Looking to streamline the process of hunting for downpayment assistance (DPA), Freddie Mac has launched a new set of standardized mortgage documents designed to increase accessibility to DPA programs nationwide.
The government-sponsored enterprise is encouraging lenders that work with housing finance agencies at the state, city and county levels to use the new documents to cut down on confusion regarding DPA programs.
“Saving for a downpayment continues to be the largest barrier to homeownership for lower-income and first-time homebuyers,” said Danny Gardner, single-family senior vice president of mission and community engagement at Freddie Mac. “We know that standardization has increased efficiency, lowered costs and improved many areas of the mortgage industry. By embracing standardization and creating a set of industrywide documents, we are providing clarity and consistency that will enable more lenders to help more individuals and families leverage downpayment assistance programs across the country.”
Freddie Mac noted that, historically, subordinate lien documents for DPA programs have varied significantly. Many are specific to housing finance agencies or use different, nonstandardized verbiage, which can lead to misunderstandings about loan terms and repayment plans. To make things simpler across the board, Freddie officials collaborated with Fannie Mae and several state housing finance agencies to make the new lien documents a reality.
State standardized lien documents are already on Freddie’s website for Alabama, Arkansas, Arizona, California, Colorado, Connecticut, Idaho, Illinois, Iowa, Massachusetts, Minnesota, New Mexico, South Dakota, Tennessee, Virginia and Washington. By the end of this year, documents will available for at least 19 states, with the rest of the states (plus the District of Columbia) to follow.
Freddie hopes that having more consistent documentation will bear fruit on the lender side as well as the consumer side, potentially leading to more lenders participating in DPA programs. Stockton Williams, executive director of the National Council of State Housing Agencies (NCSHA), praised the move as a positive step.
“This effort by Freddie Mac compliments NCSHA’s HFA1 Affordable Homeownership Lender Toolkit online resource, which enables home mortgage lenders to partner more efficiently with state housing finance agencies in providing mortgage loans and downpayment assistance to lower-income homebuyers,” he said.