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Opinion, commentary, and analysis on everything that makes the U.S. housing economy tick -- not to mention the ghosts in the machine, too. Written by HW's team of editors and reporters each business day.

Second look: Here's where Fannie got it right

Examining the Fannie Mae mortgage assistance for HomePath

April 17, 2015

On Wednesday I discussed the new Fannie Mae HomePath Ready Buyer program, and there are some things I should clarify.

Now, before we go forward, no one at Fannie put me up to this, or even pressured me to blog positive. What follows is the result of my research into the details of the program. And, as it turns out, I'm my own worst ombudsman.

In discussing it I was breezy with my words in a way that conflated the assistance the program provides in closing costs with the issue of down payment. My larger point is that I think buyers should be required to save up the initial cost of getting a mortgage – both down payment and closing cost – because “skin in the game” but that’s not really a fair thing to conflate.

Under the program, qualifying first-time homebuyers can receive up to 3% of the purchase price of the subject property in closing cost assistance toward the purchase of a HomePath property.

On a $150,000 home, this could result in up to $4,500 in savings for the buyer, Fannie said. In addition, Fannie Mae will reimburse the $75 cost of the homebuyer education course at the time of closing.

The education program that is a requirement for this program is also much more comprehensive and interactive than it seemed at first blush.

Fannie Mae is partnering with Framework, a nonprofit created by the Housing Partnership Networkand the Minnesota Homeownership Center, to create the homebuyer education course.

The course, which contains nine, thirty-minute sessions, is entirely online. The course offers homebuyers a homeownership education course that covers both the complexities of home buying and the responsibilities of owning a home.

And this assistance program is only for Fannie’s REO (foreclosed) inventory, so even if this were to be a bust, the extent of it is limited. And it looks like it shouldn’t be a bust.

I stand by my overall assessment of the growing risks in GSE backed loans, of the political push to loosen credit and underwriting being a Bad Thing™, the lowering of minimum LTVs a Very Bad Thing™, and the weakness of the housing market being a Real Thing™ as part and parcel of the overall weakness of the economy. And I do think that Ed Pinto had some great points I stand by when he said a better alternative might be to use the 3% closing cost help and the 3% down payment to buydown a Wealth Building Home Loan.  

But the program has its strong suits, too, and we'll see how it performs. 

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