Transcript MyCommunity Mortgage for Housing Finance Agencies

MyCommunity Mortgage
for
Housing Finance Agencies
Sheryl Krocek, Presenter
U.S. Bank Home Mortgage – MRBP Division
January 24, 2005
What is MyCommunityMortgage™
(MCM)?
MCM is Fannie Mae’s affordable lending product
developed to serve low and moderate-income
communities and borrowers.
MCM can help you:
•Say “yes” to more borrowers
•Reach a broader audience of
borrowers with the standard
MCM product plus options
for additional flexibilities
Options include:



Community SolutionsTM (for
education employees)
Community HomeChoiceTM
Section 8 for
Homeownership
MCM for Housing Finance Agencies
• An affordable, Conventional Mortgage
for HFAs
• Offers a wide range of flexibilities
• Available within or outside of HFAs’
MRB programs
MCM for Housing Finance Agencies
Lender Benefits
• Conventional product for HFA programs
• MyCommunityMortgage flexibilities
• Underwriting available through DU
MCM for Housing Finance Agencies
Consumer Benefits
• Affordable, flexible product may be combined
with HFA programs, such as down payment
assistance
• LTVs up to 100%
An Affordable, Flexible Mortgage
MyCommunityMortgage™ makes it easier than ever
to afford a home of your own.
You need as little as $500 from your own funds
(remaining necessary funds can come from a variety of sources including
gifts; grants; loans from relatives or nonprofit groups; employer-assisted
housing; or a secured loan from a lender).
With MyCommunityMortgage™, your lender will
work with you to consider all types of income and
credit histories to help you qualify for the mortgage
that you need.
Is This Mortgage Right for You?
If any of these situations describes you,
MyCommunityMortgage might be a good fit:
• You have limited savings for a down payment and/or
closing costs
• You do not have a “traditional” credit history, but can show
other ways that you have handled credit well, such as
paying rent
• You receive rent payment from boarders, or income from
government benefits, or other sources
MCM: Eligibility Parameters
Loan Purpose
Purchase
Product Types
• 30-year fixed rate
Eligible Properties
• One-unit owner-occupied only (condos are allowed)
Home Buyer
Education
• Home-buyer education is required for all buyers
Underwriting
• Eligible for Manual Underwriting
• For DU, Approve/Eligible, EA-I/Eligible, and EA-II/Eligible
 Nontraditional credit accepted, but for DU, at least one
borrower must have a traditional credit history as
determined by DU
 Credit and income-source flexibilities available, including
boarder income from non-relatives
MCM: Eligibility
Borrower Income
and Purchase Price
Eligibility
• Borrowers must meet both income and purchase price limits
set by the HFA
LTV/CLTV and
Subordinate
Financing
• 100%/105% w/Community Seconds®; 100%/100% w/
subordinate financing (non–Community Seconds) if allowed
by the HFA
• Minimum CLTV for DU underwriting: 95%
•No minimum CLTV for manual underwriting
• Financed MI permitted with LTV up to 100% including the
financed MI (1-unit only)
Minimum
Borrower
Contribution
• $500 from borrower’s own funds
MI Coverage
as of 7/24/05
• 97.01% - 100.00%: 20% • 85.01% - 90%: 12%
• 95.01% - 97%:
18% • 80.01% - 85%: 6%
• 90.01% - 95%:
16%
Seller Contribution
• 3% interested party contribution allowed for closing costs
and prepaid items only
Counseling Requirements
• Pre-Purchase Counseling is required for all home buyers,
utilizing one of the following forms of pre-purchase
counseling:
Face-to-face home-buyer education
Classroom or workshop sessions
Telephone/Internet education/counseling program by
an approved mortgage insurer sponsored by the
lender
• Early Delinquency Counseling MUST BE IN PLACE!!
Enhancements Effective July 2005
• Lower minimum required mortgage insurance
coverage – highest rate of 20 percent
• Cash-on-Hand added as an acceptable source of
funds for closing costs and down payment
• New Fannie Mae collections policy applied for
loans underwritten through Desktop Underwriter
(DU®)
Example of Borrower Savings
Hypothetical example of borrower savings, 20% vs. 35% MI coverage:
$100,000 loan, 100% LTV, 5.65% interest rate, 30-year fixed-rate
20% MI
MI Standard Rate
MI monthly payment*
Income to qualify assuming
43% housing ratio:
MI A– Rate, 619 FICO®
MI monthly payment*
35% MI
$49
$80
Monthly savings: $31
$22,132
$22,993
$114
$157
Monthly savings: $43
Income to qualify assuming
43% housing ratio:
$23,946
$25,132
* Assumes application of commonly available Standard or A- MI rates as of
May 2005; particular rate subject to MI company requirements.
