If I Am A Landlord Is Financial Assistance Available
If you’re a landlord struggling to pay your mortgage because your tenants have been impacted by COVID-19 and are having difficulty paying their rent, the Consumer Financial Protection Bureau has helpful information on state and local programs offering rental assistance. Eligibility varies, but landlords can often apply directly, and may be able to receive direct payments. Each rental assistance program has conditions, and landlords and tenants should contact the program in their area to find out how to get started. Or if you would like personalized help from a HUD-approved housing counselor, call our Disaster Response Network directly at . These counselors can help you navigate the rental assistance application process for your tenants.
Flexible Home Loans Backed By Freddie Mac: The Homeready Mortgage
A Fannie Mae program with lots of exceptions to the usual guidelines is the HomeReady mortgage.
Rather than 5% down you can qualify for the HomeReady program with just 3% up front. Need more income to qualify? Up to 30% of the buyers income can come from a roommate. And nope, you dont have to be a firsttime buyer.
For more information regarding Fannie Mae products and services speak with loan officers. Ask about compensating factors if you need them.
What Does Fannie Mae Do
Fannie Mae is a massive player in the mortgage process, and yet very few borrowers understand what it really does.
It doesnt have any branches or ATMs. You cant borrow money from it. And yet, magically, the interest rate you pay and the type of mortgage financing you get are very much impacted by Fannie Mae.
To understand how Fannie Mae works, consider a local bank or mortgage company.
If Smith Lending has $25 million that it can use to originate mortgages and if the typical mortgage is $200,000 then Smith has the ability to generate 125 mortgages.
In this example, if youre mortgage customer number 126 at Smith Lending, youre out of luck. Theres no money left to lend.
Thats where Fannie Mae and the secondary mortgage market come into play.
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Who Is Your Mortgage Servicer
Here are a few different ways that you can find out the identity of your loan servicer.
- You can check your monthly mortgage billing statement. Your servicer is the company that sends you the bill for your payment.
- Look at your payment coupon book, if you have one. The servicer will be listed.
- Call the Mortgage Electronic Registration System, Inc. Servicer Identification System toll-free at 888-679-6377 or visit the MERS website. Your mortgage servicer’s identity will be listed in the MERS system if you have a MERS loan.
Is Fannie Mae Better Than Fha
The difference between a FHA and Fannie Mae loans are that the FHA insured loan is a loan by The US Federal Housing Administration mortgage insurance backed mortgage loan that is provided by a approved lender. The Fannie Mae loan has a higher credit score requirement at 620 to 640 which is higher than the FHA loan.
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Why Did Fannie And Freddie Require A Taxpayer Bailout
Fannie and Freddie failed in large part because they made bad business decisions and held insufficient capital. Also, unlike most private investment firms, Fannie and Freddie had only one line of businessresidential mortgage financeand thus did not have other sources of income to compensate when home prices began to fall.
In 2008 Fannie and Freddie lost a combined $47 billion in their single-family mortgage businesses, forcing the companies to dig deep into their capital reserves. Nearly half of those losses came from Alt-A loans, despite those loans accounting for just 11 percent of the companies total business. But those losses were only the beginning: Between January 2008 and March 2012, Fannie and Freddie would lose a combined $265 billion, more than 60 percent of which was attributable to risky products purchased in 2006 and 2007.
What Is Fannie Mae
Fannie Mae short for the Federal National Mortgage Association dominates the secondary mortgage market. But what exactly does that mean?
Along with its counterpart, Freddie Mac, Fannie Mae purchases about 66% of Americas mortgages from the lenders that originate them.
This frees up money so those companies can keep on lending and buyers can keep on purchasing homes.
In large part, Fannie Mae and Freddie Mac are also behind the rate you get from your mortgage lender. The two play a big role in keeping U.S. mortgage rates relatively low.
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What Role Did Fannie And Freddie Play In Inflating The Housing Bubble Of The Mid
Contrary to conservative talking points, the answer is very little. During the bubble, loan originators backed by Wall Street capital began operating beyond the Fannie and Freddie system that had been working for decades by peddling large quantities of high-risk subprime mortgages with terms and features that drastically increased the chance of default. Many of those loans were predatory products such as hybrid adjustable-rate mortgages with balloon payments that required serial refinancing, or negative amortization, mortgages that increased the unpaid balance over time.
Wall Street firms such as Lehman Brothers and Bear Stearns packaged these high-risk loans into securities, got the credit-rating agencies to bless them, and then passed them along to investors, who were often unaware or misinformed of the underlying risks. It was the poor performance of the loans in these private-label securitiesthose not owned or guaranteed by Fannie and Freddiethat led to the financial meltdown, according to the bipartisan Financial Crisis Inquiry Commission, among other independent researchers.
These decisions eventually contributed to the companies massive losses, but all this happened far too late to be a primary cause of the housing crisis.
Fannie Mae Guidelines: Conforming And Conventional Mortgages
Loans that conform to Fannie Mae and Freddie Macs guidelines are called conforming mortgages.
