Mortgage Companies that Pay Closing CostsHypothecary banks bearing acquisition costs
Now Fannie Mae enables creditors to participate in the borrower's acquisition costs | 2018-04-04-04-04
Whilst it's not quite the same as the down payments that government-sponsored companies used to allow, creditors now have a new way to help debtors buy a house - the closing costs aid. As Fannie Mae said this weekend, creditors will now be allowed to add to borrowers' closing costs as long as the funds are a present and are not used to pay a borrower's down payments.
In recent years, Freddie Mac permitted large amounts of creditors and Fannie Mae smaller amounts of creditors to give away funds to debtors that could be used to pay their down payments of 3%. Within the framework of the programmes, creditors would "grant" 2% of the advance payments to the debtor.
Include this in the 1% borrowers' fee and you would have the 3% required to be eligible for the Fannie and Freddie programmes. The programmes were disgraced after some creditors began to roll back the'grants' in the shape of premiums into the credits themselves, with the creditor charging a higher interest in return for the advance aid.
Freddie was able to stop the programme last summers because the Federal Housing Agency took up a few banners on the issue. Thus the advance aid programmes ended, at least in relation to the 2% that came directly from the creditor and had to be paid back. However, under certain conditions, creditors who are selling their credits to Fannie Mae can now begin to offer support to debtors in closing the costs.
Fannie Mae sent an e-mail to the creditors this weekend announcing that the funds must be in the shape of a present and must not be the object of a refund obligation. In addition, the funds may not be used to finance part of the borrower's down payments. It can only be used for closing costs and charges.
Mae also said that there is no limitation on the amount a creditor can give to a debtor, as long as it does not top the overall amount of acquisition costs. "We are making it easy fororrowers to buy a home by enabling creditors to finance acquisition costs and pre-paid fees," said Fannie Mae Chief Credit Officer for Single Family Houses Carlos Perez in a note to creditors.
"Whilst there is no limitation on the amount of contribution received from the creditor, the resources cannot be used for a down payment, cannot cover the entire acquisition costs and should not be covered by any type of reimbursement agreement," added Perez. Fannie Mae also states in her creditor report that support for acquisition costs must come directly from the creditor and cannot be transferred from a third person to the creditor.
Now for the small print taken from Fannie's Lenders Bulletin: Amount of creditor premium should not be higher than amount of acquisition costs incurred by the debtor and amount of advance charges made. Otherwise, the amount of the premium shall not be capped unless the creditor is an interested person in a sale within the meaning of B3-4.
1-02, Interested Party Contributions, and in this case, the Interested Party Contribution (IPC) guideline shall apply. A surplus amount of loan assets to be surrendered to the Mortgagor in accordance with current prudential standards shall be deemed to be an oversubscription of duties and payments and may be surrendered to the Mortgagor as a capital constraint or in the form of liquid funds.
However, now the GSE is making the options available to all creditors. Fannie Mae says that under these terms, creditors can immediately start to contribute to the borrowers' closure costs.