September, 2015

Fannie Mae Just Made It Easier To Get a Mortgage

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Lending product HomeReady expands to include refis

homeready-logo-stackedThe government is once again expanding access to credit in an effort to capture a wider audience by making homeownership more available through Fannie Maes latest update.

Thanks to new research and lender input, Fannie Mae announced its new HomeReady mortgage that will replace MyCommunityMortgage, Fannie’s previous affordable lending product.

The latest product is designed to help creditworthy borrowers with lower and moderate incomes access an affordable, sustainable mortgage.

“HomeReady will help qualified borrowers access the benefits of homeownership with competitive pricing and sustainable monthly payments,” said Jonathan Lawless, vice president for underwriting and pricing analytics at Fannie Mae.

“We are also confident this mortgage option will create business opportunities for lenders serving the changing demographics and borrower needs seen in today’s market.

Back at the end of last year, Fannie expanded its MyCommunityMortgage product to include an option for qualified first-time homebuyers that would allow for a down payment as low as 3%.

At the time, the 3% down payment option was only allowed if at least one co-borrower was a first-time buyer. However, with the new update, first-time and repeat homebuyers can purchase a home using HomeReady with a down payment of as little as 3%.

Lenders can now also reach a wider audience due to a new functionality through Desktop Underwriter that will automatically flag potentially eligible loans.

In addition, lenders can fully leverage Fannie Mae’s integrated suite of risk management tools for greater certainty and efficiency.Desktop Underwriter-Logo

While this will still be a small percentage of Fannie’s portfolio overall, this update will still help lenders find borrowers who are getting skipped over.

Also, in more good news for lenders, Fannie Mae’s pricing is more favorable and simplified for lender use, and eliminates or caps standard loan level price adjustments.

This is welcomed news after Tuesday’s announcement from the Mortgage Bankers Association that total loan production expenses – commissions, compensation, occupancy, equipment, and other production expenses and corporate allocations – decreased to $6,984 per loan in the second quarter of 2015, from $7,195 in the first quarter of 2015.

As for borrowers, they will be required to complete an online education course to prepare them for the homebuying process and provide post-purchase support for sustainable homeownership.

The education course, called Framework, is provided by the Housing Partnership Network and the Minnesota Homeownership Center, and is based on the requirements of the HUD Housing Counseling Program and the National Industry Standards for Homeownership Education and Counseling.

Additionally, the lending requirements borrowers simplified.

Equal HousingUnder the update, 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. According Fannie Mae’s research, 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.

Fannie will provide more 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 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.

By: Brena Swanson, Housingwire.com

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Are REOs ready for a comeback?

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Clear Capital: Increases in distressed, seasonal changes suggest yes

A new report from Clear Capital suggests that REOs and short sales may be on the rise again.

“With stocks plummeting last week and the global economic impact on our domestic economy and housing markets still unknown, distressed sales continue to be a critical market indicator,” the report says. “Just like in the fashion industry’s iconic September issue, learn to be a trendsetter—from stateside to Puerto Rico—by letting distressed market measures give you full perspective of the market.”

REO comeback 1Nationwide, quarterly distressed saturation (or the percentage of REOs and short sales to all sales) increased by 0.7% in August 2015, from 15.4% to 16.1%. While we are closer to historic, pre-2008 rates of distressed saturation which hovered around 4% of all sales, increases in distressed activity leading into winter could shift momentum towards peak distressed saturation levels of 40%.

Notably, the West’s and Midwest’s distressed saturation rates have exceeded that of the nation, increasing by 0.9% and 1.2%, respectively, while the largest gains in distressed saturation came in the South, with a 1.5% increase from 18.6% to 20.1%. The Northeast was the only region to experience a decrease in distressed saturation, where rates dipped 0.3% from 14.3% to 14.0%.

“Distressed saturation continues to be a challenge we face in today’s housing market,” says Alex Villacorta, vice president of research and analytics at Clear Capital. “In fact, today’s ‘traditional’ housing market continues to be defined by distressed saturation levels. In Act One, at the start of the downturn, distressed properties were an albatross around housing’s neck. In Act Two, between 2011 and 2013, investors stepped in, buying, rehabbing and selling or renting distressed properties, which gave way to higher demand and rising prices.

“While the overall effect of higher rates of distressed saturation in Act Three of the recovery is unknown, one thing is clear; when it comes to housing, REOs and short sales are not a passing fad,” Villacorta said.

For the past three years, distressed saturation in the San Juan MSA has been steadily increasing, having grown eight percentage points, from a reading of 9% in 2013 to 17% today. This trend is unusual in the current housing environment. Over the same three year period, nearly all of the major metro markets have experienced steady declines in distressed saturation. In terms of pricing, this near doubling of the saturation rate has corresponded with a rapid change in price declines from a yearly loss of 1.5% in 2013 to a yearly rate of decline of 10.2% today.REO comeback 2

 The Midwest is the only region to see quarterly gains in price appreciation, nearly doubling from 0.4% to 0.7%. The region still lags behind the West, which experienced declining gains of 0.1 percentage points, yet still continues to report highest quarterly growth at 1.2%. The South and Northeast appreciation rates remained stagnant, reporting 0.8% and 0.2% growth over the quarter. (Chart 1)

Regional performance is echoed at the MSA-level. The San Jose, CA and Detroit, MI MSAs both report healthy growth rates of 2.1%.

While the South did not see accelerated price gains, continued growth through August could be a sign that this region is on firm footing moving forward. Seven of the 15 top performing markets are located in the South, while four of the lowest performing MSAs are in the Northeast.

Villacorta said that last week’s crash leaves the economy and housing tenuous at best, especially as we move from the promise of the summer buying season. The last third of the year will reveal whether the housing recovery can withstand broader global volatility.

“If investors pull out, oversupply of distressed inventory could bring us back to Act One,” he said. “Or, a renewed source of distressed inventory could revive demand from investors and traditional homebuyers, alike, in an inventory-starved market. The driving factor will be whether traditional consumers will be willing, and more importantly, be able to participate. As the global and domestic economic outlook unravels, we will continue reporting on its effect on housing.”

By Trey Garrison

Reprinted from Housingwire.com

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