Written By: Joel Palmer, Op-Ed Writer
Freddie Mac recently announced an initiative that continues an industry trend toward making mortgage loans more accessible.
Freddie will launch its new HomeOne mortgage on July 29. HomeOne is a conventional 3 percent downpayment mortgage for qualified first-time homebuyers.
The agency's goal with HomeOne is to qualify more first-time homebuyers.
In its latest mortgage rate survey, Freddie Mac noted that first-time buyers were having success obtaining financing despite higher mortgage rates and escalating home prices. Its data through April showed first-timers represent 46 percent of purchase loans, up from 43 percent over the same period a year ago.
Freddie said HomeOne will provide lenders “the flexibility they need to help borrowers anywhere in the country achieve the milestone of homeownership and overcome the common down payment resource hurdle.”
There are no geographic or income restrictions on HomeOne mortgages. The program can be used for single-family properties, including townhouses and condos, though not for manufactured homes. Purchase transactions and “no cash-out” refinances are eligible.
Additional HomeOne rules include:
• Super conforming mortgages are not permitted.
• Construction Conversion and Renovation Mortgages originated per Guide Chapter 4602 are permitted.
• The HomeOne mortgage must be underwritten through Freddie Mac’s Loan Product Advisor, which makes a complete risk assessment based on several factors as it relates to credit, capacity and collateral. Manually underwritten mortgages are not eligible.
• The program only applies to conforming fixed-rate mortgages.
• At least one of the borrowers must be a first-time homebuyer.
• At least one borrower must participate in homeownership education, which can be fulfilled through Freddie Mac’s CreditSmart program or another acceptable program.
The GSE is not replacing its Home Possible program, launched in 2014 to help low-to-moderate income buyers. Instead, Freddie is making changes to that program to make it a complement to HomeOne.
Freddie is updating the income limits for Home Possible:
• For all Home Possible mortgages, with the exception of those secured by properties located in a low-income census tract, the borrower’s income, converted to an annual basis, must not exceed 100% of the area-median-income (AMI).
• There will continue to be no income limit for homes located in low-income census tracts where the median income is at or below 80 percent AMI.
The announcement of HomeOne comes at a time when mortgage processors and underwriters, as well as the rest of the mortgage lending industry, are debating whether mortgage lending standards are still too tight or whether they are becoming too lenient.
A number of new rules and initiatives have been introduced by GSEs and the FHA in the last year to make mortgages more accessible. But consumer advocates say mortgages are still relatively difficult to obtain.
About the Author
As an NAMP® Opinion Editorial Contributor, Joel Palmer is a freelance writer who spent 10 years as a business and financial reporter and another 10 years in marketing for the insurance and financial services industries. He regularly writes about the mortgage industry, as well as residential and commercial real estate, investments, and retirement income planning. He has also ghostwritten books on starting a business, marketing, and retirement income planning.