expanding homeownership responsibly with freddie mac …millennials dominate the conversation...

Expanding Homeownership Responsibly with

Freddie Mac Home Possible®

Nadja Vital

MBA Central FL, Nov.8, 2017

© 2017 Freddie Mac

A Better Freddie Mac …and a better housing finance system

For families

...innovating to improve the liquidity, stability and

affordability of mortgage markets

For customers

...competing to earn their business

For taxpayers

...reducing their exposure to mortgage risks

© 2017 Freddie Mac

The State of the Purchase Market

− Market Conditions and Purchase Drivers

− First-Time Homebuyers

− Changing Demographics

− Millennial Impact

Products & Offerings to Help with Your Purchase Market Business− Home Possible & Home Possible Advantage

− HFA Advantage for Housing Finance Agencies

− Affordable Seconds

− Down Payment Assistance

Resources to Support Your Business

Purchase Market Resource Center

Home Possible Income & Eligibility Tool

The Learning Center

Credit Smart

Borrower Help Centers

Expanding Homeownership Responsibly

Agenda

© 2017 Freddie Mac

The Homeownership Rate Now Is As Low As

It Was in 1968

62

63

64

65

66

67

68

69

70

1994 1995 1997 1998 2000 2001 2003 2004 2006 2007 2009 2010 2012 2013 2015 2016

Pe

rce

nt

Homeownership Rate

Source: U.S. Census Bureau

© Freddie Mac 5

Renewing the affordable lending ecosystem

Thinking and acting holistically

Strategically creating relationships

Calibrating for the market

Supporting homebuyer success

© 2017 Freddie Mac

State of the

Purchase Market

© Freddie Mac 7

2016 First-Time Homebuyer Demographics

Share increased to 35% in 2016 – An increase over last

year’s near all-time low of 32%

Median age – 32; Median income - $72,400

Down payment sources – 76% savings; 24% gifts from

friends or relatives

33% used FHA loans, 12% used VA

Typical FTHB home: 1,650 sq. ft., cost - $182,500

FTHBs plan to stay in homes for 10 years

First Time Homebuyers

35%

Repeat Homebuyers

65%

2016 Homebuyers

Married 58%

Single Female 18%

Single Male 8%

Unmarried Couple 14%

Other 2%

Source: National Association of Realtors

2016 Profile of Home Buyers and Sellers

First-time homebuyers

© 2017 Freddie Mac

Average Borrower Income Comparison Chart

and Table by Minority

Source: Data comes from 2015 HMDA originations and purchases for single family and manufactured housing properties, excluding redundant loans purchased by commercial banks, savings banks, savings associations, and affiliated institutions. Figures also exclude jumbo loans, home improvement loans, loans with a reported rate spread, HOEPA loans, second liens, and unsecured loans. Minority share is calculated using the five race variables and one ethnicity variable per applicant following the HMDA minority definition that excludes from eligibility all loans where the borrower is white but ethnicity is missing, non-Hispanics with missing race and where both race and ethnicity are missing.

Asian $106K $91K

Black $77K $71K

Hispanic $77K $76K

Minority $85K $76K

Non-Minority $89K $88K

Overall $89K $84K

Average borrower

income by minority

group

U.S. Florida

© 2017 Freddie Mac

Housing Stock Comparison Trend since 2015

Source: Data provided by Redfin, a national real estate brokerage.

© 2017 Freddie Mac

Median Sale Price Trend Comparison since

2014

Source: Data provided by Redfin, a national real estate brokerage.