Example is
for
illustration
only and
reflects just
one of the
interest rates
commonly
used under
HFA bond
programs.
Cash-on-Hand as Income Source
Borrowers may use cash-on-hand for the down
payment and closing costs, subject to specific
criteria
– Limited to one-unit, principal residences
Cash-on-hand funds will not be used to calculate
reserves (if reserves are required)
DU will use the “Cash-on-Hand” amount to
calculate the available funds to close
Cash-on-Hand as Income Source
(continued)
The lender must verify/document the following:
• Borrower customarily uses cash for expenses; usage is
consistent with previous payment practices.
• Borrower's credit report indicates limited (or no) use of
credit, and no depository relationship.
• Borrower must provide signed statement disclosing the
source of funds (and that they were not borrowed).
• The borrower must deposit with a financial institution at
the time of application, or no less than 30 days before
closing, funds sufficient for the down payment and closing
costs.
New Fannie Mae Collections Policy
• Collections: New Fannie Mae collections policy
applies to MCM loans underwritten through DU.
• Requires payoff only if collections exceed $5,000
• Must be submitted through DU – manually
underwritten loans are ineligible
Sources of Additional Funds
into Transaction
Down payment in excess of minimum required
borrower contribution (the down payment “gap”)
may consist of:
– Gift from a relative
– HFA down payment assistance program subsidy
– Unsecured or secured loan or grant from
employer, city, county, nonprofit organization
– Loan secured against asset owned by borrower
– Proceeds from Individual Development Accounts
(IDAs)
MCM: Borrower Options
What are borrower options?
• Underwriting guidelines used in conjunction with the
basic MCM platform to provide additional flexibility
for targeted borrowers.
– They are not separate products.
When underwriting an MCM mortgage, how can the
options be used?
– To use the options, first qualify the borrower for
the standard MCM, then determine eligibility for
the desired option.
– Some flexibilities require manual underwriting,
while some can be done in DU.
Summary of MCM Options
Option
Description
Community
Solutions
Borrower Option for teachers, police
officers, firefighters, and health care
workers
Community
HomeChoice
Borrower Option for a borrower with
a disability or a family member with
a disability
Section 8 housing choice vouchers
may be used as qualifying income
For any eligible properties on tribal
trust or restricted lands
Section 8 for
Homeownership
Native American
Using Desktop Underwriter
Desktop Underwriter supports most MyCommunityMortgage
loans
•
MCM permitted for Approve-Eligible along with EA
Levels I and II only, with appropriate messaging
•
Standard Loan Level Price Adjustments (LLPAs) for EA
Levels I and II do not apply for MCM in most cases
•
Lenders must be approved/activated to offer MCM through
DU, and there is an annual volume allocation for MCM*
*Loans originated under MRB programs do not affect the lenders allocation. The allocation affected is
that of the Master Servicer purchasing the bond loan.
Lender Access to DU
Types of Desktop Underwriting Access:
1. Access to DU, MCM, with EA I & II – full
access
2. Access to DU, MCM, but does not have the
MCM, EA I & II module
3. Approved Fannie Mae Seller with no access to
DU
Lender Access to DU
Access to DU, MCM, with EA I & II – full access
Lender inputs information into DU as a
Community Lending Product and selects MCM
– DU will report findings.
Lender receives the benefit of Fannie Mae’s
Reps and Warrants on the automated decision
Lender Access to DU
Access to DU, MCM, but does not have the
MCM, EA I & II module
– Some institutions offer their services to run your loan
through their DU system and report findings to the
lender for a small charge
Lender Access to DU
Approved Fannie Mae Seller with no access to DU
or no Authorized Underwriters
•
Lenders may sign up to become a Correspondent
of a lender utilizing the DU MCM EA I & II
system
For more information on
MyCommunityMortgage,
Visit www.efanniemae.com
Information Source: Fannie Mae and www.efanniemae.com