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Perspectives
October 21, 2014

Three Ways Freddie Mac is Increasing Access to Credit

Christina Boyle
By
Christina Boyle, SVP and Head of Single-Family Sales & Relationship Management

Mortgage interest rates are holding near historic lows and housing remains affordable across most of the U.S. For those who have their financial house in order, it's a great time to buy a home. But many potential buyers can't because they don’t qualify for a mortgage. And many aren't even attempting because they believe they could not qualify.

At Freddie Mac, we're focused on making home possible for more families nationwide by increasing their access to credit. Here are three ways we're doing that:

Enhancing our offerings. Our Home Possible® Mortgages are becoming even more accessible next month. Home Possible already offers borrowers low down payment options – as low as five percent – and flexible down payment options, but starting November 24:

  • Homebuyers will have expanded secondary financing options, such as HELOCs;
  • Those wanting to build a house can now get a Home Possible Mortgage to finance it;
  • Homebuyers purchasing single-family homes with 2-4 units can now use gift funds to meet our minimum reserve requirements;
  • And homebuyers wanting initial lower payments will have expanded interest rate buy-down options.

These enhancements should help more families buy a home in today's market – especially first-time homebuyers, low- to moderate-income borrowers and those in underserved areas.

Adjusting and clarifying our policies. We continue to adjust our policies to address market conditions and customer feedback without sacrificing our commitment to responsible homeownership. Changing regulation is enabling us to once again buy higher-priced mortgage loans that are 5/1 ARMs, giving our lenders additional options for homebuyers. Importantly, these loans have strong consumer protections because of the new rules put forth by the Consumer Financial Protection Bureau earlier this year. And the housing counseling requirement will help these homebuyers be better prepared for homeownership, which we know is a proven model for success. A study we conducted last year suggests that pre-purchase counseling reduces delinquencies by as much as 29 percent, particularly for first-time homebuyers.

In addition, we are facilitating more condo sales by helping our lenders better understand our guidelines and workflows for condominiums.

Educating homebuyers. A recent Wells Fargo survey found that while more than two-thirds of Americans feel that now is a good time to buy a home, many may be reluctant to do so because of uncertainty about qualifying for a mortgage or navigating the homebuying process. That's why a big focus for us has been on educating potential buyers about the mortgage process, qualifying for a loan and debunking the myths on down payments. We're also supporting our lenders with free, customizable marketing materials to help them attract new customers and educate potential borrowers about responsible homeownership.

We continue to explore options to increase access to affordable mortgage credit for America's families, which includes a sustainable mortgage product that will allow as little as three percent down.

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