DU 8.2 Release

Desktop Underwriter® (DU®) Version 8.2 Release
Fannie Mae will implement Desktop Underwriter® (DU®) Version 8.2, during the weekend of December 11, 2010,  which will include the changes in the Foreclosure Policy, Community Seconds Loan Eligibility, Simplified High-LTV Transactions, Minimum Borrower Contribution Requirements, updated income and employment message and Revolving Debts in the Debt-to-Income Ratio.
The changes included in this release will apply to new loan case files submitted to DU on or after the weekend of December 11, 2010. Loan case files created in DU Version 8.1 and resubmitted after the weekend of December 11 will continue to be underwritten through DU Version 8.1.
DU will be updated to incorporate the policy changes specified in Announcement SEL-2010-08, Underwriting Borrowers with a Prior Foreclosure, to increase the waiting period that must elapse after a borrower experiences a foreclosure to seven years. If a foreclosure is reported within seven years of the credit report date, the loan case file will receive a Refer with Caution/IV recommendation.
Lender Letter LL-2010-03, An Introduction to Fannie Mae’s Loan Quality Initiative and Announcement SEL-2010-01, Selling Guide Updates for the Loan Quality Initiative, updated the rounding logic used to determine the LTV ratio. The new policy requires the result of the LTV ratio calculation to be truncated to two decimal places, and then rounded up to the next whole percent. DU Version 8.2 will be updated to reflect this rounding logic for the LTV, CLTV, and HCLTV calculations. 
As specified in Announcement SEL-2010-07, Selling Guide Updates, Community Seconds® are no longer eligible in connection with interest-only mortgage loans. Interest-only loan case files submitted to DU Version 8.2 with a Community Seconds loan will receive an Ineligible recommendation.
As stated in Announcement SEL-2010-13 Selling Guide Updates DU Version 8.2 will no longer label high-LTV or high-CLTV ratio transactions as “Flexible mortgages.” DU Version 8.2 will be updated to remove all references to Flexible mortgages, and will permit the following transactions up to 97% LTV/CLTV/HCLTV ratio under standard eligibility:
• One unit 
• Principal residence
• Purchase and limited cash-out refinance
• Fully amortizing fixed-rate and all standard ARM products
• Non-occupant borrowers may be parties to the transaction
• Financed mortgage insurance may be included (gross LTV ratio cannot exceed 97%)
To reflect the removal of Flexible mortgage references, the Eligibility Matrix has been updated and incorporates the above eligible transaction on the DU Maximum Allowable LTV Ratios chart.
DU Version 8.2 will be updated to reflect the new guidelines specified in Announcement SEL-2010-13 regarding the required minimum borrower contribution and acceptable sources of funds that may be used for the minimum borrower contribution. With the exception of community lending products, loan case files for two- to four-unit properties, second homes, and high balance mortgage loans will receive a message reminding lenders that the borrower must contribute at least five percent toward the down payment and/or closing costs from his or her own funds.
DU Version 8.2 will also be updated to reflect the change specified in Announcement SEL-2010-13 where all revolving debt is required to be included in the debt-to-income (DTI) ratio calculation. DU Version 8.2 will include all revolving debt in the total monthly expense payment used to calculate the DTI ratio, regardless of the number of payments remaining.
If a payment for a revolving debt is not included in the online loan application, DU will calculate an estimated payment to be used in the total monthly expense payment. This payment will be the greater of $10 or 5% of the outstanding balance. 
The verbal verification of employment message will be updated to include the reference to business and calendar days, as applicable, to reflect the income policy changes specified in Announcement SEL-2010-13.  Moreover, the income and employment messages will be updated to remove the reference to requiring a pay stub covering 30 days, and to reflect additional guidance provided in Announcement SEL-2010-13 regarding the information included on the paystub.  With the requirement of a paystub covering 30 days being removed, DU Version 8.2 will no longer require a borrower to be employed a minimum of one month in order for the loan case file to be underwritten through DU. 
Announcement SEL-2010-13 introduced SFC 165, which is used when data provided by the U.S. Postal Service (USPS) indicates that a unit number should be associated to the subject property and the lender verifies that a unit number does not exist for the subject property. The DU message that is issued when it appears that the subject property did not include a unit number, or the unit number entered does not match the legal address, will be updated to specify the need for documentation to verify the accuracy of the subject property address, and to include a reference to the use of SFC 165 at loan delivery.
Announcement SEL-2010-11, Undisclosed Liabilities and Re-underwriting Requirements, simplified the DU Resubmission Policy and combined the tolerances for income, debt, and interest rate changes. The maximum interest rate message that is issued on certain fixed-rate loan casefiles is being removed with DU Version 8.2.
With the release of DU Version 8.2, DU Version 8.0, which went into production the weekend of December 12, 2009, will be retired. Therefore, effective the weekend of December 11, 2010, customers will no longer be able to resubmit loan casefiles to DU Version 8.0; however, users will continue to be able to view online loan applications and DU Underwriting Findings Reports that were created under DU Version 8.0. To obtain an updated underwriting recommendation after the weekend of December 11, the user must create a new loan casefile and submit it to DU.

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