Will McDermott is editor of Scotsman Guide Residential Edition.
Reach him at (800) 297-6061 or firstname.lastname@example.org.
Vice president of product development and affordable housing
By Will McDermott
Jonathan Lawless is vice president of
product development and affordable
housing for Fannie Mae. He has been
with the government-sponsored
enterprise for more than 16 years
and is a mortgage industry analyst
who specializes in underwriting and
pricing analytics. Lawless has a Master of Science degree in finance from
George Washington University and a
Bachelor of Arts degree from
St. John’s College.
Mortgage program helps
millennials pay off student-loan debt
Fannie Mae over a year ago introduced a 3 percent downpayment program called HomeReady that is not
restricted to first-time homebuyers. This past October the government-sponsored enterprise also announced
a program that will benefit many millennials. That program is designed to help homebuyers pay off their
student loans using a modified cash-out refinancing program — which eliminates the standard cash-out
charge if the money is used to pay down student-loan debt. We talked with Jonathan Lawless about these
Fannie Mae affordable-housing initiatives.
How did the idea for the Student Loan Payoff Refi program come about?
The evolution of that program started from work Fannie Mae is doing to think about how to help and facilitate
the next generation of homeowners. … As we were looking at it, we happened to have two numbers in the same
place at the same time. The first number was the $1.4 trillion size of the overall student-loan debt market, which is
just a mind-numbingly large number. The other number was the total amount of equity that people had in housing, which today is getting close to $8 trillion. So we started thinking is there a way for us to leverage the equity
that exists in housing today to help unburden people who have student debt, so they may become homeowners
in the future.
Do you plan to expand this program?
Our hope is to be able to expand this to all our lenders in the first quarter of . The only thing that is contingent on is we hope to see if there is actual interest in the use of the product, and we should know that soon.
The other thing is that we will have to go through our regulator to ensure they sign off on it being used broadly.
You also have HomeReady. How is that different from other low-downpayment programs?
It has a few key features that make it powerful. It’s a low-downpayment program [for creditworthy low- to
moderate-income homebuyers]. The 3 percent down can come from the borrower, but also from gifts and grants.
So it is a very flexible low-downpayment program. A lot of consumers who typically would have had a big downpayment through savings have not experienced that because of heavy student debt or high rental costs.
Another situation [the program addresses] is the typical buy-up scenario. When [first-time homebuyers] decide
to move into a larger house that has historically been facilitated by the original downpayment, plus some meaningful amount of appreciation. What we’ve seen recently is a significant drop-off in that population because …
instead of having gained additional equity, they actually ended up losing their original downpayment.
Are you doing anything else differently with HomeReady?
The other set of features we’ve introduced as part of HomeReady are new ways to think about underwriting
borrowers, particularly as it relates to income. The most interesting feature is what we call extended household
income. This is a scenario in which families co-reside. Sometimes it’s multi-generational, where they split the
cost of living between two generations. The other situation we see frequently is families in the same generation
cohabiting in the same home and sharing the cost.
Historically, when underwriting these borrowers, the income, or support, of that other family was completely
ignored. For HomeReady we’re allowing that to be used. Shockingly 14 percent of mortgage holders today have
other significant earners living in the same household. If you look specifically at the Hispanic community, that
number is 24 percent.
What other plans are you looking into?
The next significant thing that [Fannie Mae] has announced is not a specific product or program related to
affordable housing, but it is our belief it will help the lending community get comfortable lending in the
affordable space. We’re leveraging data and technology to deliver what we call Day One Certainty, meaning:
“You make this loan. That loan is done. The data is validated. You’re not going to have a future concern around
that.” We think that is going to get a lot more lenders comfortable with lending and particularly lending to
riskier consumers, which tends to be more of your affordable segment. n