Another term you might have heard is conventional financing. A conventional mortgage is simply a nongovernment mortgage. These loans are not backed by the FHA, VA or USDA.
In effect, its possible for a mortgage to both conforming, meaning it meets Freddie/Fannie guidelines, and conventional, meaning its not insured or guaranteed by a government program.
Fannie Mae and Freddie Macs guidelines are important in the mortgage world.
These requirements can include things like:
- The size of the home loan
- Minimum credit score requirement
- Down payment requirements
- Private mortgage insurance
- Debttoincome ratios
However, as a borrower, you also need to know that guidelines are often not absolute.
If you have a lot of monthly bills, for example, your debttoincome ratio could be high. In theory, this would make it hard to qualify for a conforming loan. However, compensating factors like a large down payment or beefy savings account could help offset that DTI and let you qualify.
In short, Fannie Mae and Freddie Macs loan guidelines are often less strict than borrowers might believe.
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Benefits Of Refinow & Refi Possible Programs
To ensure low-income homeowners benefit from these new offerings, lenders have some requirements they must meet when completing these refinances:
- The refinance must result in a savings of at least $50 per month on the borrowers mortgage payment.
- There must be a reduction of at least 0.50%to the borrowers interest rate.
Additionally, borrowers can benefit from an up to $500 appraisal credit if theyre not already eligible for an appraisal waiver.
Save On Your Monthly Payments
If interest rates have declined since you closed on your current mortgage loan, refinancing at a lower interest rate may help decrease your monthly payments. It can also help you reduce the total amount of interest you pay over the life of the loan. Keep in mind that your interest rate will be based on a number of factors, including your credit score.
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Is It Good To Have A Fannie Mae Loan
Fannie and Freddie loans have competitive interest rates and low down payment options. But the biggest benefit of Fannie and Freddie loans: They are the mortgages most lenders prefer to make. There is a ready market where lenders can sell the loans, earn a profit and gain more capital to make additional loans.
Dividends Paid To Government
In May 2013, Fannie Mae announced that it is going to pay a dividend of $59.4 billion to the United States Treasury.
In 2014, gross flows were:
- $116 billion received from Treasury
- $134 billion paid to Treasury
Fannie Mae’s 2014 financial results enabled it to pay $20.6 billion in dividends to Treasury for the year, resulting in a cumulative total of $134.5 billion in dividends through December 31, 2014 approximately $18 billion more than Fannie Mae received in support. As of March 31, 2015, Fannie Mae expects to have paid a total of $136.4 billion in payments to the Treasury.
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Background And Early Decades
Historically, most housing loans in the early 1900s in the USA were short term mortgage loans with balloon payments.The Great Depression wrought havoc on the U.S. housing market as people lost their jobs and were unable to make payments. By 1933, an estimated 20 to 25% of the nation’s outstanding mortgage debt was in default. This resulted in foreclosures in which nearly 25% of America’s homeowners lost their homes to banks. To address this, Fannie Mae was established by the U.S. Congress in 1938 by amendments to the National Housing Act as part of Franklin Delano Roosevelt‘s New Deal. Originally chartered as the National Mortgage Association of Washington, the organization’s explicit purpose was to provide local banks with federal money to finance home loans in an attempt to raise levels of home ownership and the availability of affordable housing. Fannie Mae created a liquid secondary mortgage market and thereby made it possible for banks and other loan originators to issue more housing loans, primarily by buying Federal Housing Administration insured mortgages. For the first thirty years following its inception, Fannie Mae held a monopoly over the secondary mortgage market. Other considerations may have motivated the New Deal focus on the housing market: about a third of the nation’s unemployed were in the building trade, and the government had a vested interest in getting them back to work by giving them homes to build.
What Is The Loan Lookup Api
The Loan Lookup API determines in real time which loans in a lenders portfolio are owned by Fannie Mae. Knowing this will help identify whether borrower is eligible for appraisal flexibilities at any point in the process, even as early as the point-of-sale or loan application.
The Loan Lookup API only needs minimal data to provide a response indicating whether a borrowers loan is owned by Fannie Mae. This automatic ownership confirmation allows lenders to prioritize loans that may benefit from an abbreviated process due to potential appraisal flexibilities, which ultimately streamlines the loan origination process.
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What To Do Once You Know Its Owned By Fannie Or Freddie
- Take note of the lender or loan servicer listed on the results page
- If you make payments to that company still, reach out to them for help
- If you pay a different company due to a servicing transfer, call them instead
- Generate a mortgage forbearance letter so you can send it to them to get the ball rolling
In terms of qualifying for mortgage forbearance via the CARES Act, it appears to pretty straightforward, with very little paperwork needed.
There is even a free tool that helps you generate a mortgage forbearance letter in minutes.
However, its also a brand new program, so loan servicers and lenders are probably still figuring it all out themselves.
Once you know that Fannie Mae or Freddie Mac own your mortgage, you should contact your loan servicer .
