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Fannie Mae Eliminates Restructured Loan Policy

Fannie Mae BHFannie Mae has announced it is eliminating its restructured loan policy, which was originally introduced in September 2008 in response to the uncertainty of how restructured loans would perform after the financial crisis, according to Fannie Mae’s most recent Selling Guide update [1].

The elimination of the restructured loan policy allows lenders to rely on existing policy when determining whether or not a restructured loan is eligible for delivery under a refinance transaction or a modified mortgage loan, according to Fannie Mae.

“Eliminating this policy provides greater access to mortgage credit by enabling borrowers to refinance with more favorable rates and terms and streamline lender processes by removing requirements that required manual steps,” Fannie Mae stated in the update.

The policy was introduced the same month that Fannie Mae and Freddie Mac were taken in to conservatorship by the Federal Housing Finance Agency (FHFA) amid uncertainty of the performance of restructured loans. The policy was updated to allow a restructured mortgage to subsequently be refinanced after the government established programs such as the Hardest Hit Fund to provide principal forgiveness relief to underwater borrowers.

“In an effort to simply our eligibility guidelines and support the housing market, we are eliminating our policy on restructured mortgages,” Fannie Mae stated in the update.

Fannie Mae also announced its first change to its HomeReady [2] product, incorporating features enabling lenders to expand credit access in a “safe and responsible manner.” Fannie Mae stated that a number of product enhancements are planned this year as a result of continued assessments of HomeReady.

The first change to HomeReady involves simplifying the way income limits are applied by establishing a single area median income limit of 100 percent (the previous limit was 80 percent or 100 percent, depending on where the property was located). The change will be implemented in Fannie Mae’s Desktop Underwriter the week of July 16, 2016; for manually underwritten loans, the policy is effective for loans with application dates on or after July 16, 2016.

Click here [1] to view the complete Selling Guide updates.