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Fannie Mae announced some recent changes to their HomeReady loan program, with more changes coming later. The intent is to make it easier for more people to qualify to buy or refinance a home. Are we heading down the same path that got us in trouble in the past?
The HomeReady program was developed by Fannie to increase the potential for low to moderate income consumers to purchase or refinance a home. This is a well-intentioned program to increase homeownership; give more people their shot at the American Dream.
Let’s take a look at the recent revision:
- Allow an occupant borrower to own other residential property
- Remove homeowner education for limited cash out refi’s
- No more landlord education for someone financing a 2 – 4 unit home
- Acceptance of 1 on 1 counseling from a HUD-approved agency. Counseling may be received through a HUD approved Community Second or DPAP provider when one of these programs are involved in the home’s financing.
For the most part, these look good. I have a little concern with the elimination of homeownership counseling for the refi’s and the landlord counseling for multi-unit homes. Studies have shown that counseling works.
Why not require it on all loans made to first-time, and low-moderate income borrowers, unless they can provide some satisfactory evidence of prior homeownership? Owning and maintaining a home is much more than just paying the rent on time.
For those taking on the responsibilities of being a landlord, the counseling couldn’t hurt and can be completed during the time it takes to approve the loan. This would benefit the borrower and Fannie Mae. There is much more involved in home ownership and maintenance when other units, and tenants, are involved.
Additional changes are planned for later this year. These include such things as increased LTV for limited cash out refi, offering buy downs and ARMs for multi-unit financing, and consideration of the 1 on 1 counseling to increase the max LTV up to 50%.
Read all about it in Fannie’s recent release (SEL-2016-06).
It’s good to offer programs to assist low to moderate income consumers in attaining their goal of owning a home. However, Fannie and others, need to be careful that we do not repeat the sins of the past by creating programs that could lead these consumers into trouble. Because this trouble that will adversely affect us all.
Careful underwriting , with comprehensive pre and post-closing reviews, are more critical than ever as we continue to ease the credit box and seek more ways to increase homeownership.
All good intentions, but you know what they say about “good intentions”…
Lend responsibly my friends.
