Freddie Tests Less-Stringent Loan Program
In a new pilot program, Freddie Mac and two non-bank lenders are easing income and documentation requirements for mortgage borrower applicants.
Meeting Buyers Halfway
The aim is to fuel more mortgage originations among first-time buyers, who tend to have more low to moderate incomes, and to better reach those who live in underserved areas, The Wall Street Journal reports.
In the pilot program, Freddie Mac says that applicants will be able to use the income of others who live with the borrower but who aren’t going to be on the mortgage to qualify. Also, income from second jobs that borrowers have held, even for a short period of time, can now be factored in. The program will also not require borrowers to come up with bank statements to show how they saved for their down payment.
The pilot program does not lower down payment or credit score requirements.
Sister mortgage giant Fannie Mae offers a similar program. However, the loosened standards are new to Freddie Mac.
Freddie Mac says the changes took effect on Monday. The pilot program will be offered for the next 12 months to mortgage applicants with Alterra Home Loans, based in Las Vegas, or New American Funding in Trustin, Calif. After 12 months, Freddie Mac will determine whether to expand its pilot program.
Source: “Freddie Mac Starts Pilot Program With Looser Standards,” The Wall Street Journal (Sept. 19, 2016)