Blog

Keys to Recovery Initiatives

Fannie Mae’s Keys to Recovery^TM 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
buyers;
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.

HFA Investment

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.

Neighborhood Stabilization

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.

Jumbo-Conforming Loans

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.

HomeStay

The company’s Keys to Recovery^TM 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 Advance^TM 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.

RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com.

Related Articles:

By Marshall Loeb

RISMEDIA, May 29, 2008-(MCT)-Are you looking to sell your home but are worried about selling into the slumping housing market? By all accounts, the market is bad. A recent report out by the National Association of Realtors showed that sales of homes fell for the eighth time in the past nine months. Meanwhile, the supply of unsold single-family homes has risen to the highest level in 23 years. Given this environment, what is a homeowner looking to sell to do?

Though certainly not an easy feat, there are measures you can take to improve your chances of success. From Consumer Reports, here are five tips on how to sell your home in a difficult market:

- Pick the right broker. Look for local agents who are listing, marketing and selling in your community even if the market is slow. Ask several of them to make a “listing presentation” to discuss your home’s value, justify their numbers and explain how they would market your property. Once you decide on a broker, you have three types of listing options. In an open listing, you reserve the right to sell the home yourself and not pay a commission, but you also allow one or more brokers to offer the property. With an exclusive-agency listing, you have one broker but reserve the right to sell the property yourself. An exclusive-right-to-sell listing gives only one broker the right to represent you during the listing term and guarantees the broker a commission. Most Multiple Listing Services will post exclusive-agency and exclusive-right-to-sell listings.

- Understand the real marketplace. To negotiate effectively, you need to know up-to-the-minute sale prices-not just what your neighbor’s house sold for last year-and the deal-making behind them. For example, two homes may each have sold for $400,000, but if one owner gave a 3% credit for deck repair and a new furnace, that’s a $12,000 reduction. Your agent should be knowledgeable about the details of sales in your area and be nimble enough to revise the marketing plan for your home to reflect changing conditions.

- Sweeten the deal. Sellers are reportedly offering some unusual sales incentives-plasma TVs, cars, boat slips, vacations and golf carts-but cash may still be king. For example, some sellers have agreed to pay condo maintenance fees for the buyer. Other ideas include covering moving expenses or a month’s mortgage payment.

- Be flexible on the deposit. To “bind” a deal, the buyer should put down a deposit (separate from the down payment), which varies widely depending on the local market. You’d like the biggest deposit you can get, but in a slow market you may have to settle for less.

- Monitor and update your listing. If it’s April, you don’t want the photo of your house on the Multiple Listing Service displaying a snowman on the lawn. An out-of-season picture is a dead giveaway that your home has been on the market for awhile. And with many buyers doing their first “look-see” on the Internet, the quality of the photos is paramount too.

© 2008, MarketWatch.com Inc.
Distributed by McClatchy-Tribune Information Services.

RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com.

Economic News Impacts Both Short- and Long-Term Rates; Applications Drop

Long- and short-term interest rates each moved slightly during the week ended May 22 on the basis of larger economic news according to Freddie Mac's Primary Mortgage Market Survey.

Frank Nothaft, Freddie Mac vice president and chief economist reported that "Interest rates for fixed-rate mortgages fell slightly this week on news of both weaker industrial production in April and consumer sentiment falling in May to its lowest level since June 1980. ARM rates, however, rose slightly on market forecasts that the Federal Reserve (Fed) may not pursue any more rate cuts over the near term. For instance, the federal funds futures market suggests virtually no change in monetary policy over the next few months and the Fed viewed the last rate cut to be a "close call," according to the minutes of its most recent policy Committee meeting.

"Housing woes still plague the economy. Although housing starts unexpectedly rose in April, all of the gains were in multifamily properties. New construction on one-unit homes fell to 692,000 homes (annualized), which was the least since January 1991 and almost 62 percent below the peak set in November 2005. In addition, homebuilder confidence matched an all-time record low in May."