remains in appropriate circumstances.”

For ARMs with initial periods of 5 years or less, Fannie Mae will require that borrowers be qualified at the greater of the note rate plus 2% or the fully indexed rate (index plus margin).  The company also said it will continue to make available an interest-only loan product, but will change its qualification criteria. The maximum loan-to-value ratio cannot exceed 70%, the borrower’s credit score must be 720 or higher and the borrower must have a minimum of 24 months of liquid asset reserves remaining after loan closing. Balloon mortgages, which typically offer lower initial interest rates but leave a significant balance due at maturity, will no longer be eligible, except with special approval.

All loans not meeting the new guidelines must be purchased as whole loans on or before August 31, 2010, or delivered into MBS pools with issue dates on or before August 1, 2010.  Fannie Mae exists to expand affordable housing and bring global capital to local communities in order to serve the U.S. housing market. Fannie Mae has a federal charter and operates in America’s secondary mortgage market to enhance the liquidity of the mortgage market by providing funds to mortgage bankers and other lenders so that they may lend to home buyers. Our job is to help those who house America.

For more information, visit www.fanniemae.com.

RISMEDIA, May 7, 2010

Contact Information

Photo of Laurel Sweeney Real Estate
Laurel Sweeney
Berkshire Hathaway HomeServices Nutshell Realty
1209 State Route 213, PO Box 452
High Falls NY 12440
Office: 845-687-2200
Toll Free 877-468-5783
Fax: 845-687-4162

© 2016 BHH Affiliates, LLC. An independently owned and operated franchisee of BHH Affiliates, LLC. Berkshire Hathaway HomeServices and the Berkshire Hathaway HomeServices symbol are registered service marks of HomeServices of America, Inc.®.  Equal Housing Opportunity.