Tuesday, April 28, 1998

Fannie Mae launching new mortgage nationwide with small downpayment

By MARCY GORDON AP Business Writer

WASHINGTON (AP) - Saying it will open home ownership to more Americans, mortgage-market giant Fannie Mae is launching nationwide a new type of mortgage with a small downpayment and flexibility regarding the source of that money.

The new mortgage, previously available only in limited areas of the country, is designed to help people with very good credit histories but little savings who have been unable to buy a home. Some 40,000 borrowers are expected to take advantage of the mortgage over the next year, Fannie Mae officials said Monday in announcing the move.

Downpayments can be as low as 3 percent and don't have to come from the borrower's own funds: they can take the form of a gift or an unsecured loan from a family member, nonprofit agency or municipality; a loan secured by a marketable asset; or a grant from an employer or nonprofit or government agency.

Housing surveys "have consistently shown that the major barrier to homeownership is the inability to save funds for a downpayment," said Jamie Gorelick, Fannie Mae's vice chairwoman. She said the new mortgage "provides borrowers of all income levels, who have demonstrated the ability to use credit wisely, with additional sources of downpayment funds."

There is no income limitation, and qualified borrowers can get mortgages up to the conventional loan limit of $227,150. There is no counseling requirement for homebuyers.

The new 30-year, fixed-rate mortgage will be available nationwide by mid-June through a network of 500 lenders using Fannie Mae's "desktop underwriter" computer software.

Ms. Gorelick said the mortgage is the most flexible among conventional home mortgages and comparable to the most flexible government-insured mortgages.

"They are making the process more flexible," said Robert Schmermund, a spokesman for America's Community Bankers, which represents 2,000 community banks and savings and loans. "We think it's a positive."

Fannie Mae and Freddie Mac are government-chartered mortgage market companies that function like commercial corporations and are publicly traded. They compete with the Federal Housing Administration, part of the Department of Housing and Urban Development, which insures mortgage loans.

In February, a coalition of mortgage bankers, builders and realtors threw its support behind a Clinton administration proposal to raise the ceiling on federally insured home loans to $227,150 - the level of Fannie Mae and Freddie Mac. But Fannie Mae and America's Community Bankers opposed the move, which would increase the ceiling for FHA-insured loans by as much as $140,833 from current levels.

HUD spokesman Victor Lambert declined comment Monday on the new Fannie Mae mortgage.

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Consumers seeking additional information can call Fannie Mae's consumer resource center at 1-800-7-FANNIE on Monday through Friday between 9:00 a.m. and 5:00 p.m. EDT.