© 2017 Freddie Mac

The U.S. Will Become More Diverse


2015

2020

2030

2040

2050

White Non-Hispanic Hispanic African-American Asian

© 2017 Freddie Mac

Minority Share Comparison Chart and Table

Source: U.S. Census Bureau, 2011-2015 American Community Survey 5-Year Estimates

Lake Orange Osceola Seminole

White 62.3% 56.1% 72.3% 58.0% 36.6% 64.0%

Black 12.3% 15.5% 9.5% 9.2% 9.7% 10.8%

Asian 5.1% 2.5% 1.8% 6.9% 2.5% 4.1%

Hispanic or Latino 17.1% 23.7% 13.5% 24.3% 49.0% 18.8%

Share of Population

by Minority

United

StatesFlorida

Select Florida Counties

© 2017 Freddie Mac

Homeownership Rates by Race/Ethnicity

Source: U.S. Census Bureau: Housing Vacancies & Homeownership Rates

© 2017 Freddie Mac

FHA Loan Share Comparison Chart and Table

by Minority

Source: Data comes from 2016 HMDA originations and purchases for single family and manufactured housing properties, excluding redundant loans purchased by commercial banks, savings banks, savings associations, and affiliated institutions. Figures also exclude jumbo loans, home improvement loans, loans with a reported rate spread, HOEPA loans, second liens, and unsecured loans. Minority share is calculated using the five race variables and one ethnicity variable per applicant following the HMDA minority definition that excludes from eligibility all loans where the borrower is white but ethnicity is missing, non-Hispanics with missing race and where both race and ethnicity are missing.

Lake Orange Osceola Seminole

Asian 180,723 13.2% 6,750 15.5% 27.2% 15.0% 22.0% 12.5%

Black 193,998 42.3% 16,699 43.1% 37.3% 47.7% 49.8% 41.0%

Hispanic 327,868 41.2% 42,368 38.4% 39.4% 39.7% 55.0% 36.3%

Minority 714,978 34.2% 65,419 37.1% 36.5% 37.9% 52.5% 32.4%

Non-Minority 2,033,000 19.7% 127,925 20.5% 20.4% 19.8% 28.5% 21.7%

Overall 3,120,697 24.1% 218,707 26.6% 24.7% 28.3% 44.7% 25.3%

Select Florida CountiesShare of FHA

loans by

minority group

US

Conforming

Loan Count

U.S.

Florida

Conforming

Loan Count

Florida

© 2017 Freddie Mac

Average Credit Score Comparison Chart

Source: Experian data as of December 2015. Data combines anonymized individual credit bureau data with marketing data to obtain race/ethnicity associated with each individual and is weighted by American Community Survey’s (ACS) Public Use Microdata Sample (PUMS) data. The credit scores are average vantage 3.0 scores by state and county.

© Freddie Mac 16

83+ million of them

26.3 years old on average

$51,000 average annual income

14% with mortgages

Millennials Dominate the Conversation

Creditworthiness

(VantageScore® 3.0)

Percentage of Millennials

Strong (>737) 14%

Moderate (661-736) 19%

Weak (<661 +/or other setbacks)

• Near-moderate 601-660

• Near-moderate <601

50%

• 29.1%

• 70.6%

Sources: Experian data, Freddie Mac analysis

24 million are

mortgage-ready

now

© 2017 Freddie Mac

Percent of population by race /ethnicity

Millennials Are the Most Racially Diverse

Generation In U.S. History


Non-Hispanic White

Hispanic

African American

Asian

Other

© Freddie Mac 18

26% of the 2015 purchase market

26% were first-time homebuyers in 2015

Many buy for more space

~20% have children younger than 18 living at home

Many carry student debt

Generation X Is Comparatively Small But

Still Important

Source: National Association of Realtors March 2016 report,

“Home Buyers and Sellers Generational Trends”

© Freddie Mac

1/4 of the U.S. population

69 million own homes

2/3 of the equity in single-family

homes

63% want to age in place

40% plan to move at least once;

13% within 4 years

Baby Boomers Control the Market

Source: Freddie Mac 55+ Survey

© Freddie Mac 20

The Size of the Future Market

Source: JCHS Household projection

© Freddie Mac

Dispelling Myths Opens

Real Possibilities

Urban Legend Fact

“A 20% down payment is required” You can get a mortgage loan with ≥3%;

average ~15%; 40% put down ≤10%

“FHA is the place for low down payment

mortgage loans”

Freddie Mac has a range of low down

payment products to meet your needs

“I only may use my savings for a down

payment”

You may be eligible for down payment

assistance; gifts & grants are OK, too

“My credit history isn’t good enough” The lender ultimately decides, but Freddie

Mac accepts FICO scores of ≥660; Freddie

Mac offers free CreditSmart® financial-

literacy curriculum

“I don’t know where to start – the buying

process is complicated”

