Selling Guide

Published April 07, 2021

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How is the re-underwriting criteria applied?

Applying the Re-underwriting Criteria

The following steps are required if the borrower discloses or the lender discovers additional debt(s) or reduced income after the underwriting decision was made up to and concurrent with loan closing:

Step Description
1 The lender must document the additional debt(s) and reduced income in accordance with B3-6-01, General Information on Liabilities or B3-3, Income Assessment, as applicable.

Note: The lender is not required to obtain a new credit report to verify the additional debt(s). However, if the lender chooses to obtain a new credit report after the initial underwriting decision was made, the loan must be re-underwritten.

2 If there is new subordinate debt on the subject property, the mortgage loan must be re-underwritten.
3 The lender must recalculate the DTI ratio. For DU loan casefiles, the DTI ratio should be recalculated outside of DU.
4
  • If the recalculated DTI ratio exceeds 45% for a manually underwritten loan or 50% for a DU loan casefile, the loan is not eligible for delivery to Fannie Mae.
  • Manually underwritten loans: If the recalculated DTI does not exceed 45%, the mortgage loan must be re-underwritten with the updated information to determine if the loan is still eligible for delivery. Note: If the increase in the DTI ratio moves the DTI ratio above the 36% threshold, the loan must meet the credit score and reserve requirements in the Eligibility Matrix that apply to DTI ratios greater than 36% up to 45%.
  • DU loan casefiles: See B3-2-10, Accuracy of DU Data, DU Tolerances, and Errors in the Credit Report for the tolerances and resubmission requirements associated with changes impacting the DTI.
  • High LTV refinance loans: For loans underwritten in accordance with the Alternative Qualification Path, if the recalculated DTI ratio exceeds 45%, the loan is not eligible for delivery to Fannie Mae. If the DTI does not exceed 45%, but is increasing by 3 or more percentage points, the loan must be re-underwritten with the updated information to determine if the loan is still eligible for delivery.
5 The final loan application signed by the borrower must include all income and debts verified, disclosed, or identified during the mortgage process.
6 Upon delivery to Fannie Mae, the lender must deliver the qualifying monthly income and expense amounts that are on the final loan application. See C1-2-02, Loan Data and Documentation Delivery Requirements.

For additional information about DU resubmission tolerances, see B3-2-10, Accuracy of DU Data, DU Tolerances, and Errors in the Credit Report.

For more information see B3-6-02, Debt-to-Income Ratios.

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