Real Estate

Fannie Mae, Freddie Mac add new rules as government shutdown persists

Fannie Mae and Freddie Mac are adding another round of new underwriting requirements and a workaround for employment verification in response to the prolonged government shutdown.

“With the shutdown extending for a longer period of time, we are concerned about the impact that continued income interruption may have on borrowers’ ability to meet their mortgage payment and other monthly obligations,” Carlos Perez, Fannie Mae senior vice president, said in a letter to lenders posted on Fannie’s website. Perez is Fannie’s chief credit officer for the single-family division.

The new requirements only apply to borrowers affected by the shutdown, according to the letter, which contains new guidance approved for both Fannie and Freddie by the Federal Housing Finance Agency.

“The temporary guidance and requirements will automatically terminate when the federal government resumes full operations,” Christina Boyle, chief client officer for Freddie Mac’s single-family division, said in Freddie Mac’s online letter to lenders.

Under the new guidance, most borrowers must have the greater of two months of documented reserves, or reserves in line with automated or manual underwriting requirements. Both agencies have some exemptions for refinances with high loan-to-value ratios.

Lenders should continue to try to obtain a verification of employment, but failing that, the requirement can be waived if the lender documents the steps taken to obtain one and provides a written statement indicating the requirement could not be met as a direct result of the shutdown.

Pay stubs no longer have to be dated no earlier than 30 days before the initial loan application date, but lenders must get the most current pay stub. If no 2019 pay stubs are available, a year-to-date pay stub for 2018 must be obtained.

Lenders will have to warrant that the borrower is employed at the time the loan is delivered, and obtain any other employment documentation normally required.

The record-setting shutdown of the federal government and continuing furlough affecting several hundreds of thousands of affected workers is going into its 27th day as an impasse over whether to fund a border wall between the United States and Mexico continues.

There have been several U.S. government shutdowns during which federal workers were furloughed, but most have lasted only one-to-five days.

The federal government has introduced contingencies into the current shutdown that have eased past pain points for lenders, including measures that have allowed homeowners to obtain federal flood-insurance and helped lenders get access to Internal Revenue Service tax transcripts used in income verification.

Fannie Mae and Freddie Mac typically have remained exempt from U.S. shutdowns because they are quasi-governmental agencies.


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