Coming Soon: DU Refi Plus

by Robert Hyder

Fannie Mae has scheduled the release of their newest version of Desktop Underwriter (version 7.1) for on or after the weekend of April 4, 2009. As part of this new release, DU Refi Plus is the enhanced automated underwriting program that will allow DU underwriting flexibilities to include expanded eligibility criteria and reduced documentation requirements for borrowers who are refinancing existing Fannie Mae loans. DU Refi Plus will also feature updated appraisal requirements on purchase transactions.

The enhanced flexibility available within DU Refi Plus for the refinancing of existing Fannie Mae loans will allow lenders increased capability so their borrowers can take full advantage of the low interest rates now being offered in this ever-demanding economy. An important footnote is that these improvements within DU Refi Plus will be applied only to the implementation of the underwriting of limited cash-out refinances, meaning the cash back to the borrower at closing cannot exceed 2% of the loan size, or $2,000, whichever is less. This includes the prohibition of subordinate financing being paid off, as well closing fees, prepaid costs and points being paid with the proceeds of the new mortgage.

Other restrictions within DU Refi Plus include:

• No new subordinate financing

• No adjustable-rate mortgages (ARMs) with fixed terms less than 5 years

• No interest-only mortgages

• No balloon mortgages

• No HomeStyle Renovation mortgages

• No MyCommunityMortgage (MCM) mortgages

The following expanded eligibility guidelines will be applied to limited cash-out refinances:

• If a loan-to-value (LTV) is 80% or less, the minimum credit score of 580 will not be required

• If an ARM has an LTV of 80% or less, the minimum credit score of 680 will not be required

• Properties (2-unit primary residences with high-balance loans, 3- to 4-unit primary residences, second homes on co-ops and investment properties. NOTE: subordinate financing is not allowed for second home co-ops) limited to 75% LTV/CLTV/HCLTV will now be eligible up to 80% LTV/CLTV/HCLTV

As for reduced employment documentation, DU Refi Plus will only require one current pay stub and a verbal verification of employment (VOE) for employees who receive a salary, bonus and overtime. For commissioned and self-employed borrowers, only one federal income tax return is required. DU Refi Plus will also waive the requirement for an appraisal or exterior-only inspections for certain loans.

When DU Version 7.1 recognizes the file as being eligible for DU Refi Plus, the following message will be issued: “This loan casefile was underwritten according to the DU Refi Plus expanded eligibility guidelines offered on certain limited cash-out refinance loan casefiles where the borrower’s existing loan is identified by DU as a Fannie Mae loan. This loan casefile must be delivered with Special Feature Code 147.”