Let them know your loan is owned by Fannie or Freddie, and that you need assistance due to the COVID-19 epidemic. Mention the CARES Act and have that letter ready to send their way.
Lastly, keep in mind that there are also loss mitigation programs available with individual banks and mortgage lenders if you dont qualify for government assistance.
I have a list of mortgage assistance options for coronavirus-related loss of income that you can peruse as well.
Basically, everyone is providing some form of relief, though the government program appears to be the best, with waived payments for 6-12 months without any extra cost.
Read more: How is mortgage forbearance paid back?
About the Author: Colin Robertson
The Role Of Fannie Mae And Freddie Mac In The 2008 Financial Crisis
Fannie Mae and Freddie Mac played a starring role in the financial crisis of 2008, thanks to their implicit guarantee. Remember that both companies were chartered by Congress and filled federally mandated roles to maintain the stability and functioning of the mortgage market. But they were also public companies, whose bonds and shares were widely held by investors.
Given their importance, most investors in Fannie and Freddie assumed that they were too big to fail. If the companies ever ran into trouble, they assumed the government would bail Freddie and Fannie out. This wasnt something stated explicitly in any laws or regulations. Nevertheless, this made FNMA and FMCC seem to be less risky investments than many other similar companies.
This especially gave Freddie and Fannie favorable treatment in the bond market. The implicit guarantee made their bonds less risky bets than bonds from other financial companies, helping them borrow money more cheaply. Even the highest-rated debt of top financial companies couldnt compete. Fannie and Freddie borrowed trillions of dollars, meaning that their bonds were very widely heldfurther ensuring they became too big to fail.
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Do Fha Loans Go Through Fannie Mae
Neither the FHA nor Fannie Mae issues loans. The FHA program insures loans to protect lenders against default. Fannie Mae is a publicly traded entity managed under government charter that buys loans from lenders, freeing up lender assets to keep underwriting more loans for economic stability or growth.
How Can I Tell Who Owns My Mortgage
You can look up who owns your mortgage online, call, or send a written request to your servicer asking who owns your mortgage. The servicer has an obligation to provide you, to the best of its knowledge, the name, address, and telephone number of who owns your loan.
Its not always easy to tell who owns your mortgage. Many mortgage loans are sold and the servicer you pay every month may not own your mortgage. Whenever the owner of your loan transfers the mortgage to a new owner, the new owner is required to send you a notice.
If you dont know who owns your mortgage, there are different ways to find out.
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How Do I Know If Fannie Mae Or Freddie Mac Owns My Mortgage
Quick mortgage tip: How do I know if Fannie Mae or Freddie Mac owns my mortgage?
One of the key requirements to getting approved under the CARES Act to receive mortgage forbearance is ensuring that your loan is indeed owned or guaranteed by Fannie Mae or Freddie Mac.
If it isnt, you might still be eligible for mortgage relief as long as your loan is backed by the FHA, USDA, or VA. For those explicit government loans, its a little more straightforward.
Knowing who owns your loan can also be helpful to determine if youre eligible for a particular loan modification, or if you can pursue certain foreclosure prevention options via each agency.
Fortunately, the pair has made it very simple to find out if your mortgage is owned or backed by either.
Differences Between Fannie Mae And Freddie Mac
Beyond the age difference, what sets Fannie Mae and Freddie Mac apart? Although both buy mortgages, they purchase the loans from different sources. In general, Fannie Mae tends to buy loans from larger commercial banks and lenders, whereas Freddie Mac often buys loans from smaller banks.
In addition, Fannie Mae and Freddie Mac have slightly different requirements of the mortgages they purchase. The mortgage has to be a conforming loan, or adhere to these standards, for it to be eligible for purchase. The requirements cover the amount of the loan, the borrowers credit score and debt-to-income ratio, loan-to-value ratio and other factors.
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Fannie Maes Refinow Program
Starting June 5, 2021, Fannie Mae has been offering low-income mortgage holders a new refinance option through a program called RefiNow, meant to reduce their monthly payments and interest rates. To be eligible, homeowners must be earning at or below 80% of their area median income .
This program is intended to help more homeowners refinance by removing some of the barriers of the traditional refinancing process, improving affordability, and promoting sustainable homeownership. Lower-income borrowers typically refinance at a slower pace than higher-income borrowers, potentially missing an opportunity to save on housing costs, says Malloy Evans, senior vice president, and single-family chief credit risk officer, Fannie Mae.
If homeowners are unsure about whether or not Fannie Mae owns their mortgage, they can visit Fannie Maes Loan Lookup Tool. The RefiNow program offers several benefits for homeowners. First, it requires a reduction in the homeowners interest rate by a minimum of 50 basis points and a savings of at least $50 in the homeowners monthly mortgage payment. Second, Fannie Mae will provide a $500 credit to the lender at the time that the loan is purchased if an appraisal was obtained for the transaction, and this credit must be passed on from the lender to the homeowner.
To qualify for RefiNow, a homeowner must meet these qualifications:
