Freddie Mac today announced it is expanding the list of mortgage products available through its Web-based Selling System this summer by adding a new array of 40-year fixed-rate mortgages and 20 more adjustable-rate mortgage products and federally insured rural housing mortgage products.
Freddie Mac officials also announced they are beefing up the company’s flagship suite of Home Possible affordable mortgage products by adding a special 40-year fixed-rate option and providing lenders with more competitive selling options.
Separately, the company said it is revising its property insurance requirements to facilitate mortgage purchases in coastal markets where insurers are raising their deductibles.
“Today’s announcements underscore our commitment to respond quickly to our customer’s call for more flexible products and faster decisions on one easy-to-use Web-based platform,” said Paul Mullings, senior vice president of Single Family Sourcing at Freddie Mac, “and further fulfill our pledge to build new pathways into the secondary market while delivering a superior business experience to our customers.”
The enhancements announced today at the Mortgage Bankers Association’s National Secondary Conference and Expo in Chicago are scheduled to begin rolling out this summer. They are being announced now to give Freddie Mac customers and other industry participants time to gear up to take full advantage of them once complete product requirements are released.
Fully implemented, the enhancements will make it possible for lenders to assess, price and deliver on a flow basis virtually every mortgage product offered in Freddie Mac’s seller/servicer guide. Today’s announcement also brings Freddie Mac’s legacy MIDANET system one step closer to final retirement.
40-Year Home Possible Mortgage: More House with Less Income
Freddie Mac is in the process of rolling out a comprehensive line-up of 40-year mortgage options beginning with a standard 40-year fixed-rate mortgage product, a 40-year version of the Freddie 100 no-down-payment mortgage product and a 40-year Alt 97 mortgage.
“This is just the beginning of a robust product strategy designed to give lenders a highly flexible array of 40-year products so more customers can better match their home-buying ambitions with their financial circumstances,” said James Cotton, vice president of Mortgage Sourcing at Freddie Mac.
The first set of planned enhancements include a 40-year fixed-rate version of the Home Possible mortgage that builds on Home Possible’s standard low down payments, flexible credit underwriting, and conforming conventional rates that aim to give cash- and credit-strapped borrowers even more buying power.
For example, by opting for a $200,000 40-year, no-down-payment Home Possible mortgage at today’s rates a borrower would need 3.5 percent less gross monthly income to qualify and enjoy a 4.5 percent cut in his/her monthly housing payment and 5 percent more home-buying power versus a 30-year version of the same mortgage.
“This is the next logical step for giving more Home Possible borrowers a responsible way to lower their monthly payment and make successful, long-term homeownership a reality,” Mullings said.
Announced in 2005, Home Possible was designed to expand affordable home-ownership opportunities by enabling qualified borrowers to finance single-family properties with as little as $500 of their own funds for down payments or closing costs.
Freddie Mac also said it is providing a servicing released cash-sale option to lenders who deliver Home Possible loans through Freddie Mac’s Web-based Selling System in response to customer demands.
Other Home Possible changes announced at the MBA Secondary will cut the minimum borrower contribution for financing 3-4 unit properties from 5 percent to 3 percent and enable borrowers to use Mortgage Credit Certificates and Rural Housing Service Leveraged Seconds.
Helping Borrowers Cope With Rising Insurance Deductibles
Freddie Mac officials told the MBA conference the company is in the process of aligning its underwriting policies to accommodate recent property insurance deductible increases triggered by the last two years of severe hurricanes in Florida and along the Gulf Coast.
Scheduled to take effect in July, the modification will increase the maximum deductible in Freddie Mac’s guidelines from 2 percent to 5 percent for fire, water (not caused by flooding) or wind damage coverage for 1- to 4-unit properties, condominiums and Planned Unit Developments (PUDs).
The change aims to give more borrowers access to lower mortgage rates through Freddie Mac loans in hurricane-prone areas and help support the housing recovery efforts along the Gulf Coast. The higher deductibles are also expected to help borrowers lower their annual insurance premiums. Freddie Mac estimates the lower premiums could generate enough savings to offset the higher 5 percent deductible within two to four years.
Twenty Additional ARM Structures
Additional enhancements planned for this summer will enable Freddie Mac customers to use Loan Prospector and the online platform to assess, price and deliver 20 additional rate and cap structures including ARMs with shorter lookback periods (first business day of the preceding month) and five new fully amortizing LIBOR-indexed ARMs with initial periods of 3 to 10 years, followed by 6-month adjustment periods. These five new ARMs will be available through the system’s WAC ARM Guarantor execution.
The Selling System expansion will provide users, for the first time, the capacity to assess, sell and deliver home-ownership products with a special focus on particular markets, such as non-assumable Guaranteed Rural Housing Mortgages and Section 184 Native American Mortgages.
Additional planned Selling System enhancements include the ability to settle FHA and VA mortgage-backed securities.