Desktop Underwriter is Fannie Mae’s computer-generated loan underwriting tool. Using completed loan application information, an automated underwriting systems retrieves relevant data, such as a borrower’s credit history, and arrives at a logic-based loan decision. In addition to the time savings, automated underwriting is preferred because it is based on algorithms, eliminating human bias. Freddie Mac maintains and markets a large automated underwriting engine known as Loan Prospector.

The latest version of Fannie Mae’s Desktop Underwriting System is being modified to only accept and approve loans that have a DTI (Debt-To-Income ratio) of 45% or less, with exceptions to 50% for borrowers with strong compensating factors. Assets are definitely a strong compensating factor.

FHA financing may allow for higher debt ratios. However, with HUD’s required capitalization ratio falling dangerously close to the industry minimum, they will likely follow suit.

The bottom line is to make sure homebuyers and Realtors are working with competent lenders who are versed in changes like these prior to shopping for a home.