Fannie Mae says no to credit scores below 580

Fannie Mae is setting new rules about what mortgages it will buy, including a credit score threshold for the first time.

The Washington, D.C.-based mortgage giant has told lenders it will no longer buy most loans made to borrowers who have credit scores below 580, nor will it buy loans that have been more than 60 days past due within the last year.

Without evidence that extenuating circumstances led to a foreclosure, it also will no longer buy mortgages made to borrowers who have lost a home to foreclosure within the last five years. Fannie Mae currently considers buying mortgages after four years have passed.

The new rules go into effect June 1.

"The dramatic shifts in market dynamics over the past several months have prompted us to continually review the full spectrum of our risk appetite, eligibility requirements, automated underwriting risk assessment and pricing," Fannie Mae said in the revised guidelines.

Conforming loan limits will remain at $417,000 in 2009, despite falling home prices. That ceiling has been temporarily raised to $729,000 in high-cost cities until the end of 2008.