Expanding Homeownership Responsibly with Freddie Mac Home Possible

Transcription

1 Expanding Homeownership Responsibly with Freddie Mac Home Possible March 23, 2017

2 A Better Freddie Mac and a better housing finance system For families...innovating to improve the liquidity, stability and affordability of mortgage markets For customers...competing to earn their business For taxpayers...reducing their exposure to mortgage risks Freddie Mac 2

3 Advancing Affordable Lending Offering financing solutions to help qualified borrowers become homeowners» For low- and moderate-income households» For first-time homebuyers Supporting underserved markets» Rural housing» Manufactured housing Working with housing finance agencies Forming alliances across the industry to create ownership opportunities Conducting education and outreach Providing resources, training, and tools Freddie Mac 3

4 First-time homebuyers 2016 Homebuyers First Time Homebuyers 32% 2016 First-Time Homebuyer Demographics Share slipped 32% in 2016 Well below the historical norm of 40% Median age 30; Median income - $77,400 Down payment sources 81% savings; 27% gifts from friends or relatives Typical FTHB home: 1,720 sq. ft. FTHBs plan to stay in homes for 10 years Repeat Homebuyers 68% Single Male 9% Unmarried Couple 7% Single Female 15% Married 67% Other 2% Source: National Association of Realtors 2016 Home Buyer and Seller Generational Trends Freddie Mac 4

5 (millions) Growth in Millennial Households and Homeowners mm new Millennial homeowners by mm new Millennial homeowners by Households Homeowners Sources: JCHS of Harvard University chart depicts middle projection (interpolated): ; Collingwood Group. Freddie Mac 5

6 Growth in Millennial Households and Homeowners Hispanics and Asians growing fastest Freddie Mac 6

7 Millennial characteristics Millennials AVERAGE AGE 26.3 years AVERAGE INCOME INSIGHT AVERAGE PERCENT WITH A MORTGAGE AVERAGE REVOLVING CARD BALANCE STUDENT LOAN DEBT AS A PERCENTAGE OF TOTAL DEBT (for those with student debt) $50, % $4,002 64% 1 in 5 Millennials are Hispanic: Freddie Mac 7

8 Mortgage readiness underwriting criteria: Mortgage Ready= Strong + Moderate Strong VantageScore 3.0 greater than 737 Total DTI < 45% No foreclosures in the past 84 months Moderate VantageScore 3.0 between 661 and 736 Total DTI < 45% No bankruptcies in the past 12 months No severe delinquencies ( DPD) in the past 12 months Weak VantageScore 3.0 less than 661 AND / OR Total DTI > 45% Foreclosure in the past 84 months Bankruptcy in the past 12 months Severe delinquency ( DPD) in the past 12 months Freddie Mac 8

9 How many millennials are Mortgage Ready? Millennials Strong 14% Moderate 19% Weak 50% Have a mortgage 14% Unscorable 3% 24,508,934 Strong + Moderate Mortgage Ready Millennials Age Distribution of Weak Segment: 26% 22% 29.1% 19% 23% Near-Moderate in Weak Segment: 70.5% VantageScore 3.0 range: < 601 >660 Freddie Mac 9

