Loan Prospector to Use Higher of 2006 or 2007 AMI Estimates
[October 19, 2007]
On October 21, Loan Prospector will be updated to automatically use the higher of the 2006 or 2007 area median income (AMI) estimates for all mortgages with AMI requirements.
As a reminder, the Department of Housing and Urban Development (HUD) issues AMI estimates annually. Because of a change in HUD's methodology, many AMI estimates for 2007 are lower than the AMI estimates for 2006. This change to Loan Prospector will ease the transition to HUD's new methodology.
More Lending Options for You and Your Borrowers
With the expanded eligibility opportunities afforded by this change, you'll be able to increase your origination volume and serve more low- to moderate-income borrowers with the following loan offerings:
- Home Possible® Mortgages
- Alt 97 Mortgages with Affordable Seconds®
- Freddie Mac 100 Mortgages with Affordable Seconds
Manually underwritten Alt 97 Mortgages and non-Loan Prospector Freddie Mac 100 Mortgages with an Affordable Second also may be underwritten using the higher of the 2006 or 2007 AMI estimates.
What this Means for You
Effective October 21, more of your borrowers will be eligible for our affordable lending options as a result of the Loan Prospector update so that:
- All mortgages submitted to Loan Prospector on and after October 21, 2007, will be assessed using the higher of the 2006 or 2007 AMI estimates.
- Borrowers that previously did not qualify for a Home Possible Mortgage or other offering with an AMI limit may now be eligible for one of these affordable lending options upon resubmission.
- More of your loans may now be eligible for the lower Home Possible delivery fee rate (see our August 1 Guide Bulletin [PDF]), which applies to purchase transaction Home Possible Mortgages where the income used to qualify the borrower is 80% or less than the applicable AMI when the settlement date is on or after November 1, 2007.
Currently, in order to determine if a Home Possible Mortgage is eligible for the reduced delivery fee rate, you must manually calculate whether or not your borrower's income is at or below 80% of the applicable AMI using our Affordable Income & Property Eligibility lookup tool. The tool was updated to reflect the higher AMI estimate on October 18.
As announced in our September 7 issue of LP News, on November 18, Loan Prospector will be updated with a new feedback message that automatically notifies you if your borrower's income is at or below 80% of the AMI and if the loan is eligible for the reduced Home Possible delivery fee rate. With the November 18 message implementation, we encourage you to begin using the new LPR K8 message code in your processing, which indicates eligibility for the reduced delivery fee rate.
More Information
We encourage you to review the following information for complete details on the AMI changes and how they will impact your business:
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