Fannie Mae’s New Debt-to-Income Ratio of 50% is Forcing Mortgage Insurers to Adapt
By Elizabeth Stewart @ Real Estate Daily
March 8, 2018

Fannie Mae began accepting mortgages with a debt-to-income ratio of up to 50% last year, despite mortgage insurance companies fighting against the change. Now, many mortgage insurance companies are adapting by raising their standards for loans that fall within the increased DTI ceiling.

Key Takeaways

  • Fannie Mae raised its debt-to-income ceiling from 45% to 50% in July 2017
  • Mortgage insurance companies MGIC and Genworth have already increased their standards for high DTI ratio loans
  • Esset, Radian, and National MI will no longer insure high DTI mortgages if the credit score is below 700

Excerpt

Last year, the GSEs announced they were increasing their debt-to-income ratio to 50%, a move that mortgage insurance companies are starting to fight back against.

But some MI companies are beginning to fight back. Last week, HousingWire outlined plans from MGIC and Genworth to increase their standards on high DTI loans, but as it turns out, that was just the tip of the iceberg. Many other MI companies announced they also plan on raising their standards this month.

In June last year, Fannie Mae announced it was preparing to raise the debt-to-income ratio, the No. 1 reason that mortgage applicants get rejected. It announced it would be raising its DTI ceiling from 45% to 50% as of July 29, 2017. However, qualified mortgages still need a DTI of 43%.

DTI is a borrower’s total amount of debt, including credit cards, student loans, auto loans and mortgages, versus their total income.

View the original article at Housing Wire