Fannie And Freddie Compete Over Low Down Payment Loans

We’ve previously reported that both Fannie Mae and Freddie Mac are actively providing low down payment loans, with as little at 3% required for the down payment. It seems that both firms are eager to increase their activity in this segment of the mortgage market and will be competing head-to-head to garner a greater share.

National Mortgage News reports:

A new battle is brewing between Fannie Mae and Freddie Mac as the government-sponsored enterprises set out to boost their purchases of low down payment loans.

In order to meet new affordable housing goals, the two are likely to be directly competing for low down payment loans bought by local housing finance agencies.

But the two GSEs are not equally matched. Fannie has developed and maintained relationships with state housing finance agencies for nearly a decade, with 39 state agencies selling loans to the GSE. Freddie, meanwhile, has been out of the market for several years and is just now trying to get back in.

Still, Freddie is adding enticements and many housing finance agencies are signing up.

Freddie is “providing white glove service where they are providing hands-on support and training,” said Jason Boehlert, executive director of the National Association of Local Housing Finance Agencies, in an interview.

The interest in low down payment loans has increased during the past year.

Fannie and Freddie announced in December that they would start buying 97% loan-to-value single family loans from lenders this year. As of June 30, Fannie has purchased 9,000 loans with 3% down payments. Freddie began buying such loans directly from lenders in March, but has not yet disclosed the number.

So far, the results have been disappointing. But that puts new emphasis on the GSEs’ relationship with local housing finance agencies, which are the source of many low down payment loans.

Adding to the mix, the Federal Housing Finance Agency finalized new affordable housing goals on Aug. 19 that require the GSEs to buy more single-family loans from borrowers with below median income levels, consumers most likely to need a low down payment loan.

To help meet the goal, Freddie has teamed up with Minneapolis-based US Bank as a source for housing finance agency loans. The institution has a mortgage revenue bond program that provides services to state and local agencies, including purchasing loans from them. Fannie has a similar relationship with US Bank.

State housing finance agencies in New England are doing a lot of business with Fannie, according to Simon Tahan, a senior vice president with Webster Bank in Waterbury, Conn.

He said Webster spends a lot of effort on educating homebuyers to get them into the right financing program.

“Recently we have seen the state agencies programs become more appealing to first-time homebuyers,” said Tahan, saying that private mortgage insurance is less expensive than Federal Housing Administration insurance.

>> read the full article at

This entry was posted in Down Payment Assistance, First time buyer programs, Home Buying and tagged , , , . Bookmark the permalink.