Not-for-profit, HUD-approved, housing

counseling agencies help at little/no cost

“I don’t make enough money to own” In fact, you might – check with a lender or

other housing professional

“Student debt is too big an obstacle” It may be a factor but often isn’t

“I was rejected once, so can’t buy” Find out why – fix issues if you can, try again

& you might be approved this time

© 2017 Freddie Mac

Freddie Mac Products & Offerings to

Help with Your Purchase Business

© 2017 Freddie Mac

Home Possible Features and Benefits

High LTV mortgage for qualified first-time homebuyers, low- and

moderate-income borrowers and move up buyers

Borrower Profile

First-time homebuyers

Repeat homebuyers

Families in underserved areas

Multi-cultural buyers

Empty nesters

Very low and low- to moderate-

income borrowers

Key Features

Maximum LTV/TLTV:

Home Possible Advantage -

97% LTV / 105% TLTV

Home Possible – 95% LTV /

95% TLTV

Eligible annual income of up to

100% of Area Median Income

(higher in high cost areas)

No income limit in Underserved

Areas

2-4 unit properties up to 95%

LTV / 95% TLTV under Home

Possible

Homebuyer education only

required for one borrower when

all borrowers are First-Time

Homebuyers

Borrower Benefits

Low down payment

No minimum borrower

contribution from personal funds

for 1-unit residences

Flexible down payment and

closing cost funding options

Reduced mortgage insurance

coverage levels (25% coverage

when LTV > 90%)

No cash-out refinancing

No reserves required on 1 unit

owner-occupied properties (2

months reserves on 2-4 units)

Homebuyer education available

at no cost to the borrower

© 2017 Freddie Mac

Borrowers Without Credit Scores

© 2017 Freddie Mac

Flexible Down-payment & Closing-cost

Sources

FreddieMac.com/homepossible/

Financing Concessions» 3% LTV/TLTV ratio > 90%

» 6% LTV/TLTV ratio > 75% < 90%

» 9% LTV/TLTV ratio < 75%

Lender Credit

Unsecured Loan: Originating Lender (Refer to Guide Section 5501.4)

Flexible Sources of Funds*

* Closing costs

Borrower Personal Funds(Minimum borrower contribution, if applicable)

Individual Development

Account (IDA): include matching

funds only if not subject to recapture tax

Community Savings deposited

by the Borrower

Trade equity

Rent Credits

Cash value of life insurance

Borrower’s real estate

commission

Depository accounts

Sale of Borrower Asset

Cash on hand

Trust disbursement

Pooled funds

Loan secured by

Financial Assets

Securities

Government bonds

Retirement accounts

Credit card charges, cash advances or unsecured line of credit:

to pay fees associated with the mortgage application process

Other Eligible Sources

Gifts/Wedding Gift Funds/Gift of Equity Gift/Grant: Agency Secondary Financing Affordable Seconds Employer-Assisted Homeownership

Benefit IDA: matching funds subject to

recapture tax Unsecured loan: Agency/Related

Person, or Community Savings Systems (funds in excess of Borrower’s contribution)

Sweat equity (once 5% downpayment from personal funds has been met)

http://www.freddiemac.com/homepossible/

© Freddie Mac

Why choose Home Possible over FHA?

Mortgage Insurance

Stays for the life of the loanEnds when LTV < 80% (or amortizes

to 78%)

FHA: Upfront AND monthly

premiums

Conventional MI: monthly

OR single premiums

Down payment funds applied

to principal AND upfront PMI

Down payment funds

applied to principal

WHAT THIS MEANS: With more funds applied toward the

principal upfront, a Home Possible mortgage with Private MI lets

the borrower build equity faster.

Home Possible FHAvs.

