MyCommunity MortgageMyCommunity Mortgageforfor

Housing Finance AgenciesHousing Finance Agencies

Sheryl Krocek, PresenterU.S. Bank Home Mortgage – MRBP Division

January 24, 2005

What is MyCommunityMortgage™ (MCM)?

MCM is Fannie Mae’s affordable lending product developed to serve low and moderate-income communities and borrowers.

Options include:

Community SolutionsTM (for education employees)

Community HomeChoiceTM Section 8 for

Homeownership

Options include:

Community SolutionsTM (for education employees)

Community HomeChoiceTM Section 8 for

Homeownership

MCM can help you:•Say “yes” to more borrowers•Reach a broader audience of

borrowers with the standard

MCM product plus options

for additional flexibilities

MCM for Housing Finance Agencies

• An affordable, Conventional Mortgage for HFAs

• Offers a wide range of flexibilities

• Available within or outside of HFAs’ MRB programs

• Conventional product for HFA programs

• MyCommunityMortgage flexibilities

• Underwriting available through DU

MCM for Housing Finance Agencies

Lender Benefits

• Affordable, flexible product may be combined

with HFA programs, such as down payment

assistance

• LTVs up to 100%

MCM for Housing Finance Agencies

Consumer Benefits

MyCommunityMortgage™ makes it easier than ever to afford a home of your own.

You need as little as $500 from your own funds (remaining necessary funds can come from a variety of sources including gifts; grants; loans from relatives or nonprofit groups; employer-assisted housing; or a secured loan from a lender).

With MyCommunityMortgage™, your lender will work with you to consider all types of income and credit histories to help you qualify for the mortgage that you need.

An Affordable, Flexible Mortgage

Is This Mortgage Right for You?

If any of these situations describes you, MyCommunityMortgage might be a good fit:

• You have limited savings for a down payment and/or closing costs

• You do not have a “traditional” credit history, but can show other ways that you have handled credit well, such as paying rent

• You receive rent payment from boarders, or income from government benefits, or other sources

MCM: Eligibility ParametersLoan Purpose Purchase

Product Types • 30-year fixed rate

Eligible Properties • One-unit owner-occupied only (condos are allowed)

Home Buyer Education

• Home-buyer education is required for all buyers

Underwriting • Eligible for Manual Underwriting • For DU, Approve/Eligible, EA-I/Eligible, and

EA-II/Eligible Nontraditional credit accepted, but for DU, at least one

borrower must have a traditional credit history as determined by DU

Credit and income-source flexibilities available, including boarder income from non-relatives

MCM: EligibilityBorrower Income and Purchase Price Eligibility

• Borrowers must meet both income and purchase price limits set by the HFA

LTV/CLTV and Subordinate Financing

• 100%/105% w/Community Seconds®; 100%/100% w/ subordinate financing (non–Community Seconds) if allowed by the HFA

• Minimum CLTV for DU underwriting: 95%•No minimum CLTV for manual underwriting

• Financed MI permitted with LTV up to 100% including the financed MI (1-unit only)

Minimum Borrower Contribution

• $500 from borrower’s own funds

MI Coverage

as of 7/24/05

• 97.01% - 100.00%: 20% • 85.01% - 90%: 12% • 95.01% - 97%: 18% • 80.01% - 85%: 6% • 90.01% - 95%: 16%

Seller Contribution • 3% interested party contribution allowed for closing costs and prepaid items only

Counseling Requirements

• Pre-Purchase Counseling is required for all home buyers, utilizing one of the following forms of pre-purchase counseling:

Face-to-face home-buyer education Classroom or workshop sessions Telephone/Internet education/counseling program by

an approved mortgage insurer sponsored by the lender

• Early Delinquency Counseling MUST BE IN PLACE!!

Enhancements Effective July 2005

• Lower minimum required mortgage insurance coverage – highest rate of 20 percent

• Cash-on-Hand added as an acceptable source of funds for closing costs and down payment

• New Fannie Mae collections policy applied for loans underwritten through Desktop Underwriter (DU®)

Example of Borrower Savings

$100,000 loan, 100% LTV, 5.65% interest rate, 30-year fixed-rate

20% MI 35% MI

MI Standard Rate MI monthly payment* $49 $80

Monthly savings: $31Income to qualify assuming 43% housing ratio: $22,132 $22,993

MI A– Rate, 619 FICO®

MI monthly payment* $114 $157

Monthly savings: $43Income to qualify assuming 43% housing ratio: $23,946 $25,132

* Assumes application of commonly available Standard or A- MI rates as of May 2005; particular rate subject to MI company requirements.

