Fannie Mae, responding to congressional pressure, expanded its Community Home Buyers program to 544 central cities and announced several other changes that also should make it easier to securitize inner-city mortgages.
Besides increasing eligibility, the agency: * trimmed mortgage insurance fees for borrowers using the so-called 3/2 option; * waived mandatory home buyer education and counseling in some cases; * created a "second look" policy to review Community Home Buyer's loans within Fannie Mae, thus slashing the odds that a seller/servicer might have to repurchase a loan sold to Fannie: and * decided to consider exceptions to Fannie Mae's "declining market" policy in neighborhoods where community reinvestment efforts are under way. * Larry Dale, executive director of the Federal National Mortgage Association's National Housing Impact Division, noted that Fannie Mae already had a special program for residents of particular neighborhoods who had incomes up to 140% of the area?s median income. The special Community Home Buyers underwriting guidelines, available to seller/servicers who use the agency's FannieNeighbors program, required only 5% down payments on home mortgages.
Under the broadened eligibility program, FannieNeighbors loans now can be made anywhere within the boundaries of the 544 cities defined by the U.S. Office of Management and Budget to be the largest city in a metropolitan area. It also will be good in other cities that have populations of at least 250,000 or meet certain criteria regarding their employed residents.
Besides adding more cities, Fannie Mae also announced it will stop limiting the size of incomes eligible for 5% down payments and at times will waive its requirements that buyers have at least two months' cash reserves in order to qualify.
Dale, speaking at the new program's announcement in San Francisco on July 14, said the expansion to all 544 clues occurred because Congreas wanted it. He said members indicated they wanted more cities involved when they voted last year for legislation revamping laws overseeing the government-sponsored enterprises.