Required regardless

of the LTV

Only required if the LTV is

greater than 80%

© Freddie Mac

Home Possible Income & Property Eligibility

Tool

FreddieMac.com/homepossible/eligibility.html

© 2017 Freddie Mac

Home Possible Income & Property Eligibility

Tool – Augusta, GA

© Freddie Mac 30

Freddie Mac provides HFAs with a source of liquidity and supports their service

to low and moderate income borrowers. We:

Launched HFA Advantage mortgage, our enhanced product for housing

finance agencies, which includes:

» 97% LTV and 105% TLTV

» HFA income limits in lieu of Home Possible Area Median Income limits

» HFA determined homebuyer education requirements

» Credit enhancement options including charter-level mortgage insurance

coverage

Engage with master servicers who have relationships with smaller state and

local HFAs

Provide a comprehensive program for housing finance agencies that

includes a white-glove onboarding process, training and support, and market-

competitive pricing

Housing Finance Agencies (HFAs)

© Freddie Mac

When all borrowers are first-time

homebuyers, at least one qualifying

borrower must participate in a

homeownership education program

before the Note Date*

» A copy of a Homeownership Education

Certification, or another document with

comparable information, to be retained in

the mortgage file

2- to 4-unit primary residence

(Home Possible only): At least one

qualifying Borrower must

participate in a landlord education

program before the Note Date*

» A copy of a certificate evidencing

successful completion of the landlord

education program must be retained in

the Mortgage file

This requirement stresses the importance of utilizing a curriculum that contains the minimum

core content specified by the National Industry Standards for Homeownership Education and

Counseling. These standards help ensure quality education and counseling is delivered with

fairness and respect to homebuyers and homeowners

Homeownership Education

*or the Effective Date of Permanent Financing for Construction Conversion and Renovation Mortgages

Purchase Transactions Required:

*NOTE: Must not be provided by an interested party to the transaction, the originating lender or Seller

© 2017 Freddie Mac

Most assistance programs offer down payment help in three

different forms:

» Grants

– Funds that do not have to pay back as long as the borrower owns and

occupies the home for a certain period of time

» Second mortgage loans

– Most common of the down payment sources,

Typically low or no interest rate and

Payments are deferred over a certain timeframe

» Tax credits (Mortgage Credit Certificates – “MCC”)

– Reduces the amount of federal income tax that the borrower pays, giving

them more available income upfront to use towards down payment and/or

closing costs

Types of Down Payment Assistance

© 2017 Freddie Mac

Affordable Seconds

Subsidized secondary

financing or other

financial assistance,

evidenced in the land

records, that is

provided by an Agency

and that meets the

requirements of the

Seller/Servicer Guide

© Freddie Mac

Real Estate Professionals Resource Center

Freddiemac.com/singlefamily/RealEstatePros

http://www.freddiemac.com/singlefamily/housingpros/real_estate_professionals_resource_center.html

http://www.freddiemac.com/singlefamily/RealEstatePros

© Freddie Mac

Real Estate Professionals Resource Center

FreddieMac.com/singlefamily/housingpros/subscribe.html

http://freddiemac.com/singlefamily/housingpros/subscribe.html

© Freddie Macmyhome.FreddieMac.

com

My Home by Freddie MacSM Consumer Website

What will the borrower find on My

Home? A wealth of information to help

the borrower decide whether to rent or

buy, understand the mortgage process

and who to contact for help if they are

struggling to pay their mortgage. All of

this, plus:

• Tutorials

• “Meet the Experts” video series

• Calculators

• Quizzes

• Worksheets

• Brochures

• Infographics

• “What home means to me” photo essay

http://myhome.freddiemac.com/

© 2017 Freddie Mac

CreditSmart®

FreddieMac.com/creditsmart

FreddieMac.com/creditsmart/consumer_training.html

Educate Consumers About

Credit, Money

and Homeownership

Financial education curriculum

designed to help consumers build

and maintain better credit, make

sound financial decisions, and

understand the steps to sustainable

homeownership

http://www.freddiemac.com/creditsmart

http://www.freddiemac.com/creditsmart/consumer_training.html

© Freddie Mac 40

Receive the latest news and updates

To sign up for news releases, go to:freddiemac.mwnewsroom.com/News-Signup

For Learning Center updates, go tofreddiemac.com/learn/ch_ind/

To sign up for business updates fromFreddie Mac Single Family, go to:freddiemac.com/learn/ch_ind/

© Freddie Mac 41

Working together, we are helping to shape the future

Defining and making the transition to a new housing

finance system will take time

Meanwhile, you can count on Freddie Mac

Creating Our Future Together

expanding homeownership responsibly with freddie mac …millennials dominate the conversation...

Documents