Mortgages With No Money Down Still Available

Washington Post (06/09/08) P. D1; Hilzenrath, David S.
Borrowers still have access to mortgages for up to 105 percent of the home price through Fannie Mae and Freddie Mac, despite the fact that no equity and falling home prices could make it difficult for them to refinance or sell down the road. Freddie Mac says such loans have lower delinquency rates because borrowers are required to complete homeownership education, while Fannie Mae says a requirement that a second loan used to finance the amount above 97 percent of the home price be forgiven if borrowers stay put for five years has helped loan performance. The loans enable the government-sponsored enterprises to meet their affordable housing goals and permit borrowers to include transaction costs in their mortgages, though reduced availability of mortgage insurance can make it hard for such loans to move forward. Although most lenders are requiring 2.5 percent to 3 percent down, National Association of Affordable Housing Lenders President Judy Kennedy says no-money-down loans can be successful with support from nonprofit organizations that help borrowers make their monthly payments if they encounter financial trouble.