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   ARTICLE   |   From Scotsman Guide Residential Edition   |   May 2013

3 Niche Programs Realtors Will Love

These Fannie Mae programs can help you ramp up your purchase business

With today’s low rates, mortgage brokers and originators everywhere are closing refinances like there’s no tomorrow. After all, these deals often are easy money and simply represent what the market has to offer, but savvy mortgage professionals also are busy working on their purchase business in preparation for increasing interest rates.

Housing inventory is a challenge for Realtors and purchase-centric lenders all across the country right now. There are Realtors out there who are scrambling for buyers and sellers alike. These industry partners can use all the help they can get to gain a competitive advantage.

With that in mind, here are three Fannie Mae niche programs that may help you give your referral partners a competitive edge — and give yourself something new and exciting to talk to them about as you build your agent base before inventory volumes pick up.

MyCommunityMortgage

Fannie Mae’s MyCommunityMortgage (MCM) loan is a Federal Housing Administration (FHA) alternative program that’s often perfect for limited-asset, low-downpayment borrowers. MCM targets low- to moderate-income borrowers and offers reduced private mortgage insurance (PMI) premiums that are close to half of FHA’s annual mortgage-insurance premium (MIP), which increased this past April 1. In addition to reduced PMI premiums, the MCM program limits the amount of loan-level price adjustments (LLPA) to the adverse market delivery charge (0.25 percent) and thus offers a maximum LLPA of just 0.75 percent of the loan amount for borrowers down to a 620 credit score.

It also should be noted that PMI may require FICO or loan-to-value ratio restrictions. Interested mortgage professionals can learn more about this opportunity by referencing Fannie Mae’s selling guide, which includes matrixes and details about the MCM program. Don’t forget, however, to cross-qualify everything with PMI guidelines to establish your company’s risk tolerance, as well as the availability of this product.

Delayed financing

Delayed financing is a Fannie Mae program that allows cash-out refinancing within six months of the purchase of a home. This is a great opportunity to partner up with listing agents who work with all-cash investors. A qualifying all-cash investor may take cash out of as much as 70 percent of the purchase price just one day after the close of escrow. 

In short, this program can offer opportunities for your real estate agent partners to help their investor clients gain access to their equity faster, which will allow them to start searching for their next property. This is a win for everyone involved. It also will allow you to build long-term referral sources with both agents and investors.
This program also is available for owner-occupied homes and second homes. Again, interested mortgage professionals can refer to Fannie Mae’s seller guide for details on this program and should check with their investors for overlays and restrictions.

PMI

Of course, PMI isn’t exactly a Fannie Mae product, but it can function as a kind of niche in itself. In this sense, it may be of increasingly intense interest to originators and their customers alike. With recent moves to make PMI easier to qualify for, many providers will allow a variety of options to borrowers. In particular, here are three PMI options that mortgage brokers and originators should familiarize themselves with:

  1. Split premium: Split premium allows your borrower to finance a portion of the PMI while significantly reducing the annual premiums. When it comes to most PMI providers, this option costs about half of FHA’s MIP with both the upfront and annual rates.
  2. Single premium: Single premium offers a one-time buy-out option for borrowers, which can be paid a variety of different ways. If a homebuyer is getting seller concessions, lender credits or using downpayment assistance, consider running the numbers on this option. Many borrowers love the idea of buying a home with less than 20 percent down and not paying mortgage insurance.
  3. Lender-paid mortgage insurance (LPMI): LPMI can be another attractive option for asset-strapped, low-downpayment homebuyers. Giving the borrower the option to take a slightly higher interest rate in exchange for no monthly mortgage insurance can be appealing to borrowers who are reluctant to pay mortgage insurance.

"Many borrowers love the idea of buying a home with less than 20 percent down and not paying mortgage insurance."

With LPMI, mortgage professionals also can talk to their clients about converting potentially non-deductible mortgage insurance premiums into tax-return-friendly mortgage interest. The elimination of the mortgage insurance tax deduction has been discussed quite a bit recently, and the ability to avoid the risk of losing this benefit may put you in good standing with borrowers who are looking to save on their taxes — and that may include just about everyone.

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In familiarizing themselves with these programs, mortgage professionals can impress their borrowers with in-depth knowledge of affordable options, and their Realtor referral partners will appreciate the ability to present and accept offers without the stigma that can come with having FHA financing on the purchase contract. 
Having a competitive advantage in today’s market does not mean that you have to close a lot of these niche loans, however. Simply having the ability to hold an informed conversation with your referral partners and borrowers can give you an edge over your rivals, especially if that competition didn’t bother to do much research or think outside of the box.


 


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