Fannie Mae Announces Enhancements to HFA Preferred, HomeReady Products

Fannie Mae announced Tuesday that it will be making several adjustments to its affordable HomeReady product that it believes will allow the product to serve more low- and moderate-income borrowers. Fannie Mae has informed NCSHA that these adjustments will also be incorporated into its HFA Preferred Products.

One of the more substantial changes will exempt any borrower who receives customized one-on-one counseling from a HUD-approved counselor from the mandatory online counseling otherwise required for HomeReady borrowers. HFAs may also waive their counseling requirements for HFA Preferred borrowers that receive such one-on-one training. For the borrower to qualify for the exemption, the training they receive must “assess the borrower’s current financial situation, address credit challenges, develop a workable budget, help determine whether it is the appropriate time to become a homeowner, and educate the borrower on the home buying process and responsibilities of homeownership.”

Starting later this year, mortgagees who deliver to Fannie Mae HomeReady or HFA Preferred loans for borrowers who received HUD-approved one-on-one counseling will be eligible to receive a $500 rebate from Fannie Mae. Fannie Mae also intends in the near future to allow such counseling to be used as compensating factor when underwriting loans for borrowers with debt-to-income ratios above 45 percent but below 50 percent.

Other changes include:

• Allowing HFA Preferred and HomeReady occupant borrowers to own other residential properties;

• Removing the education requirement for limited cash-out refinances;

• Eliminating the requirement that borrowers receive landlord education when purchasing multi-unit homes;

• Allowing, on a case-by-case basis, for banks and other financial institutions to fund down payment assistance grants in order to meet obligations under the Community Reinvestment Act (CRA) and other regulations, provided that such assistance is not financed through the mortgage transaction itself.

Except as noted above, all of these policy changes will become effective immediately. However, Fannie Mae’s Desktop Underwriter (DU) system has not yet been updated to reflect the changes. Until DU is updated, Fannie Mae suggests that mortgagees disregard any messages they receive from DU that conflict with the new policies.