Fannie Mae Makes Home Buying Tougher for Job Transferees

Mortgage giant Fannie Mae issued new lending rules earlier this month that will make it harder for workers facing job-related transfers.

Job-related transfers typically involve one spouse who’s moving to stay with the company while the other spouse has to give up their current job and find a new one, often only after the move takes place. Under Fannie Mae’s new rules, the income potential of the “trailing” spouse will no longer be considered in the mortgage application, even if the second spouse is a high wage-earner. The result? Families transferring with their employers may have to trade down to less house than they were accustomed to based on two salaries, or they may end up having to rent.

In the past, lenders usually counted at least a portion of the trailing spouse’s income when processing the mortgage application, but they’ll do so no more, given the state of the economy and particularly the unemployment picture, the Washington Post reports.

More than 800,000 relocating families could be affected each year, according to Worldwide ERC.

Freddie Mac still factors in the trailing spouse’s income, but with strict limits; self-employment income can’t be included, and the trailing spouse’s income can’t represent more than 33% of the total qualifying income.

In addition to ending consideration of a trailing spouse’s income, Fannie Mae will also start relying less on the value of stocks, bonds and mutual fund investments as part of a mortgage applicant’s financial reserves, something that lenders routinely look at as part of the mortgage application review process.

Due to stock market volatility, the value of stocks, bonds and mutual funds that’s counted as part of the applicant’s financial reserves will now be discounted by 30%, while only 60% of the value of retirement accounts will be considered as part of the applicant’s financial reserves.

Do you think tighter lending standards could cause some couples to change their minds about a job-related relocation?

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