Example is for

illustration only and

reflects just one of the

interest rates commonly used under HFA bond programs.

Hypothetical example of borrower savings, 20% vs. 35% MI coverage:

Cash-on-Hand as Income Source

Borrowers may use cash-on-hand for the down payment and closing costs, subject to specific criteria

– Limited to one-unit, principal residences

Cash-on-hand funds will not be used to calculate reserves (if reserves are required)

DU will use the “Cash-on-Hand” amount to calculate the available funds to close

Cash-on-Hand as Income Source (continued)

The lender must verify/document the following:• Borrower customarily uses cash for expenses; usage is consistent with

previous payment practices.

• Borrower's credit report indicates limited (or no) use of credit, and no depository relationship.

• Borrower must provide signed statement disclosing the source of funds (and that they were not borrowed).

• The borrower must deposit with a financial institution at the time of application, or no less than 30 days before closing, funds sufficient for the down payment and closing costs.

New Fannie Mae Collections Policy

• Collections: New Fannie Mae collections policy

applies to MCM loans underwritten through DU.

• Requires payoff only if collections exceed $5,000

• Must be submitted through DU – manually

underwritten loans are ineligible

Sources of Additional Funds into Transaction

Down payment in excess of minimum required borrower contribution (the down payment “gap”) may consist of:– Gift from a relative– HFA down payment assistance program subsidy– Unsecured or secured loan or grant from employer,

city, county, nonprofit organization– Loan secured against asset owned by borrower– Proceeds from Individual Development Accounts

(IDAs)

What are borrower options? • Underwriting guidelines used in conjunction with the basic MCM

platform to provide additional flexibility for targeted borrowers. – They are not separate products.

When underwriting an MCM mortgage, how can the options be used?– To use the options, first qualify the borrower for the standard

MCM, then determine eligibility for the desired option. – Some flexibilities require manual underwriting, while some

can be done in DU.

MCM: Borrower Options

Summary of MCM OptionsOption Description

Community Solutions

Borrower Option for teachers, police officers, firefighters, and health care workers

Community HomeChoice

Borrower Option for a borrower with a disability or a family member with a disability

Section 8 for Homeownership

Section 8 housing choice vouchers may be used as qualifying income

Native American For any eligible properties on tribal trust or restricted lands

Using Desktop Underwriter

Desktop Underwriter supports most MyCommunityMortgage loans

• MCM permitted for Approve-Eligible along with EA

Levels I and II only, with appropriate messaging

• Standard Loan Level Price Adjustments (LLPAs) for EA

Levels I and II do not apply for MCM in most cases

• Lenders must be approved/activated to offer MCM through

DU, and there is an annual volume allocation for MCM**Loans originated under MRB programs do not affect the lenders allocation. The allocation affected is

that of the Master Servicer purchasing the bond loan.

Lender Access to DU

1. Access to DU, MCM, with EA I & II – full

access

2. Access to DU, MCM, but does not have the

MCM, EA I & II module

3. Approved Fannie Mae Seller with no access to

DU

Types of Desktop Underwriting Access:

Access to DU, MCM, with EA I & II – full access

Lender inputs information into DU as a

Community Lending Product and selects MCM

– DU will report findings.

Lender receives the benefit of Fannie Mae’s

Reps and Warrants on the automated decision

Lender Access to DU

Lender Access to DU

Access to DU, MCM, but does not have the MCM, EA I & II module

– Some institutions offer their services to run your loan

through their DU system and report findings to the

lender for a small charge

Approved Fannie Mae Seller with no access to DU

or no Authorized Underwriters

• Lenders may sign up to become a Correspondent of a lender utilizing the DU MCM EA I & II system

Lender Access to DU

For more information on MyCommunityMortgage,

Visit www.efanniemae.com

Information Source: Fannie Mae and www.efanniemae.com