By Anessa V. Cohen
Since the mortgage debacle back in 2007, news articles have been discussing regulatory belt tightening and the consistent elimination of mortgage programs that were considered “risky.” Bank regulators have looked to restructure the entire mortgage industry to prevent fraud in an environment that was already causing grave havoc in the U.S. economy.
Fannie Mae and Freddie Mac, the main loan purchasers for the mortgage industry, were in such a negative state back then, that even after a major tap dance and reshuffling of these agencies, it was touch-and-go for many years as to whether they would be able to pick up the baton and be at full strength for the mortgage industry in its newest format—safe!
Well, I guess the powers that be have decided that Fannie Mae is strong enough at this point for the strings to be loosened a little in order to offer first-time homebuyers with low resources a new opportunity to be homeowners. This is a bid by the government to open up the real-estate market to low income earners, creating opportunities for them to purchase their own homes with a “looser” mortgage product for them.
Fannie May released the following information dated December 8:
Fannie Mae (FNMA) announced an option for qualified first-time homebuyers that will allow for a down payment as low as 3 percent. Building upon Fannie Mae’s successful lower-down-payment program offered through state housing finance agencies, the 97-percent loan-to-value ratio (LTV) option will expand access to credit for qualified first-time homebuyers who may not have the resources for a larger down payment. These loans will meet Fannie Mae’s usual eligibility requirements, including underwriting, income documentation, and risk-management standards. These loans will require private mortgage insurance or other risk sharing, as is required on purchase loans acquired by the company with greater-than-80-percent LTV.
“FNMA’s goal is to help additional qualified borrowers gain access to mortgages,” said Andrew Bon Salle, Fannie Mae executive vice president 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 are working to remove barriers for creditworthy borrowers to get a mortgage. We are confident that these loans can be good business for lenders, safe and sound for Fannie Mae, and an affordable, responsible option for qualified borrowers.”
With today’s announcement, homebuyers can purchase a home under Fannie Mae’s standard offering or its My Community Mortgage product with a 3-percent down payment if at least one co-borrower is a first-time buyer. In addition, eligible homeowners who wish to refinance their Fannie Mae-owned mortgage but do not qualify under the Home Affordable Refinance Program (HARP) can refinance their loan up to the 97-percent LTV level under a limited cash-out option.
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These mortgage-lending parameters under FNMA’s new program offering will still require proof of “ability to repay,” which all loans being underwritten today require.
Although this program may only serve a small segment of the community, it still is the door opening a crack wider in what has been a rigid and paranoid attitude that bank regulators and government officials have taken towards the mortgage industry in the last seven years. Hopefully this will be the beginning of the door opening even more for some new programs for other groups of possible borrowers that have still been left out of the new mix.
Anessa Cohen lives in Cedarhurst and is a licensed real-estate broker and a licensed N.Y.S. mortgage broker with over 20 years of experience, offering full-service residential and commercial real-estate services (Anessa V Cohen Realty) and mortgaging services (First Meridian Mortgage) in the Five Towns and throughout the tri-state area. She can be reached at 516-569-5007 or via her website, www.AVCrealty.com. Readers are encouraged to send questions or comments to anessa.cohen@AVCrealty.com.