Now nearly one year in, Fannie Mae announced changes to its growing low-down-payment program in order to expand access to credit for more borrowers.
When the 3% down payment first began, it required at least one co-borrower to be a first-time buyer, but with the adoption of HomeReady last August came the option for both first-time and repeat homebuyers to purchase a home with as little as 3%.
Now, Fannie said a further update expands the program to expand access to credit and promote successful homeownership.
Here are the key changes from the announcement:
- Allowing the occupant borrower on a HomeReady loan to own other residential properties
- Removing the requirement for homeownership education for limited cash-out refinance transactions
- Eliminating the requirement for landlord education for HomeReady loans secured by two-, three, or four-unit properties (homeownership education is still required)
- Deleting references to post-purchase early delinquency counseling requirements to align the post-purchase counseling requirements for all Fannie Mae conventional mortgage loan types as recently described in Servicing Guide Announcement SVC-2016-05
- Accepting homeownership education from Community Seconds or Down Payment Assistance Program (DPAP) providers as long as the providers are HUD-approved counseling agencies and the first mortgage loan involves a Community Second or DPAP.
All of these changes are effective immediately and Desktop Underwriter will be updated in a future release to reflect these changes, Fannie said.
Fannie Mae noted that until then, lenders may disregard any messages that conflict with the changes described above.
When HomeReady was first announced, borrowers were required to complete an online education course to prepare them for the home-buying process and provide post-purchase support for sustainable homeownership.
The education course, called Framework, was provided by the Housing Partnership Network and the Minnesota Homeownership Center and based on the requirements of the HUD Housing Counseling Program and the National Industry Standards for Homeownership Education and Counseling.
In this new announcement, Fannie Mae broadened the options for borrowers to meet the homeownership education requirement.
A borrower can now obtain customized one-on-one assistance from a HUD-approved nonprofit counseling agency, Fannie noted.
“Such assistance will assess the borrower’s current financial situation, address credit challenges, develop a workable budget, help determine whether it is the appropriate time to become a homeowner and educate the borrower on the home-buying process and responsibilities of homeownership,” Fannie Mae stated.
Fannie Mae added that the assistance must meet HUD standards and cover the content detailed on the Certificate of Pre-purchase Housing Counseling (Fannie Mae Form 1017), which must be signed by the counseling recipient (the borrower) and the HUD counselor. The form certifies that the assistance provided meets HUD standards and Fannie Mae requirements, which the lender then must retain in the mortgage loan file.
The changes don’t end there though.
Fannie Mae also outlined in its release several other underwriting and eligibility updates that will be available for HomeReady borrowers later in 2016.
Future changes include:
- Allowing a maximum loan-to-value ratio greater than 95% up to 97% on limited cash-out refinance transactions in DU, per standard underwriting guidelines, including a requirement that the existing mortgage be owned or securitized by Fannie Mae to be eligible.
- Expanding current HomeReady eligibility for buydowns and adjustable-rate mortgage loans to include three-to four-unit properties.
The following additional benefits exclusively for HomeReady loans where borrowers have received customized one-on-one assistance from HUD-approved nonprofit counseling agencies in accordance with the requirements outlined above:
- If the HomeReady loan is delivered with Special Feature Code 184, the lender will receive a loan-level price adjustment credit of $500
- When the lender indicates in DU that the HUD-approved one-on-one assistance was completed, that information will be considered a compensating factor for those loan casefiles with debt-to-income ratios greater than 45% up to 50%.
Official details on these changes will be announced in a future Guide update and DU Release Notes, FannieMae said.
For more information on the HomeReady program, here is a factsheet on the program from Fannie Mae.