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FHFA Director Watt gives small glimpse into status of 3% down programs

Here's who has used the program

Since Fannie Mae and Freddie Mac unveiled their low down mortgage programs back in 2014, there hasn’t been a lot of detail given around the status or success of the programs.  

Both programs from the government-sponsored enterprises are intended to help more first-homebuyers and other qualified borrowers jump into the market.

And so far, according to the latest data, first-time homebuyers are beginning to trust it.

The information is still sparse, but it’s one of the first times the government has put out information on the programs.

In Federal Housing Finance Agency Director Mel Watt’s testimony for his hearing before of the House Financial Services Committee, he gave a brief update on the low down programs when talking about new credit initiatives.

“FHFA continues to work with the Enterprises on other access to credit initiatives, including low-down payment programs,” said Watt. “FHFA and the Enterprises’ analysis showed that many borrowers were creditworthy and could sustain paying a mortgage, but did not have the money or wealth to cover a large down payment and closing costs.”

As a result, Watt stated that in 2014, FHFA approved a limited program that allowed the enterprises to purchase mortgages with a 3% down payment.

Between 2015 and June 2017, the GSEs have purchased more than 130,000 mortgages with a 3% down payment. And, Watt said, “The program is continuing to grow.”

Watt also noted that the average loan amount has been about $180,000, and more than 95% of these borrowers were first-time homebuyers.

“The enterprises also allow reduced fees when the borrower’s income is at or below the area median income,” said Watt. “When evaluating a borrower’s eligibility for these loans, both Enterprises establish purchase guidelines and underwriting standards that include appropriate compensating factor requirements and risk mitigants.”

So while it isn’t a lot of information, some of last comments on the program came from Donald Layton, Freddie Mac CEO, about a year ago.

In an interview with HousingWire after the government-sponsored enterprise posted its second-quarter 2016 earnings, Layton simply quantified the success of the 3% down as “rapidly growing in demand.”

He also noted that the 97% LTV product has significantly attractive characteristic for first-time homebuyers.

However, at the time, he said that the numbers were not large enough to be driving an increase yet.

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