: Your Conventional Loans May Be in Jeopardy as soon as NOW!!

Your Conventional Loans May Be in Jeopardy as soon as NOW!!

As you are all aware, DU release 8.0 is rolling out this week. 

This means that if your loan was approved through the AUS (Automated Underwriting System) with a 47%-56% debt ratio and has not closed or let's suppose waiting for a Short Sale approval, you risk that the loan will not be approved. 

Why?

The new AUS guidelines are now restricting the buyer to a maximum of 45%.  It is not flexible and does & will not base the decision on the strength of the buyer. The days of stretching the ratios to someone who had compensating factors are over.  In my opinion, it will not be long before FHA follows suit (Which always tends to be the case). 

So what do you do?

Make your negotiators and the asset managers understand that this will ultimately affect their books if they don't put themselves in gear.  Do not be passive and light a candle and make the "Sales Prayer".  It's lame, it doesn't help anyone and it surely reduces the chance the deal will get accepted and funded.

I know what you are thinking..  "But Ted, we don't want to upset our negotiator or the asset manager."  You might as well say "I,m scaaaarrrredddd!!" and go cry in the corner.  Of course not because it would be useless and imagining it, quite funny but embarassing.  You have NOTHING TO LOSE!!  The deal is going south anyway.

This will cause a ripple in transactions that are pending approval of some sort.  Imagine all the deals that are in the waiting line.  Wooo Eeeeeyy!!   Do not be that transaction.  Get on top of this and fast.

There are some banks already implementing these guidelines as of yesterday, so you may want to look into your transactions asap.

If you did not receive your final DU run by a date prior to the last couple of days, then the risk of losing that approval will be exposed.  We do not have specific information that confirms that a DU run / approval that was previously run on version 7.0 / 7.1 will be able to run through DU on the older version.   To err on the side of caution is the right approach in this case. 

There are a lot of other changes that will surely affect your transactions but this post is not about that, it is more of a wake up call.  If you are interested in more of the finer details, you can visit Fannie Mae at: https://www.efanniemae.com/sf/guides/duguides/pdf/current/rndodu80.pdf

 

Comment balloon 28 commentsTed Canto • December 16 2009 11:49PM

Comments

Yikes this is not good.  Another bad decision made to help consumers get into homes.

Posted by Tim Lorenz, 949 874-2247 (TIM LORENZ - Elite Home Sales Team) almost 9 years ago

Ted, thanks for the info. Sounds like another challenge to getting families in homes.

Posted by Deanne Olivas, Your Home Matters (Keller Williams Realty East Valley) almost 9 years ago

Ted: Thanks for the heads up. Rather than panic, I plan on adjusting accordingly. Our industry has been hit with so many challenges; this is just one more! Thanks for the post!

Posted by Paul McFadden, Pest Control, Seattle, WA. (Paratex) almost 9 years ago

Paul, your correct.. No need to panic but it is time to get into plan B mode. I am positive there are people biting their nails instead of doing something  about it.  

Posted by Ted Canto, Arizonan #1 Mortgage Lender (Amerifirst Financial, Inc) almost 9 years ago

Yeah, the day of a du approve/eligible on a 64.99% DTI are long gone.  Change is a constant.

Posted by almost 9 years ago

Thanks for the important info. -Now off to say the "Sales Prayer"-LOL

Posted by Kristi DeFazio, Colorado Springs Rea lEstate 719-459-5468 (RE/MAX Advantage) almost 9 years ago

Mike.. Yes they are.. As I said though, imagine all the loans in the pipe that are either dead or on death row..  Scary. . Agents and LO's better visit their pipelines or they're in for a ugly surprise and some upset clients. 

Side note:  I think it totally stinks for the scenarios that make sense. 

Posted by Ted Canto, Arizonan #1 Mortgage Lender (Amerifirst Financial, Inc) almost 9 years ago

Ted...You are right.  We need to be adaptable, and now more than ever.  I am level headed and pro-active about it, so I think that I will be just fine.  :-) 

Posted by Sarah Eubanks, Preferred Oregon Loan Consultant & Notary Public (Hill Valley Financial Services) almost 9 years ago

Kristi, I have a funny picture of the sales prayer but it is on my office computer and I am working on the field from my laptop.  We've all been there!  Please God, I will be  good and give low rates and return all phone calls, please let this one get approved!..   LOL

Posted by Ted Canto, Arizonan #1 Mortgage Lender (Amerifirst Financial, Inc) almost 9 years ago

Hi Ted,

Thanks for the info and the link, I'll check it out. I wasn't aware of the changes coming down the line.

I'd also hope that NAR is working pro-actively with FHA to insure they're still able to fund those "make sense" loans that do not meet the conventional guidelines. My husband and I bought our first home decades ago using the FHA 203-B program when we didn't have the funds to meet the conventional requirements. For many it does make the difference.

