Fannie Mae, the biggest source of money for US mortgages, has tightened its qualification standards for borrowers acquiring homes or refinancing loans.
A Bloomberg report revealed that the tougher changes include slashing maximum loan-to-value ratios for adjustable-rate mortgages from as much as 97 percent to 90 percent and increasing the required credit scores for certain mortgages.
Aside from that, Fannie Mae will also demand more tax returns from self-employed borrowers, said Matt Hackett, Underwriting Manager at New York lender Equity Now Inc.
Hackett noted that tax-information demand along with updates to underwriting software utilised by originators “can knock a decent portion of borrowers out of the picture who had a rough year in business two years ago”.
Fannie Mae’s new guidelines could also add to the challenges facing the US housing market, which has been showing signs of recovery after a six-year slump, said Pacific Investment Management Co., the manager of the world’s largest mutual fund.
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