GMFS breaks down latest Fannie updates

Download the Homebuyer Education and Rental Income Property flyer

Homebuyer Education

New policy- At least one Borrower must complete Homebuyer Education for the following transactions:

•  If ALL Borrowers are relying solely on nontraditional credit to qualify (applies to ALL loan products).
• ALL purchase transactions with LTV, CLTV, or HCLTV greater than 95% when ALL Borrowers are 1st Time Buyers.
• For ALL HomeReady purchase transactions when ALL occupying Borrowers are
• 1st Time Buyers – regardless of LTV

Fees wiaved- In support of their commitment to Homebuyer Education, beginning October 23, 2019, Fannie will waive the fee for the Framework Homeownership, LLC (Framework®) course for lenders, removing the cost burden for Borrowers. Additional information about this is forthcoming.

Rental Income Property

We are implementing new requirements for determining when rental income can be used for qualifying purposes. These changes are intended to support sustainable homeownership for borrowers purchasing an investment property without a prior history of managing rental properties. This new policy may also help to address certain risks, such as reverse occupancy fraud.

To determine the amount of rental income from the subject property that can be used for qualifying purposes when the borrower is purchasing a two- to four-unit principal residence or one- to four-unit investment property, the lender must consider the following:

If a Borrower:
• currently owns a Principal Residence (or has a current housing
expense), and
• has at least a one-year history of receiving rental income
(or documented property management experience)

Then:
• There is no restriction on the amount of rental income that can
be used.
• For a Principal Residence: rental income in an amount not
exceeding the PITIA of the subject property can be added to
the borrower’s gross income.
• For an Investment Property: rental income can only be used
to offset the PITIA of the subject property

If a Borrower:
• does not own a Principal Residence, and
• does not have a current housing expense

Then:
Rental Income from the subject property cannot be used.

HomeReady – This policy does not apply to HomeReady loans with rental income from an accessory unit.