Earlier this summer Fannie Mae announced a major update to its Automated Underwriting System (AUS) known as Desktop Originator/Desktop Underwriter (DO/DU). With this update, the days of drive-by appraisals will be over.
So what does this mean to homeowners? Be ready to pay for a full appraisal, upwards of $400 with most lenders.
Currently, once your loan officer has a complete file, including, but not limited to:
- 30 days of paystubs
- Last 2 years W-2s
- Last 2 years federal income tax returns
- Last 2 months bank statements
The loan office, or his/her processor, would run your file through Fannie Mae’s AUS, known as DO/DU. This automated system analyzes the overall file and determines if it meets Fannie Mae’s requirements (based on the info input) and then issues findings specifying the minimum documentation requirements.
On this Findings Report, issued by Fannie Mae, it will specify the type of appraisal required. On a single family, owner occupied residence, the appraisal types possible are:
- 1004 – Full Appraisal
- 2055 – Drive By Appraisal with a value
- 2075 – Drive by Appraisal with no value
- PIW – Property Inspection Waiver (an appraisal waiver)
With the update that is scheduled to roll out the weekend of October 20th, there will only be two options that remain:
- 1004 – Full Appraisal
- PIW – Property Inspection Waiver (an appraisal waiver)
Only time will tell if Fannie Mae will be more generous in handing out appraisal waivers, or if all those loans that would have received the 2055 or 2075 appraisals will now be required to get the more expensive full appraisal.
If you are interested in refinancing, but are concerned about your property value you should speak with a loan officer now. Loans that are submitted to Fannie Mae’s AUS before the change takes place will still be eligible for the reduced appraisal requirements. Click here to request a free, no obligation Ohio Interest Rate Quote.
One of the other changes coming with this update is income documentation requirements. Beginning the weekend of October 20th, documentation requirements will be:
Ohio Fannie Mae Updated Income Documentation
| Income Type | Normal Documentation | HARP Documentation |
|---|---|---|
| Base Pay (salary or hourly) | Paystub + Most recent years W-2 | Paystub only |
| Bonus, Overtime, and Commission < 25% of total income | Paystub + last 2 years W-2s | Paystub only |
| Commission >= 25% of total income | Paystub + last 2 years W-2s + last 2 years tax returns | Most recent years tax return |
| Self Employment | Last 2 years personal and business tax returns | Most recent years personal tax returns |
| Second job, not self employed | Paystub + 2 years W-2s | Paystub + 2 years W-2s |
| Second job, self employed | Most recent 2 years personal and business tax returns | Most recent 2 years personal and business tax returns |
There are other minor updates along with the appraisal and income changes. The full release can be reviewed at Fannie Mae DO/DU Update
With property values still being a major concern in the refinance process, homeowners are encouraged to act now to have any chance at a reduced appraisal requirement. If you would like to review your options you can complete the Ohio Mortgage Rate Request form.
