Expanding Homeownership Responsibly with Freddie Mac Home Possible Nadja Vital MBA Central FL, Nov.8, 2017
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
Agenda Expanding Homeownership Responsibly The State of the Purchase Market Market Conditions and Purchase Drivers First-Time Homebuyers Changing Demographics Millennial Impact Products & Offerings to Help with Your Purchase Market Business Home Possible & Home Possible Advantage HFA Advantage for Housing Finance Agencies Affordable Seconds Down Payment Assistance Resources to Support Your Business Purchase Market Resource Center Home Possible Income & Eligibility Tool The Learning Center Credit Smart Borrower Help Centers
Percent The Homeownership Rate Now Is As Low As It Was in 1968 Homeownership Rate 70 69 68 67 66 65 64 63 62 1994 1995 1997 1998 2000 2001 2003 2004 2006 2007 2009 2010 2012 2013 2015 2016 Source: U.S. Census Bureau
Renewing the affordable lending ecosystem Thinking and acting holistically Strategically creating relationships Calibrating for the market Supporting homebuyer success Freddie Mac 5
State of the Purchase Market
First-time homebuyers 2016 Homebuyers Repeat Homebuyers 65% First Time Homebuyers 35% 2016 First-Time Homebuyer Demographics Share increased to 35% in 2016 An increase over last year s near all-time low of 32% Median age 32; Median income - $72,400 Down payment sources 76% savings; 24% gifts from friends or relatives 33% used FHA loans, 12% used VA Typical FTHB home: 1,650 sq. ft., cost - $182,500 FTHBs plan to stay in homes for 10 years Single Male 8% Unmarried Couple 14% Single Female 18% Married 58% Other 2% Source: National Association of Realtors 2016 Profile of Home Buyers and Sellers Freddie Mac 7
Average Borrower Income Comparison Chart and Table by Minority Average borrower income by minority group U.S. Florida Asian $106K $91K Black $77K $71K Hispanic $77K $76K Minority $85K $76K Non-Minority $89K $88K Overall $89K $84K Source: Data comes from 2015 HMDA originations and purchases for single family and manufactured housing properties, excluding redundant loans purchased by commercial banks, savings banks, savings associations, and affiliated institutions. Figures also exclude jumbo loans, home improvement loans, loans with a reported rate spread, HOEPA loans, second liens, and unsecured loans. Minority share is calculated using the five race variables and one ethnicity variable per applicant following the HMDA minority definition that excludes from eligibility all loans where the borrower is white but ethnicity is missing, non-hispanics with missing race and where both race and ethnicity are missing.
Housing Stock Comparison Trend since 2015 Source: Data provided by Redfin, a national real estate brokerage.
Median Sale Price Trend Comparison since 2014 Source: Data provided by Redfin, a national real estate brokerage.
The U.S. Will Become More Diverse 2015 2020 2030 2040 2050 White Non-Hispanic Hispanic African-American Asian Source: U.S. Census Bureau
Minority Share Comparison Chart and Table Share of Population by Minority United States Florida Select Florida Counties Lake Orange Osceola Seminole White 62.3% 56.1% 72.3% 58.0% 36.6% 64.0% Black 12.3% 15.5% 9.5% 9.2% 9.7% 10.8% Asian 5.1% 2.5% 1.8% 6.9% 2.5% 4.1% Hispanic or Latino 17.1% 23.7% 13.5% 24.3% 49.0% 18.8% Source: U.S. Census Bureau, 2011-2015 American Community Survey 5-Year Estimates
Homeownership Rates by Race/Ethnicity Source: U.S. Census Bureau: Housing Vacancies & Homeownership Rates
FHA Loan Share Comparison Chart and Table by Minority Share of FHA loans by minority group US Conforming Loan Count U.S. Florida Conforming Loan Count Florida Select Florida Counties Lake Orange Osceola Seminole Asian 180,723 13.2% 6,750 15.5% 27.2% 15.0% 22.0% 12.5% Black 193,998 42.3% 16,699 43.1% 37.3% 47.7% 49.8% 41.0% Hispanic 327,868 41.2% 42,368 38.4% 39.4% 39.7% 55.0% 36.3% Minority 714,978 34.2% 65,419 37.1% 36.5% 37.9% 52.5% 32.4% Non-Minority 2,033,000 19.7% 127,925 20.5% 20.4% 19.8% 28.5% 21.7% Overall 3,120,697 24.1% 218,707 26.6% 24.7% 28.3% 44.7% 25.3% Source: Data comes from 2016 HMDA originations and purchases for single family and manufactured housing properties, excluding redundant loans purchased by commercial banks, savings banks, savings associations, and affiliated institutions. Figures also exclude jumbo loans, home improvement loans, loans with a reported rate spread, HOEPA loans, second liens, and unsecured loans. Minority share is calculated using the five race variables and one ethnicity variable per applicant following the HMDA minority definition that excludes from eligibility all loans where the borrower is white but ethnicity is missing, non-hispanics with missing race and where both race and ethnicity are missing.
