RISMEDIA, May 28, 2008-Fannie Mae recently announced its Keys to Recovery initiatives, which is a part of the organization’s efforts to prevent foreclosures, support counseling efforts, and provide market stability in the wake of the housing and mortgage market downturn.
The initiatives are geared toward helping struggling borrowers stay in their homes, assisting prospective home buyers with home purchases, and stabilizing impacted communities. Here is a summary:
Keys to Recovery Initiatives
Fannie Mae’s Keys to RecoveryTM initiatives are geared toward providing liquidity, stability, and affordability to the housing and mortgage markets for the long term, and includes steps to keep struggling borrowers in their homes, assist prospective home buyers with home purchases, and stabilize communities impacted by the mortgage market downturn.
The initiatives include:
1.) A new refinancing option for Fannie Mae “underwater” borrowers that will allow for refinancing up to 120% of a property’s current value;
2.) A renewal and expansion of the company’s partnership with State Housing Finance Agencies (HFAs) to provide $10 billion in financing for qualified, first-time home
3.) In partnership with Self-Help, a new initiative that allows families in hard-hit communities to reside in foreclosed properties on a rent-to-own basis; and 4) pricing for new jumbo-conforming loans that will be flat to conforming for portfolio asset acquisition through the end of the year.
Refinancing “Underwater” Borrowers
With home prices declining in many areas of the country and lending standards tightening as a result of the ongoing turmoil in the housing finance system, many borrowers find themselves with mortgages that exceed the value of their homes and are locked out of refinancing into safer loans that would allow them to sustain their mortgage payments.
In order to assist borrowers whose home equity is “underwater,” reduce foreclosures, and support sustained homeownership, Fannie Mae will purchase refinanced loans the company owns for up to 120% of the current property value provided the borrower is current with their mortgage payments.
HFAs exist to provide affordable homeownership and rental housing opportunities within their states. The majority of HFA single-family business is for first-time home buyers who have received borrower counseling and down payment and/or closing cost assistance from the government.
Fannie Mae has maintained a long-term agreement with the National Council of State Housing Agencies (NCSHA) to purchase loans generated by the HFAs. The company is renewing and expanding its agreement with NCHSA to purchase up to $10 billion in HFA loans by the end of 2009. In addition, the company will provide access to low down payment mortgage products at competitive prices, resulting in more advantageous financing opportunities for first-time home buyers.
In order to minimize the neighborhood impact of foreclosed properties, Fannie Mae will support an initiative with Self-Help in partnership with local nonprofits to purchase foreclosed homes in hard-hit neighborhoods.
The nonprofits would acquire and rehab the properties, and then sell them to qualified borrowers or enter into a customized lease-purchase agreement. The initiative will be geared toward borrowers who have the income to qualify for the home purchase, but need additional time to improve creditworthiness. Participants choosing the rent-to-own option would be granted up to five years to qualify for the mortgage and receive extensive credit counseling during the lease period.
Following passage of the Economic Stimulus Act of 2008, Fannie Mae is temporarily able to purchase loans greater than the conventional-conforming loan limit of $417,000. In certain high-cost areas as designated by HUD, the company is able to purchase jumbo-conforming loans up to $729,750 in the continental U.S. The company is now accepting deliveries of 15-year and 30-year fixed-rate (FRM), and certain adjustable-rate (ARM), jumbo-conforming mortgages.
In order to bolster liquidity in the jumbo-conforming market and help reduce rates for jumbo-conforming mortgages in high-cost areas, the company will now:
• Price new jumbo-conforming loans flat to conforming for portfolio asset acquisition through the end of the year. This means that although jumbos are not TBA-eligible, we will be pricing them as if they were.
• Allow for cash-out, jumbo-conforming loan refinancings.
• Expand loan-to-value (LTV) criteria for jumbo-conforming purchase loans and limited cash-out refinancings.
• Offer expanded jumbo-conforming FRM and ARM options.
The company’s Keys to RecoveryTM efforts build on Fannie Mae’s HomeStay® initiative announced last year.
The company is working with lenders, loan servicing companies, and policy makers to respond to the housing and mortgage market crisis with a goal to minimize the impact on families and communities by preventing foreclosures, supporting counseling efforts, and providing market stability.
Through HomeStay®, since the beginning of 2007, the company has:
• Helped more than 200,000 at-risk homeowners refinance into safer loans or work out their loans, including nearly $28 billion in refinancings for subprime borrowers.
• Provided more than $10 million in grants – and hundreds of employee volunteer hours – to support foreclosure prevention counseling and workshops since the housing crisis deepened last year.
• Worked with loan servicers to emphasize work-outs for delinquent loans, instituted attorney incentive fees for workouts, provided HomeSaver AdvanceTM loans that allow borrowers to catch up on their delinquent mortgage payments, deployed staff to work on-site with our largest servicers, and made dozens of operational changes and enhanced servicer authorities to allow for easier modifications and work-outs.
• Supported HOPE NOW initiatives and public policies to give at-risk and delinquent borrowers a better chance to afford their mortgages.
National Down Payment Policy
On May 16, 2008, the company announced a new, single down payment policy in all communities across the nation for conventional, conforming mortgages the company will purchase or guarantee. Starting with loan applications taken on June 1, 2008, Fannie Mae will accept up to 97% loan-to-value ratios for conventional, conforming mortgages processed through its Desktop Underwriter® automated underwriting system, and 95% loan-to-value ratios for loans underwritten outside of Desktop Underwriter, in all geographic locations in the United States.
This new national down payment policy will supersede the “Maximum Financing in Declining Markets Policy” Fannie Mae adopted in December 2007, which required higher down payments in markets where home prices are declining. The new policy now equalizes down payment requirements across the country, regardless of local market conditions.
For more information, visit www.FannieMae.com.
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