Fannie Mae Announces Improved Affordable Lending Product
August 25, 2015, Fannie Mae announced HomeReady™ mortgage, an innovative lending option aimed at helping creditworthy borrowers with lower and moderate incomes have access to an affordable, sustainable mortgage. HomeReady will replace Fannie Mae’s MyCommunityMortgage®.
HomeReady features new functionality for lenders through Desktop Underwriter® to automatically flag potentially eligible loans and fully leverage Fannie Mae’s integrated suite of risk management tools for greater certainty and efficiency.
Under the new guidelines, Fannie Mae pricing is favorable and simplified for lender use, and eliminates or caps standard loan level price adjustments. Borrowers will be required to complete an online education course preparing them for the home buying process and providing post-purchase support for sustainable homeownership.
The education course, called Framework, will be provided by the Housing Partnership Network and the Minnesota Homeownership Center, and meets the requirements of the HUD Housing Counseling Program and the National Industry Standards for Homeownership Education and Counseling.
For the first time, income from a non-borrower household member can be considered to determine an applicable debt-to-income ratio for the loan, helping multi-generational and extended households qualify for an affordable mortgage. Fannie Mae’s research indicates that these extended households tend to have incomes that are as stable or more stable than other households at similar income levels, positioning them well for homeownership.
Other HomeReady flexibilities include allowing income from non-occupant borrowers, such as parents, and rental payments, such as from a basement apartment, to augment the borrower’s qualifying income. First-time and repeat homebuyers can purchase a home using HomeReady with a down payment of as little as 3%.
Fannie Mae will provide additional details to lenders in the coming weeks through a Selling Guide announcement, with HomeReady guidelines anticipated for Desktop Underwriter inclusion in late 2015. Fannie Mae anticipates accepting loan deliveries under the HomeReady guidelines in late 2015 as well.
HomeReady will be available to borrowers at any income level for properties in designated low-income census tracts, and to borrowers at or below 100% of area median income (AMI) for properties in high-minority census tracts or designated natural disaster areas. For properties in remaining census tracts, HomeReady borrowers must have an income at or below 80% of AMI. Approximately half of census tracts will be subject to the 100% AMI limit or have no income limit.
HomeReady income guidelines are reflected in maps available on Fannie Mae’s website. These AMI eligibility determinations will be made in Desktop Underwriter when the lender submits the loan file. Later this year, Fannie Mae will provide online tools to help lenders determine specific income guidelines for HomeReady in their areas.
Anna DeSimone founded Bankers Advisory in 1986 and is a nationally recognized authority in residential mortgage lending. She has received numerous industry awards and has authored more than 40 best practices guides and hundreds of articles.
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