AC-001 Important Conventional Credit Updates and ATR-QM Points and Fees Thresholds
This bulletin announces credit updates made by Fannie Mae and Freddie Mac to various requirements for Conventional Mortgages and new CFPB Qualified Mortgages and HOEPA Points and Fees threshold
Fannie Mae
Use of Business Assets
The requirements related to the use of business assets on self-employed borrowers have been simplified when self-employed income is not being used to qualify for the loan, but the borrower is using assets from the business towards a down payment, closing costs, and/or financial reserves:
- The borrower must be listed as an owner of the business account
- The business account must be verified in accordance with standard verification of funds to close and bank statements, and
- The underwriter is not required to perform a business cash flow analysis
Gift Letter Requirements
Gift letters can now either specify the exact dollar amount or the maximum dollar amount of the gift being given to the borrower (the actual amount of gift funds received must still be documented in the DU findings) and removed the requirement that gift letters must specify the date the funds were transferred.
Note: with these two updates, Fannie Mae is now closely aligned with Freddie Mac’s policies already in place related to these topics.
Freddie Mac
Acceptable Gift and Gift of Equity Updates
Freddie Mac announced in Bulletin 2022-25 a new seasoning requirement when a first mortgage is being refinanced with the proceeds of a cash-out refinance must be seasoned for 12 months (at least 12 months must have passed between the Note Date of the Mortgage being refinanced and the Note Date of the cash-out refinance Mortgage).