Notes From The Mortgage Insider

Everyone has heard that underwriting rules have gotten much tougher over the last two years. But a closer look reveals that for the top-tier borrower, things are not all that much different. If you have a high credit score, steady employment, a reasonable amount of debt, and 25% equity (using today's values) you can get a mortgage loan without too much difficulty. Even those who are starting a new job (in the same line of work as the previous job) will usually only have to produce one or two paystubs and written verification from their employer.

But if your income includes marital support, and especially if your separation agreement was recently signed, then the phrase "without too much difficulty" becomes "only with great difficulty." Several of our wholesale lenders now refuse to accept Fannie Mae automated underwriting findings for marital support income and instead are now requiring us to document a full 12 months history of receiving support payments in order to count that income for underwriting purposes.  Fannie Mae DU (Desktop Underwriter™) findings typically require a 3 month history.  That's FOUR TIMES the number of months.  And since they sell almost all of their loans to Fannie (or to Freddie) these rules are theirs alone.

Now there is nothing wrong with strengthening underwriting standards for income, but shouldn't the standards be strengthened accross the board rather than just for certain types of income?  Of course not say the wholesalers.  Only marital support income gets such treatment.  Wage income is evaluated according to the DU findings - no strengthening there.  Self-employment income is evaluated according to the DU findings - no strengthening there.  Retirement income is evaluated according to the DU findings - no strengthening there.  What is so bad about support income?

As a result we have been unable to secure mortgage financing for a number of otherwise qualified applicants because they had not yet reached the one-year anniversary date of their settlement agreement.

If you are negotiating your agreement or if you are an attorney whose practice includes domestic matters, we encourage you to contact us about this issue.  We can provide you with information that will help you put you or your client in the best possible position for their mortgage application.