Average Credit Score Comparison Chart Source: Experian data as of December 2015. 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. The credit scores are average vantage 3.0 scores by state and county.
Millennials Dominate the Conversation 83+ million of them 26.3 years old on average $51,000 average annual income 14% with mortgages Creditworthiness (VantageScore 3.0) Strong (>737) 14% Moderate (661-736) 19% Weak (<661 +/or other setbacks) Near-moderate 601-660 Near-moderate <601 Percentage of Millennials 50% 29.1% 70.6% 24 million are mortgage-ready now Sources: Experian data, Freddie Mac analysis Freddie Mac 16
Millennials Are the Most Racially Diverse Generation In U.S. History Percent of population by race /ethnicity Non-Hispanic White Hispanic African American Asian Other Source: U.S. Census Bureau
Generation X Is Comparatively Small But Still Important 26% of the 2015 purchase market 26% were first-time homebuyers in 2015 Many buy for more space ~20% have children younger than 18 living at home Many carry student debt Source: National Association of Realtors March 2016 report, Home Buyers and Sellers Generational Trends Freddie Mac 18
Baby Boomers Control the Market 1/4 of the U.S. population 69 million own homes 2/3 of the equity in single-family homes 63% want to age in place 40% plan to move at least once; 13% within 4 years Source: Freddie Mac 55+ Survey Freddie Mac
The Size of the Future Market Source: JCHS Household projection Freddie Mac 20
Dispelling Myths Opens Real Possibilities Urban Legend Fact A 20% down payment is required You can get a mortgage loan with 3%; average ~15%; 40% put down 10% FHA is the place for low down payment mortgage loans I only may use my savings for a down payment My credit history isn t good enough I don t know where to start the buying process is complicated Freddie Mac has a range of low down payment products to meet your needs You may be eligible for down payment assistance; gifts & grants are OK, too The lender ultimately decides, but Freddie Mac accepts FICO scores of 660; Freddie Mac offers free CreditSmart financialliteracy curriculum Not-for-profit, HUD-approved, housing counseling agencies help at little/no cost I don t make enough money to own In fact, you might check with a lender or other housing professional Student debt is too big an obstacle It may be a factor but often isn t I was rejected once, so can t buy Find out why fix issues if you can, try again & you might be approved this time Freddie Mac
Freddie Mac Products & Offerings to Help with Your Purchase Business
Home Possible Features and Benefits High LTV mortgage for qualified first-time homebuyers, low- and moderate-income borrowers and move up buyers Borrower Profile First-time homebuyers Repeat homebuyers Families in underserved areas Multi-cultural buyers Empty nesters Very low and low- to moderateincome 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 2-4 unit properties up to 95% LTV / 95% TLTV under Home Possible 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 for 1-unit residences Flexible down payment and closing cost funding options Reduced mortgage insurance coverage levels (25% coverage when LTV > 90%) 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
Borrowers Without Credit Scores
Flexible Down-payment & Closing-cost Sources Flexible Sources of Funds* Financing Concessions» 3% LTV/TLTV ratio > 90%» 6% LTV/TLTV ratio > 75% < 90%» 9% LTV/TLTV ratio < 75% * Closing costs Lender Credit Unsecured Loan: Originating Lender (Refer to Guide Section 5501.4) Borrower Personal Funds (Minimum borrower contribution, if applicable) Depository accounts Sale of Borrower Asset Cash on hand Trust disbursement Pooled funds Loan secured by Financial Assets Securities Government bonds Retirement accounts Individual Development Account (IDA): include matching funds only if not subject to recapture tax Community Savings deposited by the Borrower Trade equity Rent Credits Cash value of life insurance Borrower s real estate commission Credit card charges, cash advances or unsecured line of credit: to pay fees associated with the mortgage application process Other Eligible Sources Gifts/Wedding Gift Funds/Gift of Equity Gift/Grant: Agency Secondary Financing Affordable Seconds Employer-Assisted Homeownership Benefit IDA: matching funds subject to recapture tax Unsecured loan: Agency/Related Person, or Community Savings Systems (funds in excess of Borrower s contribution) Sweat equity (once 5% downpayment from personal funds has been met) FreddieMac.com/homepossible/
