Home Loan Wholesale

Fannie Mae announced that it will tighten lending requirements for its interest-only loans and adjustable rate mortgage loans. If a borrower wants an interest only mortgage through Fannie Mae, for example, he or she will have to make down payments of 30% of the sale price. For ARM’s, Fannie will only buy those underwritten to ensure that borrowers could still afford payments even if their interest rates reset to the higher of either one of the home loan’s initial interest rate plus two percentage points or 2) the maximum the interest rate the loan can rise to, known in the industry as the cap rate. As an example, for a home mortgage loan with a beginning rate of 5% and a cap rate of 6% borrowers would have to demonstrate they could still keep up payments even if the mortgage rate rose to 7%. If the cap rate is 8%, borrowers would have to be able to afford an 8% mortgage. For an ARM with a fixed period (ie. 5/1 ARM) any initial period with 5 years or less qualify at greater of note rate +2% or fully indexed rate, and interest only mortgage loans will have a maximum LTV 70% and a minimum FICO of 720 with 24 months minimum reserves. Balloon Loans, unless they receive special approval, are going away entirely with Fannie.