Desktop Originator/Desktop Underwriter Release Notes DU Version 8.

3 March Update
January 3, 2012

During the weekend of March 17, 2012, Fannie Mae will update Desktop Underwriter (DU) Version 8.3 to implement enhancements to DU Refi PlusTM. The updates included in this release will apply to DU Version 8.3 loan casefiles submitted or resubmitted to DU on or after the weekend of March 17, 2012. DU Refi Plus Enhancements
As specified in Announcement SEL-2011-12, the HARP program has been extended. The following enhancements will be made in DU to expand eligibility. Updated Credit Risk Assessment With this release, modifications are being made to the credit risk assessment in order to give more borrowers the ability to refinance using DU Refi Plus. As a result, the number of DU Refi Plus loan casefiles that receive an EA-III recommendation will be expanded. Maximum LTV Ratios and Eligible Products As stated in Announcement SEL-2011-12, the maximum LTV ratio for DU Refi Plus loan casefiles is being removed for DU Refi Plus fixed-rate mortgages with terms up to 30 years, and there will continue to be no limits on the CLTV or HCLTV ratios. The maximum LTV ratio limits for all occupancy and property types are: No maximum LTV ratio for fixed-rate mortgage loan casefiles with terms up to 30 years. A maximum LTV ratio of 105% for fixed-rate mortgage loan casefiles with terms greater than 30 years up to 40 years, and for adjustable rate mortgage loan casefiles with initial fixed periods greater than or equal to five years and terms up to 40 years (as permitted by the ARM plan).
NOTE:

Though DU will issue an eligible recommendation on DU Refi Plus fixed-rate mortgages with terms of 15 years or less and an LTV over 105% after March 17, 2012, those loans will not be eligible for delivery to Fannie Mae until June 1, 2012. Borrower Benefit Requirement Announcement SEL-2011-12 updated the borrower benefit criteria to also include a reduction in the interest rate or a reduction in the loan amortization term as eligible borrower benefits. The DU message that reminds lenders of the borrower benefit requirement will be updated to reflect this change. DU Refi Plus Property Fieldwork Waiver The property risk assessment that determines eligibility for the DU Refi Plus property fieldwork waiver will be updated to further increase the number of loan casefiles that are considered for the DU Refi Plus property fieldwork waiver.

2012 Fannie Mae. Trademarks of Fannie Mae.

1.3.2012

The following transactions will be eligible for consideration for a DU Refi Plus property fieldwork waiver with the DU Version 8.3 March Update: one- to four-unit properties; primary residences, second homes, and investment properties; loan casefiles with an LTV, CLTV, or HCLTV greater than 125%; and attached and detached properties, units in a condominium or cooperative project, and manufactured homes. Loan casefiles that receive an Ineligible recommendation will continue to be ineligible for the DU Refi Plus property fieldwork waiver. Project Review Requirements The project eligibility requirements for DU Refi Plus loan casefiles are being updated to reflect that in addition to the current representation and warranty that the property is not in a condominium hotel or motel, or a cooperative hotel or motel, the lender must also represent and warrant that the property is not in a houseboat project or a timeshare or segmented ownership project. As a result, the project review message that is issued on DU Refi Plus loan casefiles secured by a property in a condominium, PUD, or cooperative project will be updated to state that the lender must ensure the project meets the project review requirements for DU Refi Plus loan casefiles, as specified in the DU Refi Plus section of the Selling Guide. This updated requirement will be added to the Selling Guide in the next monthly update. Loan Level Price Adjustments (LLPAs) The cap applicable to the sum of the LLPAs and the Adverse Market Delivery Charge (AMDC) on HARP mortgage loans (loans secured by principal residences with LTV ratios greater than 80%) with amortization terms less than or equal to 20 years was reduced to 0.00% with Announcement SEL-2011-12. As a result, the AMDC/LLPA message will not be issued by DU on these transactions.

Miscellaneous
The following changes, which are not specific to DU Refi Plus, will also be made with the DU Version 8.3 March Update. Cooperative properties with subordinate financing Announcement SEL-2011-05 clarified Fannie Maes long-standing policy that cooperative share loans that are subject to subordinate financing are not eligible for delivery to Fannie Mae. DU will be updated to issue an Ineligible recommendation on any cooperative loan casefile that is subject to subordinate financing. This change will not apply to DU Refi Plus loan casefiles. Subject net cash flow The subject net cash flow message is being updated to provide clarity regarding the acceptable documentation that may be used to obtain rental income amounts for the purpose of reporting gross monthly rent, as specified in Announcement SEL-2011-10. Calculate and document the net cash flow on the subject property according to the Fannie Mae Selling Guide. If the borrower is being qualified with the entire payment, without benefit of rental income, rental income documentation for the subject property is not required for qualifying purposes. However, the lender must report the monthly rent at delivery. Refer to the Fannie Mae Selling Guide for permissible sources for obtaining monthly rent for reporting purposes.

2012 Fannie Mae. Trademarks of Fannie Mae.

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Income message for salary borrowers The following message will be updated to clarify that if a Verification of Employment is obtained, year-to-date income must be included. <Borrower>'s income must be supported by a paystub or by a standard Verification of Employment (1005). The paystub must be dated no earlier than 30 days prior to the initial loan application date and it must include all year-to-date earnings. Additionally, the paystub must include sufficient information to appropriately calculate income; otherwise, additional documentation must be obtained. If a standard Verification of Employment (1005) will be obtained, it must include all year-to-date earnings. Length of employment for a second job The following message will be modified to clarify that the second job income must be consistent for 12 months, not the employer of the borrowers second job. Income from a second job is listed on the application for <borrower>; however, the borrower has not been on this job for a minimum of 12 months. If the second job income has been interrupted in the last 12 months, it cannot be considered qualified income and should be removed from Section V and the loan casefile resubmitted for underwriting. Reserve requirements for second home and investment properties The following message will be updated to provide more detail on the reserve requirement that was not met that caused DU to issue an Ineligible recommendation. This loan casefile is ineligible for sale to Fannie Mae due to inadequate reserves. A minimum of two months reserves are required for second home transactions and a minimum of six months reserves are required for investment property transactions. Funds must be verified from eligible sources.

For More Information

For more information about these Release Notes, lenders may contact their Fannie Mae customer account team; and mortgage brokers should contact their DO sponsoring wholesale lender.

2012 Fannie Mae. Trademarks of Fannie Mae.

1.3.2012