FHA, Freddie Mac Announce Mortgage Enhancements
Written By: Joel Palmer, Op-Ed Writer
Assistance may be on the way to mortgage underwriters and processors to help offer mortgages to more potential borrowers.
Last week, several products and proposed rules were announced that were specifically target to low-income and moderate-income homebuyers.
Freddie Mac released a pair of enhancements.
One was a change to its HFA Advantage mortgage. Freddie Mac plans to expand the types of loans it will purchase through this offering.
The most notable change is that Freddie is adding manufactured homes and two- to four-unit properties to the list of acceptable properties for HFA Advantage.
Additional changes to HFA Advantage include:
The inclusion of non-occupant borrowers.
Expanded credit risk assessments within Loan Product Advisor® (LPASM).
The ability to offer the HFA Advantage mortgage—or rerun existing loans—to more borrowers due to recently updated AMI values issued by the Federal Housing Finance Agency.
HFA Advantage was launched in 2015. It’s available to housing finance agencies and participating lenders. It helps buyer obtain qualifying mortgages by leveraging the affordable requirements of Freddie Mac Home Possible, the company’s 3 percent low down payment mortgage offering.
Freddie Mac also announced a change in its underwriting standards.
It will now include a review of a borrower’s bank account data to identity a history of positive monthly cash flow.
This industry-first innovation will be available to mortgage lenders nationwide through Freddie Mac’s automated underwriting system, Loan Product Advisor (LPASM), beginning November 6.
With the borrower’s permission, lenders and brokers can submit financial account data for LPA to identify 12 or more months of cash flow activity for inclusion in the tool’s risk assessment. Data can be obtained from checking, savings and investment accounts. The account data submitted can only positively affect the borrower’s credit risk assessment. To help identify opportunities, LPA will notify lenders when submitting additional account data could benefit a borrower.
“With the addition of positive monthly cash flow data, our underwriting system can help with more accurately predicting a borrower’s ability to pay their mortgage because it uses a comprehensive view of how personal finances are managed over time,” said Terri Merlino, Freddie Mac Single-Family senior vice president and chief credit officer.
Lenders and brokers can obtain this data from designated third-party service providers using the same automated process they currently use to verify assets, income (using direct deposit), employment, and on-time rent payments via a single report through LPA’s asset and income modeler (AIM).
The Federal Housing Administration (FHA) is also working to expand mortgage lending opportunities. Last week it released a proposed rule to increase and index the loan limits for its Title I Manufactured Home Loan Program. This program insures loans used to finance manufactured homes titles as personal property.
“Adjusting loan limits to current market conditions will make Title I a much more useful source of affordable loan financing for manufactured homes,” said Federal Housing Commissioner Julia Gordon. “This proposal is the next step in FHA’s ongoing work to support manufactured housing as an affordable and attractive option in a challenging housing market.”
Loan limits for the program were last updated by the Housing and Economic Recovery Act of 2008. The proposed rule would establish indexes that annually calculate and adjust loan limits using sale prices, number of sections of the manufactured home, and property data collected by the U.S. Census Bureau.
Comments about the proposed rule will be accepted through December 19, 2022. Comments can be submitted at www.regulations.gov.
About the Author
As an NAMU® 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.
