I would like to post Fannie Mae's most recent update to desktop underwriting as it outlines very important aspects and changes regarding the HARP refinance. You can read the full article here: https://www.efanniemae.com/sf/guides/duguides/pdf/current/rndodu90.pdf
Here's the most important changes that I see:
1. Retirement of Expanded Approval Recommendations
With DU Version 8.3, EA-II and EA-III recommendations were no longer returned for loan casefiles submitted to DU, except those underwritten as DU Refi Plus. With DU Version 9.0, the retirement of the Expanded Approval (EA) recommendations will be completed and the EA-I recommendation will no longer be returned. As the Refer with Caution/IV recommendation is also considered an EA recommendation, it will be replaced with a recommendation of Refer with Caution.
EA-I, EA-II, and EA-III recommendation levels will continue to be returned for DU Refi Plus loan casefiles; however, the number of DU Refi Plus loan casefiles that receive an Approve recommendation will be expanded due to an update to the credit risk assessment.
What does this mean? This means that there will be no more Expanded Approvals...
Now I don't really know what to think of this, whether it be a good thing or a bad thing. There were lenders offering the HARP refinance under Expanded Approval which required Manual Underwriting. This means there will no longer be any manual underwriting what-so-ever, you must receive "Approve/Eligible" Feedback to move forward with the new loan.
The downside to this is now, we won't know what risk level you are! In many circumstances I have had clients receive EA-1 and EA-2 feedback which in certain cases have been easily overcome with adjusting the new term, additional assets....etc. Now that we won't know what risk level you have, it's going to be hard judging what needs to be fixed in order to obtain the new refinance. This also means that all the borrowers who would have been able to get financed with Expanded Approval (Manual Underwriting) lenders that they will no longer be able to? This is what I read, and there is more....
2. Updated Credit Risk Assessment
Fannie Mae’s mission is to help eligible borrowers have access to mortgage credit to purchase homes they can afford over the long term. As part of normal business operations, DU is regularly reviewed to determine whether its risk analysis is appropriate based on new data and loan performance information. As a result of this work, DU Version 9.0 will include an update to the DU credit risk assessment and eligibility requirements.
The DU Version 9.0 credit risk assessment will consider the probability of future serious delinquency, rather than default. Based on an analysis of recent loan casefiles submitted to DU, the new credit risk assessment is expected to have a minimal impact on the percentage of Eligible recommendations that lenders receive today.
DU Version 9.0 will evaluate loan casefiles using the same risk factors currently evaluated in DU Version 8.3.
What I see here is more overlays Fannie Mae may be implementing into Desktop Underwriter but it looks like it could help certain borrowers show they have the ability to repay the new loan.
3. Simultaneous refinance of subordinate liens
DU Version 9.0 will be updated to allow for the simultaneous refinancing of a subordinate lien on DU Refi Plus loan casefiles, provided that the new loan amount does not exceed the existing unpaid principal balance of the subordinate lien.
This is GREAT! What this means is the HARP Refinance will now allow second mortgages the ability to be combined? I'm really curious about this as I have been subordinating 2nd mortgages to date. I'm going to have to find more information about this, whether it will be eligible for Same Servicer or also Open Access. I'll keep everyone updated, as always
.
Here's the most important changes that I see:
1. Retirement of Expanded Approval Recommendations
With DU Version 8.3, EA-II and EA-III recommendations were no longer returned for loan casefiles submitted to DU, except those underwritten as DU Refi Plus. With DU Version 9.0, the retirement of the Expanded Approval (EA) recommendations will be completed and the EA-I recommendation will no longer be returned. As the Refer with Caution/IV recommendation is also considered an EA recommendation, it will be replaced with a recommendation of Refer with Caution.
EA-I, EA-II, and EA-III recommendation levels will continue to be returned for DU Refi Plus loan casefiles; however, the number of DU Refi Plus loan casefiles that receive an Approve recommendation will be expanded due to an update to the credit risk assessment.
| The following are the recommendations that will be returned with DU Version 9.0: DU Recommendations | DU Refi Plus Recommendations |
| Approve/Eligible Approve/Ineligible | Approve/Eligible Approve/Ineligible |
| Refer with Caution | EA-I/Eligible EA-I/Ineligible |
| EA-II/Eligible EA-II/Ineligible | |
| EA-III/Eligible EA-III/Ineligible | |
| Refer with Caution | |
| Out of Scope | Out of Scope |
| Error | Error |
What does this mean? This means that there will be no more Expanded Approvals...
Now I don't really know what to think of this, whether it be a good thing or a bad thing. There were lenders offering the HARP refinance under Expanded Approval which required Manual Underwriting. This means there will no longer be any manual underwriting what-so-ever, you must receive "Approve/Eligible" Feedback to move forward with the new loan.
The downside to this is now, we won't know what risk level you are! In many circumstances I have had clients receive EA-1 and EA-2 feedback which in certain cases have been easily overcome with adjusting the new term, additional assets....etc. Now that we won't know what risk level you have, it's going to be hard judging what needs to be fixed in order to obtain the new refinance. This also means that all the borrowers who would have been able to get financed with Expanded Approval (Manual Underwriting) lenders that they will no longer be able to? This is what I read, and there is more....
2. Updated Credit Risk Assessment
Fannie Mae’s mission is to help eligible borrowers have access to mortgage credit to purchase homes they can afford over the long term. As part of normal business operations, DU is regularly reviewed to determine whether its risk analysis is appropriate based on new data and loan performance information. As a result of this work, DU Version 9.0 will include an update to the DU credit risk assessment and eligibility requirements.
The DU Version 9.0 credit risk assessment will consider the probability of future serious delinquency, rather than default. Based on an analysis of recent loan casefiles submitted to DU, the new credit risk assessment is expected to have a minimal impact on the percentage of Eligible recommendations that lenders receive today.
DU Version 9.0 will evaluate loan casefiles using the same risk factors currently evaluated in DU Version 8.3.
What I see here is more overlays Fannie Mae may be implementing into Desktop Underwriter but it looks like it could help certain borrowers show they have the ability to repay the new loan.
3. Simultaneous refinance of subordinate liens
DU Version 9.0 will be updated to allow for the simultaneous refinancing of a subordinate lien on DU Refi Plus loan casefiles, provided that the new loan amount does not exceed the existing unpaid principal balance of the subordinate lien.
This is GREAT! What this means is the HARP Refinance will now allow second mortgages the ability to be combined? I'm really curious about this as I have been subordinating 2nd mortgages to date. I'm going to have to find more information about this, whether it will be eligible for Same Servicer or also Open Access. I'll keep everyone updated, as always
.