Read about other federal
■ Federal Housing Administration (FHA).
FHA loans require downpayments of only
3. 5 percent, have flexible underwriting standards and an easier approval process. Low
closing costs and recently lowered mortgage
insurance rates make these loans attractive.
■ U.S. Department of Agriculture (USDA).
USDA loans allow for 100 percent financing for
low- and moderate-income households buying,
building, refinancing or rehabilitating homes
in eligible rural areas.
■ U. S. Department of Veterans Affairs (VA).
For veterans and active members of the military,
VA loans allow for 100 percent financing and
never require mortgage insurance.
In addition to requiring just 3 percent down, Fannie
Mae has expanded the acceptable sources of funds
for downpayments and closing costs in the MCM pro-
gram. Downpayment funds can come from personal
gifts, gifts or grants from a qualified entity, employer
assistance and Community Seconds — mortgages
funded through state, local and community affordable
Another benefit of Fannie Mae’s MCM program is
that the Private Mortgage Insurance (PMI) requirement is 18 percent, instead of 35 percent for a standard
97 percent LTV loan. This lower rate translates to a
monthly savings of about $100 on a $250,000 loan.
Saving $100 a month is meaningful to almost every
first-time homebuyer, no matter what the market.
The MCM loans require prepurchase education and
counseling for first-time homebuyers to qualify for
the lower PMI percentage, so make sure you inform
your clients of that requirement when educating them
about this program.
If clients are skeptical about whether the MCM
program will work for them, originators can use
Fannie Mae’s automated underwriting system, Desk-top Underwriter, to provide fast determination if a
loan is eligible for MCM. The program even determines
borrower income levels needed to qualify for the
97 percent loan based on area median incomes (AMI).
These income levels vary, as do the adjustments
Can low-downpayment loans and assistance programs for first-time homebuyers stimu- late growth in the housing market? Yes, but with one big caveat: Doing so requires
originators and their partners to help educate potential homebuyers about all of the new options available
to them for getting loans.
The challenge is that potential buyers — especially
young, first-time homebuyers — may not know that
the Federal Housing Administration (FHA), U.S Department of Veterans Affairs (VA) and U.S. Department
of Agriculture (USDA) even exist, let alone that they
and various state-level agencies have programs that
can help qualified buyers make downpayments and
Education is critical. The Fannie Mae National Housing Survey found that consumer attitudes toward
future homebuying plans were flat this past March
compared with previous months. The share of respondents who said “now is a good time to buy”
was 67 percent this past January and February and
66 percent this past March.
Fannie Mae noted that the share of consumers who
believe it is a good time to sell a home “reached a new
survey high of 46 percent,” however. With the gap
narrowing between homeowners reporting it is a
good time to sell and buyers saying it is a good time
to buy, Fannie Mae believes we may be moving to-
ward “a more balanced housing market.”
Unfortunately, those respondents who said they
would buy a new home if they were going to move fell
from 66 percent in January and 65 percent in February
to 60 percent in March, a new survey low. Obviously,
something needs to change to boost consumer confi-
dence in the housing and mortgage markets.
Economists believe attitudes toward homebuying
can become more positive as the economy improves,
consumers gain more confidence in their financial
future and the mortgage industry finds more ways to
make it easier for first-time homebuyers to get loans.
This is why education is essential. Many such programs
already exist. Now it is up to originators to get the
The next few months will be critical. The Fannie
Mae survey noted that 52 percent of the respondents expect mortgage rates to rise in the next
year and 53 percent say home rental prices will rise.
Respondents also weren’t impressed by existing
efforts to ease eligibility requirements, with only
50 percent thinking it would be easy to get a home
mortgage, down from 54 percent in the previous
month. Consumer perceptions about the increased
difficulty of obtaining a home loan also rose from
43 percent this past February to 46 percent in March.
Help from Fannie Mae
First-time buyers having difficulty putting together
a downpayment may find help in the Fannie Mae
MyCommunityMortgage (MCM) program, which offers
affordable financing for qualified first-time homebuyers. MCM can be attractive in many markets
because it has a maximum 97 percent loan-to-value
(LTV) ratio, which is designed to attract more young
Catherine Blocker is executive vice president for production operations and a partner at Guild Mortgage. She joined
Guild in 1998 with a background in wholesale and retail
sales and operations at Weyerhaeuser Mortgage Company.
In 2001, Blocker was promoted to head of production
operations, assuming the leadership of underwriting and the
branch operations service center. She was instrumental in
reshaping the corporate culture to balance prudent underwriting with effective customer service. Reach Blocker at
The Key to Mortgage Industry Growth
Low-downpayment loans and assistance programs can jump-start the market
By Catherine Blocker
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