10 Mortgage Ready millennials in Minneapolis MSA Variables, Metro-Areas Minneapolis MSA (Minneapolis-St. Paul-Bloomington, MN-WI) Percentage of millennials in the metro area a 32% Percentage of millennials with a mortgage b 22% Percentage of millennials mortgage ready c 41% Percentage of mortgage-ready millennials that can afford SF d 51% Percentage of mortgage-ready millennials that can afford condo e 87% Housing Stock (Inventory/Sales) f 1.76 Note: Experian data for Dec 2015 to investigate mortgage ready millennials. Data combines anonymized individual credit bureau data with marketing data to obtain race/ethnicity associated with each individual and is weighted by American Community Survey s (ACS) Public Use Microdata Sample (PUMS) data. Housing Stock data from Redfin for the month of May a. Calculates the share of millennials in the metro area. b. Calculates the percentage of the millennials in the metro area that have at least one mortgage trade. c. Calculates the percentage of the millennials in the metro area that are mortgage ready. Please refer to slide 3 for definition. d. Calculates the percentage of the mortgage ready millennials in the metro area that can afford a median-priced single family house. The calculations are based on affordability indicators such that if the quarterly gross income exceeds the annual mortgage payment on a median priced single family house (under the assumption of 10% down payment, 4% interest rate and 30 year contract), then the house is affordable. d. Calculates the percentage of the mortgage ready millennials in the metro area that can afford a median-priced condo. The calculations are based on affordability indicators such that if the quarterly gross income exceeds the annual mortgage payment on a median priced condo (under the assumption of 10% down payment, 4% interest rate and 30 year contract), then the condo is affordable. e. Housing Stock indicator =Inventory/Sales. Includes single-family, condo and townhomes. Industry Rule-of-thumb is if the ratio exceeds 6, then stock is adequate, otherwise it is not. Freddie Mac 10

11 Minneapolis MSA amongst top 15 metro areas with mortgage-ready millennials Note: Experian data for Dec 2015 to investigate mortgage ready millennials. The Housing Stock data is from Redfin for the month of May Freddie Mac 11

12 Agenda Features and Benefits General Requirements Sources of funds Key Selling Points and Resources Home Possible Freddie Mac

13 Home Possible Mortgages Features and Benefits Responsible, high LTV mortgage options for first-time homebuyers, low- and moderate-income borrowers and move up buyers Borrower Profile First-time homebuyers Repeat homebuyers Families in underserved areas New immigrants Very-low and low-to-moderate income borrowers Key Features Maximum LTV/TLTV: Home Possible Advantage - 97% LTV / 105% TLTV Home Possible 95% LTV / 95% TLTV Eligible annual income of up to 100% of Area Median Income (higher in high cost areas) No income limit in Underserved Areas Homebuyer education only required for one borrower when all borrowers are First-Time Homebuyers Borrower Benefits Low down payment No minimum borrower contribution from personal funds Flexible down payment and closing cost funding options No cash-out refinancing No reserves required on 1 unit owner-occupied properties (2 months reserves on 2-4 units) Homebuyer education available at no cost to the borrower Freddie Mac 13

14 Home Possible Mortgages Eligibility Criteria* Eligibility Criteria Home Possible Home Possible Advantage Eligible Mortgages 15-, 20- and 30-year fixed 5/1, 7/1 and 10/1 CMT- and LIBORindexed ARMS Construction Conversion and Renovation Mortgages 15-, 20- and 30-year fixed Construction Conversion and Renovation Mortgages Occupancy Primary residence Same Property Type 1- to 4- units: Single-family, Condos, PUDs, Manufactured Housing (1-unit primary residences only) 1-unit: Single-family, Condo, PUD Underwriting Method Loan Prospector or Manual Same Other Income Fund Sources for Down Payment & Closing Costs Boarder income (1-unit properties only) up to 30% of qualifying income from this source allowed if 12 months documentation of recent rent payments and continued rental arrangement included Gifts, grants, Affordable Seconds Same Same * See Freddie Mac Single-Family Seller/Servicer Guide for details. Freddie Mac 14

15 General Requirements Affordable Income and Property Eligibility Area Median Income (AMI) Limit: The maximum allowed qualifying income based on the median income for the area in which the mortgaged premises is located Qualifying Income* up to 100% of the AMI Higher AMI limits in designated High Cost Areas Lifted in Underserved Areas *All stable monthly income for all borrowers for qualifying. The Seller must attempt to verify all income reported on the Form 65, Uniform Residential Loan Application, in accordance with the Guide. Any discrepancies, including underreported income, must be corrected before submitting the mortgage to Loan Prospector. All income reported on the Form 65 that has been verified and that meets the criteria for stable monthly income as described in Chapters must be used to qualify the borrower and submitted to Loan Prospector for Loan Prospector Mortgages. Guide Chapter 4501 Freddie Mac 15

