Expanding Homeownership Responsibly with Freddie Mac Home Possible - Nadja Vital MBA Central FL, Nov.8, 2017 - MBA of Central Florida
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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
© 2017 Freddie Mac
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
© 2017 Freddie Mac
The Homeownership Rate Now Is As Low As
It Was in 1968
Homeownership Rate
70
69
68
67
Percent
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
© 2017 Freddie Mac
Renewing the affordable lending ecosystem
Thinking and acting holistically Calibrating for the market
Strategically creating relationships Supporting homebuyer success
© Freddie Mac 5
State of the
Purchase Market
© 2017 Freddie Mac
First-time homebuyers
2016 First-Time Homebuyer Demographics
2016 Homebuyers
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
First Time 33% used FHA loans, 12% used VA
Homebuyers Typical FTHB home: 1,650 sq. ft., cost - $182,500
35%
Repeat FTHBs plan to stay in homes for 10 years
Homebuyers
65%
Unmarried
Couple 14%
Single
Male 8%
Other 2%
Single Female Married
18% 58%
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 U.S. Florida
group
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.
© 2017 Freddie Mac
Housing Stock Comparison Trend since 2015
Source: Data provided by Redfin, a national real estate brokerage.
© 2017 Freddie Mac
Median Sale Price Trend Comparison since
2014
Source: Data provided by Redfin, a national real estate brokerage.
© 2017 Freddie MacThe U.S. Will Become More Diverse
2015
2020
2030
2040
2050
White Non-Hispanic Hispanic African-American Asian
Source: U.S. Census Bureau
© 2017 Freddie MacMinority Share Comparison Chart and Table
Select Florida Counties
Share of Population United
Florida
by Minority States 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
© 2017 Freddie MacHomeownership Rates by Race/Ethnicity
Source: U.S. Census Bureau: Housing Vacancies & Homeownership Rates
© 2017 Freddie MacFHA Loan Share Comparison Chart and Table
by Minority
Share of FHA US Florida Select Florida Counties
loans by Conforming U.S. Conforming Florida
minority group Loan Count Loan Count 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.
© 2017 Freddie MacAverage 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.
© 2017 Freddie MacMillennials Dominate the Conversation
83+ million of them
26.3 years old on average
$51,000 average annual income
14% with mortgages
Creditworthiness Percentage of Millennials
(VantageScore® 3.0)
Strong (>737) 14%
Moderate (661-736) 19% 24 million are
Weak (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
© 2017 Freddie MacGeneration 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 18Baby 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 MacThe Size of the Future Market
Source: JCHS Household projection
© Freddie Mac 20Dispelling 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 Freddie Mac has a range of low down
mortgage loans” payment products to meet your needs
“I only may use my savings for a down You may be eligible for down payment
payment” assistance; gifts & grants are OK, too
“My credit history isn’t good enough” The lender ultimately decides, but Freddie
Mac accepts FICO scores of ≥660; Freddie
Mac offers free CreditSmart® financial-
literacy curriculum
“I don’t know where to start – the buying Not-for-profit, HUD-approved, housing
process is complicated” 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 MacFreddie Mac Products & Offerings to
Help with Your Purchase Business
© 2017 Freddie MacHome Possible Features and Benefits
High LTV mortgage for qualified first-time homebuyers, low- and
moderate-income borrowers and move up buyers
Borrower Profile Key Features Borrower Benefits
First-time homebuyers Maximum LTV/TLTV: Low down payment
Repeat homebuyers Home Possible Advantage - No minimum borrower
97% LTV / 105% TLTV contribution from personal funds
Families in underserved areas
Home Possible – 95% LTV / for 1-unit residences
Multi-cultural buyers 95% TLTV Flexible down payment and
Empty nesters Eligible annual income of up to closing cost funding options
Very low and low- to moderate- 100% of Area Median Income Reduced mortgage insurance
income borrowers (higher in high cost areas) coverage levels (25% coverage
No income limit in Underserved when LTV > 90%)
Areas No cash-out refinancing
