Selling Guide Updates The Selling Guide has been updated to include changes to the following: Student Loan Solutions Project Eligibility Review Waiver for Fannie Mae to Fannie Mae Limited Cash-Out Refinances Properties Listed for Sale in the Previous Six Months PERS Expiration Dates Truncated Asset Account Numbers Flash Settlement for Mortgage-Backed Securities Servicing Execution Tool Bifurcation Option Terms and Conditions Miscellaneous Selling Guide Update Each of the updates is described below. The affected topics for each policy change are listed on the Attachment. Lenders should review each topic to gain a full understanding of the policy changes. The updated topics are dated April 25, 2017. Student Loan Solutions Student Loan Payment Calculation We are simplifying the options available to calculate the monthly payment amount for student loans. The resulting policy will be easier for lenders to apply, and may result in a lower qualifying payment for borrowers with student loans. If a payment amount is provided on the credit report, that amount can be used for qualifying purposes. If the credit report does not identify a payment amount (or reflects $0), the lender can use either 1% of the outstanding student loan balance, or a calculated payment that will fully amortize the loan based on the documented loan repayment terms. The current Desktop Underwriter® (DU®) message issued when an installment debt on the loan application does not include a monthly payment will be updated in a future release to reflect this new policy. Until then, lenders may disregard the statement in the message specifying the previous policy and follow the requirements in the Selling Guide. Effective Date This policy change is effective immediately. Debts Paid by Others We are simplifying our requirements for excluding non-mortgage debts from the debt-to-income ratio. Non-mortgage debts include debt such as installment loans, student loans, and other monthly debts as defined in the Guide. If the lender obtains documentation that a non-mortgage debt has been satisfactorily paid by another party for the past 12 months, then the debt can be excluded from the debt-to-income ratio. This policy applies regardless of whether the other party is obligated on the debt.
Effective Date Lenders may implement this flexibility immediately. The DU message on omitted debts will require documentation to support the omission of the debt, but will not reference the documentation requirements specified above as DU is not able to identify if the debt was omitted as a result of this policy. Student Loan Cash-out Refinance With this update, we are introducing the student loan cash-out refinance feature, a cost-effective alternative to use existing home equity to pay off student loan debt. This feature provides the opportunity for borrowers to payoff one or more student loans through the refinance transaction, potentially reducing their monthly debt payments. The loan-level price adjustment that applies to cash-out refinance transactions will be waived when all requirements have been met. The student loan cash-out refinance feature contains elements of both a cash-out refinance and a limited cash-out refinance transaction as described in the table below.