Will mortgage lenders offer 3% down GSE products?

Bank of America is not doing FHFA mortgages but AMCAP is

The housing industry is not as quick to jump onboard with the Federal Housing Finance Agency’s decision to offer 97% loan-to-value products.

During a call over the announcement Monday morning, FHFA officials noted that they weren’t sure who would accept the products. “It is too early to tell who will be offering it. Lenders have been waiting for the full announcement.”

In October, FHFA Director Mel Watt announced a number of policy steps aimed at increasing mortgage credit availability at the Mortgage Bankers Association Convention & Expo in Las Vegas. This was then followed up with Fannie Mae announcing at the conference that it would soon begin to offer 97% loan-to-value products.

Shortly after the conference, Bank of America (BAC) came out saying that it does not plan on easing its mortgage standards or offering 3% down mortgages, despite regulators seeking to expand lending.

But not all lenders are shying away. There are nonbank lenders like AMCAP Mortgage, which is based in Houston, whose CEO and Director Garrett Clayton told HousingWire that this is definitely a product it would offer. 

In September, The Wall Street Journal reported that the government released a new proposal for Fannie Mae and Freddie Mac to start purchasing more low-income refinancings in order to show support for such loans.  The article explained that although the FHFA hopes that increasing demand for low-income mortgages from Fannie and Freddie will spur lenders and non banks to make more of these loans.

“Our philosophy is that we are a sell organization, and if that is a product that the agencies are going to put out there, we will have to offer that to our loan originator base,” Clayton said. “From the mortgage side, why would anyone say this is not a positive?”

Additionally, Cari McCue, executive vice president and chief operating officer with Guardian Mortgage Company said Guardian Mortgage would be offering this product. "The main benefit is the lower down payment requirement. This will allow more borrowers that have the ability to repay to qualify for loans. It will broaden the scope for more borrowers to enter the market of homeownership," McCue said.

Then outside of non banks, Wells Fargo (WFC) said it is currently in the process of examining the new product.

“Wells Fargo is pleased to see the recent policy announcements from Fannie Mae and Freddie Mac. These guidelines may reduce lenders’ risk and simultaneously improve credit conditions for qualified, prospective borrowers. Additional clarity about performance benchmarks and life of loan exemptions may also result in greater confidence across the credit spectrum,” a Wells Fargo spokesperson said.

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