Posted by Lynda Eisenmann, Broker-Owner,CRS,CDPE,GRI,SRES, Brea,CA, Orange Co (Preferred Home Brokers) almost 9 years ago

Yep. It is getting harder and harder. Will see how it all shakes out

have a great day

tony

Posted by Tony Grego, 317-663-4173 #1 Trade Association for Alternative Inv (REISA - 317-663-4173) almost 9 years ago

I don't mean to sound stupid - but, that's just how its going to be.

DU = stands for what?

All loan offices use this program and the updates?

Posted by Gregory Bain, For Homes on the Jersey Shore (Mezzina Real Estate & Insurance) almost 9 years ago

Thanks Ted,

Up-to-date, hard data is one of the main reasons that I comes to Active Rain.

Posted by Andrew Jones, LA Beach Cities Homes 310-399-3740 (Horizon Pacific Realty ) almost 9 years ago

This does affect my bottom line. I only wished it didn't. Personally I wish people could be on 0% debt before they take on a home mortgage. It's one of the better option to take.

Posted by Loreena and Michael Yeo, Real Estate Agents (3:16 team REALTY ~ Locally-owned Frisco TX Real Estate Co.) almost 9 years ago

Everyday I find that there is something negative be said or done in regards to real estate. I just spoke to a local  lender that I worked with for years and he has decided that he is not happy and is going to get out of the game, and work on his golf swing..

Posted by Lorraine or Loretta Kratz, Certified Negotiation Consultants (Crescent Moon Realty, Inc. & Land N Sea Auctions.) almost 9 years ago

Thanks for the update!

Posted by Trisha P Realty Group, "Holding the Keys to Your Dream Home" (Realty Executives) almost 9 years ago

I love how you made a serious subject sound so funny and so serious at the same time.  "My fav line: You might as well say "I,m scaaaarrrredddd!!" and go cry in the corner.  Of course not because it would be useless and imagining it, quite funny but embarassing."

BTW - I totally missed out on the 'Sales Prayer'.  All that time lost!

Posted by Joetta Fort, Independent Broker, Homes Denver to Boulder (The DiGiorgio Group) almost 9 years ago

Great points Ted - We are already reviewing and notifying clients and Realtors that are out there with a pre-approval letter that in some cases is now, no good.

Posted by Greg Miller, Florida Home Loans - Conventional,FHA,USDA,VA (Ruoff Home Mortgage ) almost 9 years ago

Your Wooo Eeee - ade me think of the Saturday Night Live Skit "What Up With Dat?" - and that's all I can say about this...

What Up With Dat!?!?

Posted by Christianne O'Malley, Exceptional Service - Delivering Results in Reno! (RE/MAX Realty Affiliates) almost 9 years ago

Thanks for the info.  I had heard about it, but nice to see you are out there alerting everyone. We, realtors always need to stay up on the latest mortgage info.

Posted by Susan Sawyer, Real Estate Expert - Hudson Ohio (Keller Williams Chervenic Realty) almost 9 years ago

Greg- it means desktop underwriter. It is the underwriting system lenders use

Lorraine- I am sure your ex-LO is a great guy but sounds like he is a wuss in business. That attitude is exactly makes me excited about 2010. More business for me.

Joetta- Nice to meet you too! That is me at my finest. LOL

Posted by Ted Canto, Arizonan #1 Mortgage Lender (Amerifirst Financial, Inc) almost 9 years ago

Great info.  I like to stay on top of this lending stuff, so I know what questions to ask the actual lender.  Thanks for the heads up.

Posted by David Monsour, ABR - www.realty-insights.com (Keller Williams Keystone Realty) almost 9 years ago

HOLY DEADLINE LOOMING . . . Batman

Posted by Carla Muss-Jacobs, RETIRED (RETIRED / State License is Inactive) almost 9 years ago

WHatever will be....will be! 

Patricia

Posted by Patricia Aulson, Realtor - Portsmouth NH Homes-Hampton NH Homes (BERKSHIRE HATHAWAY HOME SERVICES Verani Realty NH Real Estate ) almost 9 years ago

WHatever will be....will be! 

Patricia

Posted by Patricia Aulson, Realtor - Portsmouth NH Homes-Hampton NH Homes (BERKSHIRE HATHAWAY HOME SERVICES Verani Realty NH Real Estate ) almost 9 years ago

uh oh!

Posted by Scott Taylor, REALTOR (Realty Center - Orlando - Ocoee) almost 9 years ago

Not using compensating factors will make it more difficult.  And, I think it makes sense to close the outstanding deals as soon as possible.

Posted by Christine Donovan, Broker/Attorney 714-319-9751 DRE01267479 - Costa M (Donovan Blatt Realty) almost 9 years ago

Thanks for the info

Posted by David Whitehead (RE/MAX Pace Realty ) almost 9 years ago

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