Close More Loans with HFA Preferred™
An Overview for MFA Loan Officers
January 17, 2018
© 2017 Fannie Mae. Trademarks of Fannie Mae. 21/17/2018
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An important note about today’s discussion
While every effort has been made to ensure the reliability of the session content, Fannie Mae’s
Selling and Servicing Guides and their updates, including Guide Announcements and Release
Notes, are the official statements of Fannie Mae’s policies and procedures and control in the
event of discrepancies between the information in this seminar and the Guides.
© 2017 Fannie Mae. Trademarks of Fannie Mae. 41/17/2018
Agenda
• Working with HFAs• HFA Preferred™ • Tools and Resources
• Day 1 Certainty™ (D1C)• DU® Validation Service• Property Inspection Waiver (PIW)• Value
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Working with HFAsHFA Preferred
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Benefits of Homeownership and Financial ChallengesAmericans consistently agree that homeownership provides more financial and lifestyle benefits than renting, though some see financial challenges to getting a mortgage today:
Americans see both financial and lifestyle benefits to owning a house
Most view homeownership as a safe investment with a lot of potential
Renters continue to cite down payment and credit concerns as their biggest obstacles to getting a mortgage today
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Who Do Buyers Trust For Information?
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So, Here’s What We Know . . .
People still WANT to become homeowners – they view it as a stable and an
opportunity for wealth building
People are confused by the home buying process and believe things that aren’t
necessarily true about what they need to become homebuyers
People look for clear, accurate information from mortgage professionals, real
estate professionals and the media
The desire for homeownership remains strong but getting there is confusing . . .
© 2017 Fannie Mae. Trademarks of Fannie Mae. 101/17/2018
Working with Housing Finance Agencies (HFAs)
Fannie Mae Partnership with HFAs More than 40 HFAs are collaborating with Fannie Mae to
support affordable homeownership
HFAs bring many valuable attributes A careful, high-touch, mission-motivated approach to
consumers from application through the life of the loan
Why do lenders partner with the HFAs? Potentially earn CRA credits*
Down payment assistance
Support of home buyer education
*Lenders must confirm with their regulators.
© 2017 Fannie Mae. Trademarks of Fannie Mae. 111/17/2018
What is an HFA Preferred Mortgage?
HFA Preferred is an affordable low down payment mortgage product designed for creditworthy, low- to moderate-income borrowers, with expanded eligibility for financing homes in low-income communities.
With HFA Preferred, loan originators can reach growing market segments and close more loans.
Based on research
A “demographic sea change” affecting the housing market is defined by the rise of the Millennials, increased diversity, and a growing elderly population.
Targeted and goal-oriented
HFA Preferred may help lenders meet their Community Reinvestment Act goals.
Supports sustainable homeownership
Competitive pricing, cancellable mortgage insurance (restrictions apply), and buyer education that positions borrowers for long-term success.
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Who does HFA Preferred fit?
Buyers who need flexibility with down payment and income qualification.
Borrowers who meet income eligibility as established by the MFA:
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HFA Preferred Product Features
Most flexible 97% LTV option Desktop Underwriter® (DU) or manual underwriting available Simplified pricing with no LLPAs Lowest MI requirement Follow MFA income limits and homebuyer education
requirements Gifts, grants, and cash-on-hand permitted as a source of funds for
down payment and closing costs Borrower may own other property at time of closing Can be used with Manufactured Housing Eligible with HomeStyle® Energy NEW – Flexibilities for borrowers with student loan debt NEW – Income flexibilities available NEW– DTI up to 50% with no compensating factors required
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Policy Changes
Selling Guide Announcement SEL-2017-04Student Loan Solutions Student Loan Payment Calculation:
simplified options available to calculate the monthly payment amount for student loans.
Debts Paid by Others: Non-mortgage debt paid by others within the last 12 months will not be calculated in the borrower’s DTI as long as appropriate documentation is collected.
Student Loan Cash-Out Refinance: A cash-out refinance mortgage offers homeowners the flexibility to pay off high interest rate student debt
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Borrower Income Flexibilities
1. Non-occupant borrower
2. Boarder income
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Borrower Income Flexibilities
1. Non-occupant borrower
Borrower is on the loan
Non-occupant borrower(s) income is included in qualifying income
Also included are their assets, credit, and liabilities
DU LTV up to 95%; manual underwriting LTV up to 90%
Must meet income eligibility requirements
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Non-Occupant Borrower Sample Scenario
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Borrower Income Flexibilities
2. Boarder income Boarder income (relatives or non-relatives):
– Up to 30% of qualifying income Documentation required:
– Shared residency for the most recent 12-month period– Boarder income for at least 9 of the most recent 12 months (averaged over 12 months).
Important distinction between Rental and Boarder Incomes:
Boarder Income: A roommate has been sharing living quarters with the borrower for the past 12 months and plans to live in the newly purchased home.
Rental Income: The home being purchased is a 1-unit property that has a basement apartment, which includes a functioning kitchen and bathroom, that can be rented out.
