GSEs Detail new Low Down Payment Offerings

The two government sponsoredrnenterprises (GSEs) announced details today of their respective new lowrndownpayment conventional mortgage loans. rnEach will permit loans with as high as a 97 percent loan to value ratio withrncertain compensating factors.</p

Both Fannie Mae and Freddie Mac’s loans must be secured by a singlernfamily owner occupied property.  Onlyrnfixed-rate loans are eligible and manufactured housing is not acceptablerncollateral.  Tt least one borrower mustrnbe a first time homebuyer and median income eligibility levels apply.  The GSEs are also requiring a form ofrnhomeowner education, the type and duration of which varies between them.</p

Refinancing is permitted by both GSEs but on either a no-cash or arnlimited-cash out basis.  Total combinedrnloan-to-value (CLTV) ratios can go as high as 105 percent but the companiesrnhave limitations on the type of secondary financing permitted. The loans willrnrequire private mortgage insurance with 18 percent coverage for loans with arnhigher than 95 percent LTV</p

Fannie Mae’s version of the loanrnwill be called My Community Mortgage® (MCM) and will be available for loanrncasefiles underwritten through Desktop Underwriter Version 9.2, which will be implemented the weekend ofrnDecember 13, 2014.  The company said thernMCM is based on its earlier program offered through state Housing FinancernAgencies.  It will have the company’srnusual eligibility requirements including underwriting, income documentation andrnrisk management standards.    Thernloan will permit reserves to come from eligible gifts for both manuallyrnunderwritten loans and DU loan casefiles,</p

“Our goal is to help additionalrnqualified borrowers gain access to mortgages,” said Andrew Bon Salle, Fannie Mae Executive VicernPresident for Single Family Underwriting, Pricing and Capital Markets. “This option alone will not solve all the challenges around access to credit. Our new 97 percent LTV offering is simply one way we arernworking to remove barriers for creditworthy borrowers to get a mortgage. We are confident that thesernloans can be good business for lenders, safe and sound for Fannie Mae and an affordable, responsible option forrnqualified borrowers.”</p

Fannie Mae is also expanding itsrnstandard loan offering to a 97 percent LTV where at least one co-borrower is arnfirst time homebuyer.  </p

Fannie Mae said that private capitalrnwill be in the first loss position on these loans. Mortgagerninsurers and other risk sharing partners will have to concludernthat these loans are prudent to make in order for these loans to be originated and delivered to Fannie Maernin the secondary market.  The company said it is making new toolsrnavailable to help lenders better evaluate risk on loans.  This will include making its CollateralrnUnderwriter® appraisal tool available in early 2015 at no additional cost.</p

Freddie Mae is calling its loan “HomernPossible Advantage” and will begin offering it on March 23, 2015.  According to the sellers guide the company requiresrnthat manually underwritten mortgages have a minimum Indicator Score of 660 for purchaserntransactions or 680 for “no cash-out”rnrefinance transactions; the monthlyrndebt payment-to-incomernratio must not exceed 43%, and atrnleast one borrower must have a usable credit score and an Indicator Score mustrnbe establishedrn</p

Dave Lowman, Executive VicernPresident, Single-Family Business at FreddiernMac said of the new loan offering, “HomernPossible Advantage gives qualified borrowers with limited downpayment savings a responsible path tornhomeownership and lenders a new tool for reaching eligible working families ready to own a home of their own.  HomernPossible Advantage is FreddiernMac’s newest effort to foster a strong and stable mortgage market.” </p

Federal Housing Finance AgencyrnDirector Melvin L. Watt said  “The newrnlending guidelines released today by Fannie Mae and Freddie Mac will enable creditworthy borrowers who canrnafford a mortgage, but lack the resources to pay a substantial down payment plus closing costs, to get a mortgagernwith 3 percent down. These underwritingrnguidelines provide a responsible approach to improving access to credit whilernensuring safe and sound lending practices.</p

“To mitigate risk, Fannie Mae and Freddie Mac will use theirrnautomated underwriting systems, whichrninclude compensating factors to evaluate a borrower’s creditworthiness. Inrnaddition, the new offerings willrnalso include homeownership counseling, which improves borrower performance. rnFHFA will monitor the ongoing performance of these loans.”

All Content Copyright © 2003 – 2009 Brown House Media, Inc. All Rights Reserved.nReproduction in any form without permission of MortgageNewsDaily.com is prohibited.