Fannie Mae Attempts Market Reform with ‘Keys to Recovery’

By Maegan Smith

Special to the AFRO

With the housing crunch still in effect-- making it more and more difficult to buy, sell, or even keep homes -- mortgage buyer Fannie Mae has come up with four “Keys to Recovery” initiatives aimed at providing stability to the mortgage and housing markets.

                The first of the initiatives is, “a new refinancing option for Fannie Mae underwater borrowers that will allow for refinancing up to 120 percent of a property’s current value,” the company’s fact sheet on the initiatives said.

                 This means Fannie Mae borrowers with good payment records whose homes have fallen in value to below what they currently owe on mortgages will have the option to refinance for the entire amount of the loan, not just the amount that their home is currently worth.

                The company said this, “could help as many as 150,000 households obtain more stable and affordable mortgages, and protect their homes.”

                The next of the initiatives is a renewal and expansion of the company’s partnership with state housing finance agencies (HFAs). They are renewing their agreement with the National Council of State Housing Agencies to buy up to $10 billion in HFA loans by the end of 2009.

                “In addition,the company will provide access to low down payment mortgage products at competive prices, resulting in more advantageous financing oppurtunities for first-time home buyers,” the company said.

                Fannie Mae will also attempt to aid areas hit hard by forclosure by buying forclosed properties and allowing families to reside in them on a rent-to-own basis. This initiative is aimed towards borrowers who have the income but not necessarily the credit to purchase homes.  The leasers would receive credit counseling and up to five years to qualify for the mortgage.

                In the last of the “Keys to Recovery” Initiatives, the company is now able to buy loans, “greater than the conventional-conforming loan limit of $417,000,” Fannie Mae said.

                According to Fannie Mae spokeswoman Amy Bonitatibus, this is only in certain Housing of Urban Development (HUD) designated high -cost areas. With the passage of The Economic Stimulus Act of 2008 the limit in these areas will be just under $730,000 for single-family homes. These areas include the Washington D.C. metropolitan area according to the HUD Web site.

                The company has also introduced a national down payment policy that started on loans taken June 1. This policy will equalize down payment requirements nationally with no regard for local housing market conditions. Fannie Mae announced this plan on May 16. It will supercede their, “Maximum Financing in Declining Markets Policy” that was adopted in December 2007 which required higher down payments in markets with declining home prices.

                All of these initiatives, which Bonitatibus said the company had been working on since the first week of May, will build on Fannie Mae’s “HomeStay” initiative announced last year. With “HomeStay” the company is, “working with lenders, loan servicing companies, and policy makers to respond to the housing and mortgage crisis with a goal to minimize the impact on families and communities by preventing foreclosures, supporting counseling efforts, and providing market stability.”