You also can package Home Possible first mortgages with a range of second loans, which is another benefit for homebuyers with limited savings. Specifically, you can use Freddie Mac’s Affordable Seconds, or any second fixed-rate loan that isn’t seller-paid, isn’t a home equity line of credit or does not impose a prepayment penalty.

In addition to minority households, law-enforcement officials, firefighters, health-care workers and educators are priced out of more than half of U.S. big-city census tracts, according to a recent National Association of Home Builders study. Home Possible Neighborhood Solutions are designed to help them, too. These programs offer 100-percent, 97-percent and 95-percent LTVs, like the standard Home Possible. Neighborhood Solutions also have higher debt-to-income ratios and allow a three-year subsidy buy-down that can reduce the initial interest rate by as much as 1.5 percent in the first year and 0.5 percent per year for the next two (one-month reserves are required). Combined, these features can increase a borrower’s home-purchasing power by as much as 30 percent.

Terms include 15-, 20- and 30-year fixed rates for one- and two-unit properties; 7/1 or 10/1 adjustable-rate mortgages are available. We update Home Possible to meet changing market demands. For example, we responded to recent customer feedback by adding 5/1 ARMs with a 2/2/5 cap structure for single-unit (other than manufactured homes) and two-unit properties, plus reduced mortgage insurance.

Expanding your sources
Many of tomorrow’s borrowers will rely on flexible credit products, and many of the aforementioned products mandate prepurchase borrower education. Therefore, the new generation of first-time U.S. borrowers likely will be coming into the marketplace by way of community- or church-based homebuyer-education programs.

The big question is whether they will be coming through your doors or your competitors’. The answer depends on how well you establish alliances with the nation’s thousands of credit and homebuyer educators to complement your traditional sourcing channels through builders and real estate professionals.

What should you prepare for? Flexible, fully automated mortgage products, bilingual business operations and community-based sourcing channels — the ones that provide borrower education to racial minorities, immigrants and other emerging markets. At least, that’s the answer for brokers who want to succeed in a future that already has started.

Patricia McClung became Freddie Mac's vice president of housing and community investment in October 2003 and is responsible for developing and implementing affordable-housing and community-development lending products and initiatives. Previously, she was vice president of Origination Services (Single-Family Business Division), where she created and executed strategic business plans for the development and marketing of Freddie Mac's Loan Prospector automated-underwriting service. For more information, call (703) 903-2000 or (800) FREDDIE (373-3343).

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