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Where does underwriting stand today in 2018?

June 7th, 2018 11:45 AM by Sam Kader

In general, underwriting standard continues to be cautious. However, we have seen some of  underwriting standards are loosening slightly across most of the attributes of credit risk. 

First factor - Loan-To-Value/Down Payment. In December 2014, Fannie Mae upped the maximum financing by introducing HomeReady with 3% down payment - Maximum Loan-To-Value (LTV) ratio of 97%.  Freddie Mac followed a few months later by introducing similar program - HomePossible and HomePossible Advantage.  

Second factor - Debt-To-Income ratio (DTI). In July 2016, Fannie Mae revised its maximum Debt-To-Income (DTI) ratio from 45% to 50%. 

The third factor - Credit Scores have not changed. Investors share for Conventional Conforming (CC) with a credit score of less than 640 as well as the low and no-doc share were both down simultaneously. In contrast, the shares of new loans with an LTV higher than 95% and with a DTI above 45% have increased by 50% and 20% higher respectively.  

In conclusion, we have seen some underwriting guidelines loosening in some areas but definitely not near the same level as pre-2006 crisis. 

Posted by Sam Kader on June 7th, 2018 11:45 AM



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Pacific Coast Financial, LLC

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