© 2016 Fannie Mae. Trademarks of Fannie Mae
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Mortgage Insurance Coverage & Premium Plans
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Beyond the Rate (Compare FHA and HFA Preferred)
*Restrictions apply. See Fannie Mae Selling Guide for additional details (Sections: B5-6-04, B7-1-02, B-8.1-04)
30-year fixed-rate scenario Purchase price: $150K
FHA mortgageNote rate: 4.375% | LTV: 96.50%
HFA Preferred mortgageNote rate: 4.625% | LTV: 97%
Base First Mortgage $144,750 $145,500
Down Payment $5,250 $4,500
Upfront MIP Rate (%) 1.75% 0.00%
MI Premium (Annual %) 0.85% 0.65%
Financed MI $2,533 $0
Total First Mortgage $147,283 $145,500
Monthly MI $103 $79
Total Monthly Payment $1,224 $1,202
HFA Preferred™Benefits
No upfront MI premium
Ability to cancel MI*
$1,783 in additional equity
$750 Lower down payment
No need to finance MI
When payment neutral, conventional financing = $3,533 long term cost savings and equity
© 2017 Fannie Mae. Trademarks of Fannie Mae. 211/17/2018
The Big Picture
77%
77% of FHA loans could have gone conventional*
*In late 2015-early 2016, FNMA ran over 50K loans originated through US Bank’s HFA business through a DU simulation. The simulation indicated that over 77% of these loans could have gone conventional from a credit eligibility standpoint, assuming the max LTVs were held at 97%.
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Tools and Resources
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Tools to Effectively Manage Risk
Desktop Underwriter® (DU) – the leading automated underwriting platform in the industry
Early Check™ – provides access to Fannie Mae delivery edits to assist lenders in identifying and correcting potential eligibility and/or data issues early in their processes and prior to loan delivery https://www.fanniemae.com/singlefamily/earlycheck
Collateral Underwriter™ (CU™) – Proprietary appraisal review application developed by Fannie Mae to support proactive management of appraisal quality.– Gives lenders access to the same appraisal review tool
that Fannie Mae uses, at no additional cost.
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DU Demo
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Resources to Support YouOffer HOME by Fannie Mae™ https://www.fanniemae.com/singlefamily/homeapp Free interactive consumer app to support access to
homeownership Informs prospective home buyers on the home
buying process Includes dashboards, checklists, financial calendars,
videos and more
Visit the Fannie Mae HFA Webpagewww.fanniemae.com/singlefamily/housing-finance-agencies-public-entities Fact sheets, product comparison, and FAQs Free customizable HFA Preferred marketing
materials at our Marketing Center https://www.fanniemae.com/singlefamily/marketing-center Spanish Language Resource Center
https://www.fanniemae.com/singlefamily/spanish-resources-for-lenders
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Digital efficiencies will determine which lenders surge ahead …
…and which get left behind.
© 2017 Fannie Mae. Trademarks of Fannie Mae. 281/17/2018
Fannie Mae’s Vision for the Future:
Delivering a digital mortgage process – “70 to 10” .
70 days 10 days
© 2017 Fannie Mae. Trademarks of Fannie Mae. 291/17/2018
Creating a superior borrower experience, driving operational efficiency resulting in reduced origination cycle times and providing freedom from reps & warrants
DU® Validation Service
Freedom from paper-based processes
with validation of income, assets, and
employment through third-party data vendors
• Exceptional point of sale customer experience• Reduced origination cycle time• Freedom from rep & warrant on validated
components
Property Inspection WaiverFreedom from appraisal requirements on eligible refi transactions
• Exceptional point of sale customer experience• Reduced origination cycle time and cost savings• Freedom from rep & warrant on property value,
condition, and marketability
Certainty on Appraised ValueFreedom from reps & warrants on appraised value with the power of Collateral Underwriter®
(CU ™) when the CU risk score is 2.5 or lower
• Appraisal review efficiency• Freedom from rep & warrant on appraised value
© 2017 Fannie Mae. Trademarks of Fannie Mae. 301/17/2018
How are lenders benefitting from Day 1 Certainty?[We are] “seeing an increase in customer satisfaction driven primarily by ease of use, less paperwork needs, and accelerated turn times.”
“This is a win-win, as the customer’s experience is improved through reduced documentation and accelerated closing dates, while we receive reps & warrants [relief] and operational efficiencies.” -
“Efficient utilization of technology is the highway to lowering origination costs and enhancing customer experience. Fannie Mae's Day 1 Certainty is the vehicle to take [us] down that highway.”
© 2017 Fannie Mae. Trademarks of Fannie Mae. 311/17/2018
Welcome to the Future
Register with the DU validation service• Income• Employment• Assets
Exercise offers for Property Inspection Waivers
Leverage Collateral Underwriter to manage appraisal quality
© 2017 Fannie Mae. Trademarks of Fannie Mae. 321/17/2018
Day 1 Certainty Resourceswww.fanniemae.com/day1certainty
Day 1 Certainty™