Fannie Mae to Approve Loans with 50% DTI

The San Francisco Chronicle writes that changes to Fannie Mae's automated underwriting system (AUS) will approve loans with a debt-to-income ratio (DTI) of up to 50 percent. According to a release from Fannie Mae, the previous limit in Fannie's AUS was 45 percent, with some loans being approved with a 45-50 percent DTI if the borrowers had additional compensating factors, such as 12 months of reserves or a 20 percent down payment. The new AUS approval will not require these compensating factors. While borrowers must still meet other criteria, including loan-to-value ratio, credit history, and down payment requirements, Fannie Mae stated that the change is "consistent with our commitment to sustainable homeownership and with the safe and sound operation of our business." The previous limit of 45 percent DTI was higher than the CFPB-mandated limit of 43 percent DTI that applies to private sector participants, and from which Fannie and Freddie are specifically exempted. This change now moves Fannie even farther away from the standards that apply to the rest of the industry.

SFIG advocates for a level playing field between private sector participants and the GSEs. Exempting the GSEs from industry-wide rules distorts markets and forces taxpayers to bear credit risk that should be borne by private capital. If you would like to participate in SFIG's ongoing efforts to comment on the CFPB's Ability to Repay/Qualified Mortgage Rule, please contact

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