Fannie Mae Tightens Underwriting Criteria

Fannie Mae is tightening its underwriting criteria by raising the minimum credit score for automated underwriting (Desktop Underwriter) from 580 to at least 620 for all loans, justified on the grounds that this action "will support prudent risk management and better ensure sustainable homeownership." Even higher minimum credit scores may apply for both manual and automated underwriting, depending on factors such as the loan-to-value ratio and the number of units in the structure. The minimum credit score applies to all mortgage loans delivered to Fannie Mae, including FHA and other government-backed loans. Fannie is also changing the maximum debt-to-income ratio for Desktop Underwriter to 45 percent, but will allow 50 percent if there are "strong compensating factors." Other changes are also being made, as described in relevant Fannie documents (see below).

The new Desktop Underwriter Version 8.0, including the new underwriting criteria, takes effect the weekend of December 12, 2009. The revised minimum credit scores are already in effect for manual underwriting.

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