Fannie Mae Continues Tightening Lending Rules

Reversing a long-standing policy, Fannie no longer will permit mortgage applicants to count the income of so-called "trailing spouses" toward the household income needed to qualify for a loan. A trailing spouse is one who joins his or her spouse or partner in a job-related move, but who has yet to obtain employment in the new location. As part of its June 8 tightening of underwriting rules, Fannie Mae also announced that it plans to discount the values of all borrowers' stock, bond, mutual fund and retirement fund holdings that are claimed toward the applicants' financial reserves needed to qualify for a mortgage. While Fannie previously counted 100 percent of the claimed or documented value of stocks, bonds and mutual funds toward reserves, under its revised policy it will discount them by 30 percent. For retirement accounts, it will count only 60 percent of the value toward reserves. To illustrate: If your mutual funds and stocks are worth $100,000 according to your investment manager or broker, Fannie will credit only $70,000 toward reserves. If your retirement account is worth $500,000, Fannie will give you credit toward reserves of only $300,000.

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