May 1st, 2010 12:12 AM by Eric Fang
Fannie Mae has set new standards for ARM products starting Aug 1st.
1)The new standards require ARMs with initial interest rate periods of five years or less to be qualified at the greater of the note rate plus 2% or the fully indexed rate (index plus margin).
2)For interest-only loans, LTV<=70% and credit score must be 720 or higher and with 24 months of reserve.
3)Balloon loans, which generally are characterized by lower initial interest rates and a significant balance due at maturity, will no longer be eligible unless they receive special approval.
4)All loans not meeting the new guidelines have to be purchased as whole loans on or before Aug. 31 or delivered into mortgage-backed securities pools with issue dates on or before Aug. 1.