From the WSJ, Hat Tip Moose:
Mortgage-finance giant Freddie Mac and two nonbank lenders are loosening income and documentation requirements for mortgage applicants in a new pilot program.
The changes announced Monday are designed to help boost mortgage originations among first-time buyers, applicants with low-to-moderate incomes and those who live in underserved areas.
The moves come nearly a decade after the start of the mortgage meltdown, as many consumers remain shut out of the housing market largely because they can’t meet the underwriting criteria that most lenders require. Under the Freddie program, applicants will be able use the income of people who will live with them but aren’t going to be on the mortgage to qualify.
In addition, income from second jobs that borrowers have held for a relatively short period will be factored in. The pilot also doesn’t require bank statements that would show a paper trail of how some borrowers save for their down payments.
Many of the pilot’s features are similar to what Fannie Mae currently allows on some mortgages it purchases but are new for Freddie Mac, which is among the largest purchasers of mortgages in the country. Freddie Mac says it purchases one in every four mortgages originated by lenders in the U.S.
In addition, borrowers who will be living with family or other individuals for at least 12 months after they purchase the home will be able to use those non-borrowers’ income to get approved for the mortgage. The income will be factored in to help improve the borrowers’ debt to income ratio, a key figure that compares borrowers’ monthly debt obligations to their gross monthly income.
Paperwork requirements will also loosen up for some borrowers who don’t have bank statements to show how they have saved for their down payment.