Fannie Mae and Freddie Mac unveiled terms for their 97% loan-to-value home loan programs. The low-down-payment loans will be eligible to be sold to Fannie starting Dec. 13 and to Freddie starting March 23, 2015.
The fixed-rate loans will be limited to home purchases and no-cash-out refinances, and the borrower must use the home as a primary residence. Fannie Mae mortgagors may take cash out in limited circumstances when refinancing a Fannie mortgage, and Freddie will allow manual underwriting for low-down-payment loans under certain circumstances.
Borrowers must participate in a homeownership counseling program, which Fannie and Freddie regulator Mel Watt said would lead to lower default rates.
Read Fannie’s bulletin.
Read Freddie’s bulletin.