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Monday, November 10, 2014

FHFA’s Watt Details Fannie, Freddie Low Down Payment Plans

Federal Housing Finance Agency Director Mel Watt on riday offered several details about the guidelines his agency intends to issue for loans with 3-5 percent down payments to be purchased by housing GSEs Fannie Mae and Freddie Mac.

Speaking to a housing industry conference in New Orleans, Watt explained that the agency’s goal is to help address some of the headwinds to first-time homeownership. “We know that the size of a down payment -- by itself -- is not the most reliable indicator of whether a borrower will repay a loan,” he explained.

But to ensure the guidelines support safety and soundness, Watt said that the FHFA will require GSE-eligible low-down-payment loans to factor in “risk mitigants,” such as housing counseling, stronger credit histories and lower debt-to-income ratios, as well as private mortgage insurance.

Read the speech.