16 Home Possible Income & Property Eligibility Tool Possible/eligibility.html Freddie Mac 16

17 Home Possible Income & Property Eligibility Tool Freddie Mac 17

18 Home Possible Income and Property Eligibility Tool Freddie Mac 18

19 Home Possible Eligible Census Tracts - Minneapolis Freddie Mac 19

20 Home Possible Eligible Census Tracts St. Paul Freddie Mac 20

21 What is an Underserved Area? Underserved Areas are determined at the census tract or county level on the basis of median income, minority population level and disaster area designation. An Underserved Area is defined as any of the following: Low income tract: Census tracts or block numbering areas in which median income does not exceed 80% of the AMI. Disaster area designation: Disaster areas are designated at the county level by FEMA. A county will be treated as a designated disaster area for three years, beginning January 1 after the FEMA designation. Minority census tracts: Census tracts that have a minority population of at least 30%. When a property is located in a designated Underserved Area, AMI requirements do not apply. The Home Possible Income Limit shown in the eligibility tool will say No Limit. Freddie Mac 21

22 Features and Benefits: Borrower Contribution and Reserves Number of Units 1-unit primary residence, that is not a Manufactured Home Minimum Contribution from Borrower Personal Funds Home Possible Advantage None required Reserves None required Home Possible Mortgages LTV/TLTV/HTLTV < 80% LTV/TLTV/HTLTV > 80% < 95% 1-unit primary residence None required None required None required 2- to 4-unit primary residence None 3% 2 months Manufactured Home None None required None required Guide Chapter 4501 Freddie Mac 22

23 Flexible Sources of Funds Flexible Sources of Funds Financing Concessions» 3% of value for LTV/TLTV ratio > 90%» 6% of value for LTV/T LTV ratio > 75% < 90%» 9% of value for LTV/TLTV ratio < 75% Unsecured Loan: Originating Lender (Refer to Guide Section (b)) From the Single-Family Seller/Servicer Guide Chapter 4501 Borrower Personal Funds Depository accounts Loan secured by Finan Asset Sale of Borrower Asset Cash on hand Trust disbursement Pooled funds IDA: include matching funds only if not subject to recapture tax Rent Credits Trade Equity Community Savings deposited by the Borrower Credit card charges, cash advances or unsecured line of credit to pay fees associated with the Mortgage application process (Refer to Guide Section ) Other Borrower Funds Gifts Related Person Gift/Grant: Agency or Seller (as the originating lender) Affordable Seconds Secondary Financing (must be Affordable Second) Employer Assisted Homeownership Benefit IDA: matching funds subject to recapture tax Unsecured loan: Agency/Related Person or Community Savings Systems (funds in excess of Borrowers contribution) Sweat equity (once 5% downpayment from personal funds has been met) Freddie Mac 23

24 Sources of Funds: Secondary Financing Affordable Seconds * Subsidized secondary financing or other financial assistance, evidenced in land records, that is provided by an Agency and that meets the requirements of Section *Home Possible Advantage secondary financing source must be an Affordable Second, and it may not be a home equity-line-of-credit Note: RHS Leveraged Seconds are not permitted with Home Possible Advantage Variety of sources such as: a municipality which includes any duly authorized authority or agency of the federal, state, local or municipal government; a nonprofit community or religious organization (other than a credit union); the borrower s employer; or a Regional Federal Home Loan Bank under one of its affordable housing programs that meet the requirements of Guide Chapter Evidenced in land records Guide Chapter 5501 Freddie Mac

