They say that: He who has the gold, writes the golden rules! This is true. FannieMae (FNMA) is the largest purchaser and servicer of mortgages in the U.S. and presents the guidelines of which loan types and the requirements of same for which they will buy. These rules slacked off a bit a few years ago (can you tell) and have since become more stringent. Each time the rules change, FNMA issues a new version of its system called Desktop Originator/Underwriter for the mortgage industry.

On December 13^th, the industry guidelines for mortgage borrowers will change once again. Rather than bore you with the long-winded version, I am going to highlight a few items that will affect you (the reader) personally:

Total expense ratio: the amount of total monthly expense v. gross monthly income is 45%. There might be a slight exception up to 50% but this is as far as they will go. In other words, all of your monthly expenses including mortgage, RE taxes, insurance, cars, boats, student loans, credit cards, etc cannot be more than this % of your before-tax dollars. Exceptions can be made if manually reviewed at certain banks. If this is you, try a local savings and loan for a more personalized review of your loan application.

Minimum FICO score: 620 is rock bottom score of your credit. Banks no longer care if the dog ate your car bill; it is all about the grade.

Foreclosure: borrowers with foreclosure completion dates of more than 5 years, but within 7 years from the credit report date:

• The purchase of a principal residence will be permitted with a minimum down payment of 10 percent and minimum representative credit score of 680
• The purchase of a second home or investment property will not be permitted
• Cash-out refinances will not be permitted for any occupancy type

The foreclosure rules have been established for some time and might get a little tighter next year. The rules have also changed in reference to bankruptcy and deed in lieu of foreclosure timelines. These will be discussed in December when these rules have been fine-tuned. Please note, they have been tightened considerably, so there is no chance of buying another home one day out of bankruptcy! Ah, remember the 90’s!

Dale Robyn Siegel