Freddie Mac, Fannie Mae Programs Offer Financing with a 3% Downpayment

 Freddie Mac (OTCQB: FMCC) on Monday, Dec. 8, 2014  launched Home Possible Advantage(SM), an affordable conforming, conventional mortgage with a three percent downpayment requirement designed to make responsible homeownership accessible to more first-time buyers and other qualified borrowers with limited downpayment savings.

"Home Possible Advantage gives qualified borrowers with limited downpayment savings a responsible path to homeownership and lenders a new tool for reaching eligible working families ready to own a home of their own, " said Dave Lowman, executive vice president, single-family business at Freddie Mac. "Home Possible Advantage is Freddie Mac's newest effort to foster a strong and stable mortgage market."

Bloomberg News reported Monday, Dec. 8 that Fannie Mae, another GSE, starting Dec. 13 will allow three percent downpayments to buyers who get housing counseling.

The Bloomberg News story also reported that the moves to lower downpayments from the current 5 percent to 3 percent have been criticized by housing industry experts and some Republican congressmen.

From the Bloomberg News story: "Representative Jeb Hensarling [R-Texas], the chairman of the House Financial Services Committee, has faulted the idea as a return to the policies that caused the housing crash.

"Officials of Fannie Mae and Freddie Mac said rules banning risky loan features will ensure that the new low-downpayment mortgages are safe. Only borrowers buying or refinancing a single-family primary residence will be eligible.

"Fannie Mae will allow borrowers who haven’t owned a primary residence within the last three years to qualify. Freddie Mac’s program will be limited to people who’ve never owned a home, those with moderate incomes or buyers in under-served areas.

"Borrowers who currently have loans backed by either of the two companies will be allowed to refinance with as little as 3 percent down. Fannie Mae borrowers will be allowed to take cash out for closing costs; Freddie Mac (FMCC) borrowers will not."

 On Tuesday, Dec. 9, 2014, Kevin Kelly, chairman of the National Association of Home Builders (NAHB),  issued the following statement regarding announcements by Fannie Mae and Freddie Mac of programs to purchase mortgages with downpayments of as little as 3 percent:

“NAHB commends Fannie Mae and Freddie Mac for instituting new loan guidelines that will allow creditworthy borrowers to obtain mortgages with a downpayment of 3 percent. One of the biggest obstacles to achieving homeownership is the ability to come up with a downpayment. By reducing upfront cash requirements while establishing tough but fair underwriting guidelines that include a number of safeguards, Fannie and Freddie will open the door to homeownership for more American families, particularly first-time home buyers and younger households.”

Key Facts About the Freddie Mac Program:

  • Home Possible Advantage offers qualified low- and moderate-income borrowers a conforming conventional mortgage with a maximum loan-to-value ratio of 97 percent.
  • Home Possible Advantage mortgages can be used to buy a single unit property or for a "no cash out" refinance of an existing mortgage.
  • First time homebuyers must participate in an acceptable borrower education program, like Freddie Mac's CreditSmart®, to qualify for Home Possible Advantage.
  • Home Possible Advantage mortgages are available as 15-, 20-, and 30-year fixed rate mortgages.

For more information, visit Lenders should contact their Freddie Mac representative and interested borrowers should contact a Freddie Mac lender.

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