Fannie Mae To Increase LTV Ratios

By Steve
October 6, 2023
2 min read

Fannie Mae To Increase LTVs In November. Are They Driving The Housing Market Off The Cliff Again?

Fannie Mae To

The last time Fannie and Freddie raised LTVs, American taxpayers had to bail them out.

Fannie Mae on Thursday announced that its Desktop Underwriting system. The new GSA guidelines include new changes to the maximum allowable LTV ratios for two- to four-unit and principal residences. The changes also apply to purchase and limited cash-out transactions.

Fannie Mae announced the updates and eligibility requirements for increased LTV loans in June. The GSE expects to roll out the new DU updates during the weekend of Nov. 18, 2023.

The current  maximum allowable LTV on a purchase and limited cash-out refinance for a SFRs two-unit property is 85%. Current guidelines set the maximum LTV for 3 or 4 unit properties at 75%. The new guidelines increase these LTVs to 95%.

Fannie Mae’s maximum LTV ratio for a single-unit home with a fixed-rate mortgage remains unchanged at 97%.

The updated DU system will be able to identify HomeStyle Energy loan casefiles. The algorithm uses the “Mortgage loan will finance energy-related improvements” indicator. The new system will also utilize a “This home is also a HomeStyle Renovation loan.” 

The new DU update states that on all limited cash-out refinance transactions that a message will be sent to “remind lenders of this requirement, and to remind lenders that if the property is currently listed for sale, it must be taken off the market on or before the disbursement date of the new mortgage loan,” 

Earlier this week, Fannie Mae released its October 2023 update to the Selling Guide. The updated selling guide is aiming to reflect changes in the mortgage industry and  its surrounding regulatory environment. It is also to advise lenders of new Fannie Mae policy positions. One key update is a change to the documentation requirements for rental income. 

Didn’t Fannie Mae do something like this prior to the 2008 financial crisis which led them to be taken over by the government?

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