Fannie Mae’s new deposit guidelines to speed mortgage lending process, experts say

Rule change considered a positive sign for an industry awash in paperwork

From left: Debra Schultz and Rolan Shnayder
From left: Debra Schultz and Rolan Shnayder

Fannie Mae has amended its guidelines on how mortgage lenders verify large deposits to borrowers’ bank deposits, which analysts tell The Real Deal will speed up the process in clearing loans. The new rule now requires borrowers to provide documentation for the source of bank deposits larger than 25 percent of their total monthly income. Previously, lenders required borrowers to source deposits of any amount.

The change, announced by Fannie Mae on Nov. 13, is one of the few positives changes since the housing crisis, said Rolan Shnayder, director of new development lending at H.O.M.E. Mortgage Bank.

The change is small, noted Debra Schultz, senior vice president of mortgage lending at Guaranteed Rate, but she estimated the new rule would speed up mortgage loan processing by 10 percent. “[This] cuts down on the paperwork in some matter,” she said. “[Sourcing deposits was] aggravating to the client. I’ve never run into a client with a deposit that I couldn’t source.”

However, approval of a mortgage loan remains a long process. “[There’s] so many other issue that slow me down right now,” Schultz said. “Our market is still slow.”

What deposits should be sourced became an issue after the housing market deteriorated, Shnayder said. “As the climate became more regulatory, banks started asking for smaller and smaller proof of deposits,” he explained. “It was left up to the banks to define what a ‘large deposit’ was.”

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At one point, Shnayder said he had to source a loan for as little as $600.

“[This is] one of the few things we’re seeing that’s positive,” Shnayder said. “[Fannie Mae] found one little thing they could change that could lessen the burden.”

Recently, Fannie Mae and Freddie Mac suspended evictions and foreclosures for 90 days in the wake of Hurricane Sandy, as previously reported.

Fannie Mae also reported a net income of $5.1 billion in the second quarter of 2012, which put the government-sponsored entity in the black for the second quarter in the row, according to previous reports.