2-4 unit properties up to 95% No reserves required on 1 unit
LTV / 95% TLTV under Home owner-occupied properties (2
Possible months reserves on 2-4 units)
Homebuyer education only Homebuyer education available
required for one borrower when at no cost to the borrower
all borrowers are First-Time
Homebuyers
© 2017 Freddie MacBorrowers Without Credit Scores
© 2017 Freddie MacFlexible Down-payment & Closing-cost
Sources
Flexible Sources of Funds*
Financing Concessions Lender Credit
» 3% LTV/TLTV ratio > 90%
» 6% LTV/TLTV ratio > 75% < 90% Unsecured Loan: Originating Lender
» 9% LTV/TLTV ratio < 75% (Refer to Guide Section 5501.4)
* Closing costs
Borrower Personal Funds Other Eligible Sources
(Minimum borrower contribution, if applicable)
Gifts/Wedding Gift Funds/Gift of Equity
Depository accounts Individual Development Gift/Grant: Agency
Sale of Borrower Asset Account (IDA): include matching Secondary Financing
Cash on hand funds only if not subject to recapture tax Affordable Seconds
Trust disbursement Community Savings deposited Employer-Assisted Homeownership
Pooled funds by the Borrower Benefit
Loan secured by Trade equity IDA: matching funds subject to
Rent Credits recapture tax
Financial Assets Unsecured loan: Agency/Related
Securities Cash value of life insurance
Person, or Community Savings
Government bonds Borrower’s real estate Systems (funds in excess of Borrower’s
Retirement accounts commission contribution)
Sweat equity (once 5% downpayment from
Credit card charges, cash advances or unsecured line of credit: personal funds has been met)
to pay fees associated with the mortgage application process
FreddieMac.com/homepossible/
© 2017 Freddie MacWhy choose Home Possible over FHA?
Mortgage Insurance
vs.
Home Possible FHA
Ends when LTV < 80% (or amortizes Stays for the life of the loan
to 78%)
Conventional MI: monthly FHA: Upfront AND monthly
OR single premiums premiums
Only required if the LTV is Required regardless
greater than 80% of the LTV
Down payment funds Down payment funds applied
applied to principal 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 MacHome Possible Income & Property Eligibility
Tool
FreddieMac.com/homepossible/eligibility.html
© Freddie MacHome Possible Income & Property Eligibility
Tool – Augusta, GA
© 2017 Freddie MacHome Possible Income & Property Eligibility
Tool – Augusta, GA
© 2017 Freddie MacHousing 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 market-
competitive pricing
© Freddie Mac 30Homeownership Education
Purchase Transactions Required:
When all borrowers are first-time 2- to 4-unit primary residence
homebuyers, at least one qualifying (Home Possible only): At least one
borrower must participate in a qualifying Borrower must
homeownership education program participate in a landlord education
before the Note Date* program before the Note Date*
» A copy of a Homeownership Education » A copy of a certificate evidencing
Certification, or another document with successful completion of the landlord
comparable information, to be retained in education program must be retained in
the mortgage file 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 MacTypes 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
© 2017 Freddie MacAffordable 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
© 2017 Freddie MacResources to Support
Your Business
Tools for You and Your Client
© Freddie MacReal Estate Professionals Resource Center
Freddiemac.com/singlefamily/RealEstatePros
© Freddie MacReal Estate Professionals Resource Center
FreddieMac.com/singlefamily/housingpros/subscribe.html
© Freddie MacMy Home by Freddie MacSM 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 • Worksheets
• “Meet the • Brochures
Experts” video • Infographics
series • “What home
• Calculators means to me”
• Quizzes photo essay
myhome.FreddieMac. © Freddie MacCreditSmart®
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
© 2017 Freddie MacThe Learning Center
www.FreddieMac.com/learn
© Freddie Mac 39Receive the latest news and updates
To sign up for news releases, go to:
freddiemac.mwnewsroom.com/News-Signup
For Learning Center updates, go to
freddiemac.com/learn/ch_ind/
To sign up for business updates from
Freddie Mac Single Family, go to:
freddiemac.com/learn/ch_ind/
© Freddie Mac 40Creating 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 41QA
&
© Freddie Mac 42You can also read
