WASHINGTON — Real estate may be showing signs of a turnaround in many local markets but the nation's largest mortgage players continue to ratchet up their underwriting rules, making home purchases more difficult for some buyers.
Mortgage giant Fannie Mae, for example, issued a laundry list of tougher policies June 8 that could directly affect thousands of buyers in the coming months, especially those involved in job-related transfers.
Reversing a long-standing policy, Fannie no longer will permit mortgage applicants to count the income of so-called "trailing spouses" toward the household income needed to qualify for a loan. A trailing spouse is one who joins his or her spouse or partner in a job-related move, but who has yet to obtain employment in the new location.
If the main breadwinner's income isn't sufficient to handle the mortgage, the loan application will be rejected; only when the trailing spouse has documented income in the new location will it be counted.
Brian Faith, a spokesman for Fannie Mae, said "given the current economic and job market instability, the company has opted to discontinue consideration of trailing secondary wage-earner income in the interest of safer underwriting, since this income would only be anticipated and undocumented."
Jan Hatfield-Goldman, a vice president for Worldwide ERC, the international trade association representing the employee relocation industry, said Fannie's decision
Worldwide ERC estimates that about 800,000 households in the United States move in a typical year because of job transfers.
Freddie Mac, which with Fannie Mae accounts for 70 percent-plus of all new mortgage volume, still counts trailing spouse or co-borrower income for loan applications, but under strict guidelines:
As part of its June 8 tightening of underwriting rules, Fannie Mae also announced that it plans to discount the values of all borrowers' stock, bond, mutual fund and retirement fund holdings that are claimed toward the applicants' financial reserves needed to qualify for a mortgage. While Fannie previously counted 100 percent of the claimed or documented value of stocks, bonds and mutual funds toward reserves, under its revised policy it will discount them by 30 percent.