Fannie Mae issued Selling Guide Announcement SEL-2023-06 on July 5, 2023, to announce recent change to Selling Guide requirements, which include the following:
Limited Cash-Out Refinances
For new loan applications dated September 1, 2023 or later, Fannie Mae has revised the eligibility requirements for limited cash-out refinances to stipulate that a least one borrower on the new loan be a current owner of the subject property. The borrower must appear on title at the time of the initial loan application.
There are three exceptions to the new policy: (1) a borrower acquired the subject property through an inheritance; (2) a borrower was legally awarded the subject property through a legal settlement or divorce decree; or (3) the subject property was previously owned by an inter vivos revocable trust and at least one borrower is the primary beneficiary of the trust. Fannie Mae DU messaging will be updated to remind lenders of this requirement. The full requirements for limited cash-out refinance transactions are included in Fannie Mae Selling Guide Section B2-1.3-02.
Review Requirements for Condo and Co-op Projects
Fannie Mae is updating standards for project review requirements to identify projects that need substantial repairs or have material deficiencies that could result in unsafe conditions. New requirements apply to all new loan applications dated on or after September 18, 2023 and to all initial project review submissions on or after September 18, 2023, regardless of the loan application date. New requirements apply to all loans secured by units in condo projects, all cooperative share loans with five or more attached units, and loans eligible for delivery under the waiver of the project review policy.
Project review requirements include defining critical repairs, significant deferred maintenance, and routine repairs not considered critical. Sales of condo loans and co-op share loans are prohibited for projects in need of critical repairs, projects with current evacuation orders, and projects with unfunded repairs totaling more than $10,000 per unit. Inspection reports must be completed within 3 years of the lender’s project review date and cannot indicate that any critical repairs are needed.
Sale of Loans Aged Six Months or Less
Eligibility requirements for the sale of loans aged six months or less incorporated into the current Selling Guide. Loans sold on a flow basis cannot be more than six months old to be eligible for sale, based on the first payment date to the purchase ready date (whole loans) or MBS pool issue date.
HomeStyle Renovation loans are excepted from the six-month age requirement when the loan is not delivered until the renovation is complete. These loans may be up to 15 months old, when comparing at the note date to the purchase ready date (whole loans) or MBS pool issue date.
This policy first became effective as a temporary requirement on May 5, 2020, in response to the economic conditions created by COVID-19 but are now incorporated into the Selling Guide as permanent requirements.
Click here to view Fannie Mae Selling Guide Announcement SEL-2023-06.
