Maryland New Power of Attorney Law October 1, 2010

Beginning October 1, 2010, a new Power of Attorney law will go into effect to protect those who live in the State of Maryland.

T Jeremy Loomis, of Wells Fargo, shared this information with me, and that the State of Maryland stated the purpose of this new law is an effort to “protect principals from misuse from various parties.  New specific statutory language will need to be included in all Maryland POAs.”

Jeremy also shared with me a sample new power of attorney that a title company partner sent to him.

My title company partner, David Kramer, who is an attorney and runs Castle Title, today said that one of the major differences is that the new power of attorneys (POA) needs two witnesses, one of whom can be the notary signing the document.

The good news is that he states that POA’s in effect prior to October 1, 2010 are grandfathered in with this law, so changes do not need to be made on those to be compliant. You will want to check with your attorney, or contact David to be certain as to whether yours would be grandfathered.

If you are buying or selling a home in Maryland, and must use a power of attorney for any reason, make sure you are aware of the new laws and verbiage that needs to be a part of settlement.

Contact me for more information about how to sell a home in Maryland with a power of attorney.

New Fannie Mae Credit Score and Debt Ratio Requirements for Conforming Loans

Beginning December 12, 2009, Fannie Mae will have new requirements on credit scores and debt ratios for all of their conventional loans.

Prior to this change, the lowest credit score a borrower could have for this type of loan was 580. The new lowest score is 620. This is not negotiable, even if you are putting 20% down!

The other change is that the maximum debt ratio for this same 20% down borrower cannot be more than 45% of their income in order to qualify for the loan. Again, this is not negotiable.

Fannie Mae is a government controlled finance company who provides many of the mortgages offered to buyers through lending institutions. Part of the reason that these new requirements cannot be changed is that it uses an automated system to qualify or reject, so it is not a human making those decisions.

Fannie Mae made these determinations after studying what types of borrowers have been most defaulting on their loans. In this Reuters article, spokesperson Brian Faith had this to say:

“Loans to people with credit scores below 620 fell seriously behind at a rate approximately nine times higher than other loans purchased in the same period, Fannie Mae spokesman Brian Faith said. Loans taken out by borrowers with lots of debt also suffer higher levels of serious delinquency, he said.”

So what does this mean for the Towson homebuyer? If you are getting a conventional loan, you must have at least a 620 credit score and only 45% debt-to-income ratio.

Please note this does NOT affect FHA home loans or loans not provided by Fannie Mae, though as T. Jeremy Loomis of Wells Fargo Home Mortgage notes, Freddie Mac tends to follow Fannie Mae’s policies very quickly, so he expects to see these changes come through there soon, with most other institutions following their lead.

I want to thank Jeremy for this information, as he provided this to a large group of REALTORS(R) in his Continuing Education Course at the Greater Baltimore Board of REALTORS(R) earlier this week. Please also note, many lending institutions have already instituted this new policy to be in compliance for loans closing after December 12, 2009.