Fannie Mae has tightened its underwriting guidelines to
prevent homeowners who are preparing to default on their
mortgage from purchasing a more affordable home with
Fannie-guaranteed financing.
To prevent these buy-and-bail schemes, Fannie is requiring
the borrowers who are proposing to rent their home to show
they have 30% equity in the property, a copy of the lease
agreement, and a receipt for the security deposit.
Usually buy-and-bail transactions involve borrowers with
upside-down mortgages. If they don\'t have 30% equity, the
borrowers must show that they have the resources to service
both mortgages and reserves to cover six months of mortgage
payments (including insurance and taxes) for both properties.
These requirements go into effect Aug. 1.
The June 25 seller guide announcement also requires lenders
that sell loans seasoned six to 12 months to provide warranties
that the original value of the property has not declined.
Fannie also updated it policies on how long it takes borrowers
involved in bankruptcies and foreclosures to quality for a
new mortgage.