25 Homeownership Education When all borrowers are first-time homebuyers, at least one qualifying borrower must participate in a homeownership education program before the Note Date* Purchase Transactions Required:» A copy of a Homeownership Education Certification, or another document with comparable information, to be retained in the mortgage file 2- to 4-unit primary residence (Home Possible only): At least one qualifying Borrower must participate in a landlord education program before the Note Date*» A copy of a certificate evidencing successful completion of the landlord education program must be retained in the Mortgage file This requirement stresses the importance of utilizing a curriculum that contains the minimum core content specified by the National Industry Standards for Homeownership Education and Counseling. These standards help ensure quality education and counseling is delivered with fairness and respect to homebuyers and homeowners Post-purchase and Early Delinquency Counseling *or the Effective Date of Permanent Financing for Construction Conversion and Renovation Mortgages Guide Chapter 4501 Freddie Mac

26 Key Selling Points and Resources Freddie Mac 26

27 Key Selling Points High LTV No minimum down payment Higher AMI limits (100% AMI;100%+ in high cost areas)(not just 80% AMI) means broader borrower income eligibility so more borrowers will qualify No income limit on properties located in Underserved Areas Flexible sources of funds Free homebuyer education Credit Smart Can use Loan Product Advisor to provide greater certainty that the loan meets purchase requirements Freddie Mac 27

28 Why choose Home Possible over FHA? Home Possible Mortgage Insurance vs. FHA Ends when LTV < 80% Stays for the life of the loan Conventional MI: monthly OR single premiums Only required if the LTV is 80% or higher Down payment funds applied to principal FHA: Upfront AND monthly premiums Required regardless of the LTV Down payment funds applied to principal AND upfront PMI WHAT THIS MEANS: With more funds applied toward the principal upfront, a Home Possible mortgage with PMI lets the borrower build equity faster. Freddie Mac 28

29 For more information on Home Possible FreddieMac.com/homepossible FreddieMac.com/learn/mp/homepossible.html Freddie Mac 29

30 My Home by Freddie Mac Website for consumers on renting, buying and owning a home MyHome.FreddieMac.com Freddie Mac 30

31 CreditSmart Financial education curriculum» 12 financial education modules» Available online and in multiple languages» Use CreditSmart workshops to gain entry to realtor shops» Counts for CRA credit FreddieMac.com/ CreditSmart Freddie Mac 31

32 Freddie Mac Borrower Help Centers and National Network Work with trusted national nonprofit intermediaries Support Freddie Mac s ongoing commitment of:» Preparing prospective buyers for responsible homeownership» Helping struggling borrowers with Freddie Mac-owned mortgages avoid foreclosure HUD-certified counselors 13 Borrower Help Centers across the country (Phoenix, Ontario, Los Angeles, Miami, Orlando, Ft. Lauderdale, Atlanta, Chicago (2), Metropolitan Washington, DC, Detroit, Las Vegas, New York City) Work with lenders in minority and underserved communities Freddie Mac 32

33 Down Payment Assistance Down Payment Resource Website - Helps lenders connect their borrowers with homeownership programs that can help with down payment. DownPaymentResource.com/areyou-eligible/ * Available on FreddieMac.com Freddie Mac 33

34 Marketing Materials You Can Use FreddieMac.com/purchasemarket Freddie Mac

35 Real Estate Professionals Resource Center In the Spotlight 5 Ways to Boost Your Referrals Be a Housing Industry Expert Networking Events and Trainings Live Twitter Feed Subscribe for Updates! Housing Professionals Outreach News e.html FreddieMac.com/RealEstatePros Freddie Mac

36 Housing Professionals Outreach News Subscription Center Click Real Estate Professionals Box Be Invited to REP Trainings and Networking Events Get the Latest Resource Center Updates Staying connected is quick and easy! Go to the Freddie Mac Housing Professionals Outreach News Subscription Center and sign up today! FreddieMac.com/singlefamily/housingpros/subscribe.html Freddie Mac

37 What does this all mean for YOU and YOUR borrower? Low interest rates and lower home prices will continue homebuyer affordability Build business from first-time homebuyers Prepare for changing demographics Qualified first-time homebuyers need your help to overcome misconceptions and concerns Freddie Mac provides a wide variety of products and offerings to help you attract well-qualified buyers Freddie Mac 37 37

38 QA & Freddie Mac 38