Why choose Home Possible over FHA? Home Possible Mortgage Insurance vs. FHA Ends when LTV < 80% (or amortizes to 78%) Conventional MI: monthly OR single premiums Only required if the LTV is greater than 80% Down payment funds applied to principal Stays for the life of the loan 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 Private MI lets the borrower build equity faster. Freddie Mac
Home Possible Income & Property Eligibility Tool FreddieMac.com/homepossible/eligibility.html Freddie Mac
Home Possible Income & Property Eligibility Tool Augusta, GA
Home Possible Income & Property Eligibility Tool Augusta, GA
Housing Finance Agencies (HFAs) Freddie Mac provides HFAs with a source of liquidity and supports their service to low and moderate income borrowers. We: Launched HFA Advantage mortgage, our enhanced product for housing finance agencies, which includes:» 97% LTV and 105% TLTV» HFA income limits in lieu of Home Possible Area Median Income limits» HFA determined homebuyer education requirements» Credit enhancement options including charter-level mortgage insurance coverage Engage with master servicers who have relationships with smaller state and local HFAs Provide a comprehensive program for housing finance agencies that includes a white-glove onboarding process, training and support, and marketcompetitive pricing Freddie Mac 30
Homeownership Education Purchase Transactions Required: When all borrowers are first-time homebuyers, at least one qualifying borrower must participate in a homeownership education program before the Note Date*» 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 *NOTE: Must not be provided by an interested party to the transaction, the originating lender or Seller 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 *or the Effective Date of Permanent Financing for Construction Conversion and Renovation Mortgages Freddie Mac
Types of Down Payment Assistance Most assistance programs offer down payment help in three different forms:» Grants Funds that do not have to pay back as long as the borrower owns and occupies the home for a certain period of time» Second mortgage loans Most common of the down payment sources, Typically low or no interest rate and Payments are deferred over a certain timeframe» Tax credits (Mortgage Credit Certificates MCC ) Reduces the amount of federal income tax that the borrower pays, giving them more available income upfront to use towards down payment and/or closing costs
Affordable Seconds Subsidized secondary financing or other financial assistance, evidenced in the land records, that is provided by an Agency and that meets the requirements of the Seller/Servicer Guide
Resources to Support Your Business Tools for You and Your Client Freddie Mac
Real Estate Professionals Resource Center Freddiemac.com/singlefamily/RealEstatePros Freddie Mac
Real Estate Professionals Resource Center FreddieMac.com/singlefamily/housingpros/subscribe.html Freddie Mac
My Home by Freddie Mac SM Consumer Website What will the borrower find on My Home? A wealth of information to help the borrower decide whether to rent or buy, understand the mortgage process and who to contact for help if they are struggling to pay their mortgage. All of this, plus: Tutorials Meet the Experts video series Calculators Quizzes Worksheets Brochures Infographics What home means to me photo essay myhome.freddiemac. Freddie Mac
CreditSmart FreddieMac.com/creditsmart Educate Consumers About Credit, Money and Homeownership Financial education curriculum designed to help consumers build and maintain better credit, make sound financial decisions, and understand the steps to sustainable homeownership FreddieMac.com/creditsmart/consumer_training.html
The Learning Center www.freddiemac.com/learn Freddie Mac 39
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Creating Our Future Together Working together, we are helping to shape the future Defining and making the transition to a new housing finance system will take time Meanwhile, you can count on Freddie Mac Freddie Mac 41
QA & Freddie Mac 42