Fannie Mae announced that on the weekend of March 13, 2021 they will be implementing Desktop Underwriter Version 11.0, which will include the following changes:
- DU Risk Assessment Update
- Updates to Align with the Selling Guide
- Retirement of DU Version 10.2
The changes in this release will apply to new loan casefiles submitted to DU on or after the weekend of March 13, 2021. Loans with casefiles created in DU Version 10.3 and resubmitted after the weekend of March 13, 2021 will continue to be underwritten through DU Version 10.3.
DU Risk Assessment Update
Fannie Mae regularly reviews and adjusts the DU risk assessment based on the latest market and loan performance data. DU Version 11.0 will include an updated risk assessment that will fine-tune DU’s ability to assess risk while fostering homeownership sustainability.
Updated Risk Factors
DU will continue to use multiple factors to perform a comprehensive risk assessment. The risk factors below will be updated.
- Debt-to-Income Ratio/Debt Composition
DU will continue to view loan casefiles as having lower associated risk when the borrower’s DTI ratio is low. DU will also evaluate the composition of the borrower’s debt, specifically looking at how revolving debts and student loan debts make up the borrower’s total monthly expenses. Borrowers whose revolving debt makes up smaller percentage of their monthly expense will represent less risk than those with only revolving debt.
- Self-Employment/Variable Income
DU will no longer view self-employment as representing increased risk but will now evaluate the composition of borrower income. DU will view borrowers whose total annual income is made up of a higher percentage of variable income (e.g., bonus, overtime, commission, and miscellaneous) as representing increased risk.
Updates to Align with the Selling Guide
- Appraisal Waiver Update
The Selling Guide indicates that a lender may not exercise an appraisal waiver offer and must order an appraisal if the lender is using rental income from the subject property to qualify the borrower. This includes income from an accessory dwelling unit (ADU). DU will no longer evaluate a loan casefile for appraisal waiver eligibility when ADU income is provided on the loan application for use in qualifying.
- Retirement Income Message
Selling Guide Announcement SEL-2020-07 updated requirements related to use of retirement, government annuity, and pension income. The DU retirement income message will be updated to reflect these changes
- Source of Gift of Equity
For loan casefiles using the redesigned Form 1003, when a gift of equity is being used DU will also check the source of the gift of equity. When the source is one that is not a relative or unmarried partner, the loan casefile will receive an ineligible recommendation because the gift of equity must come from a relative or unmarried partner.
Retirement of DU Version 10.2
With the release of DU Version 11.0, DU Version 10.2 will be retired. Effective the weekend of March 13, 2021, casefiles will no longer be able to be resubmitted to DU Version 10.2. DU Version 10.2 loan applications and DU Underwriting Findings reports will be able to be viewed online. To obtain an updated underwriting recommendation after the weekend of March 13, 2021, a new casefile must be created and submitted to DU.