Fannie Mae Announces Pilot to Purchase $2 Billion of 'MyCommunityMortgage' Loans; Pilot Lenders to Customize Affordable Products For Low- and Moderate-Income Borrowers

Business Wire, Oct 30, 2000

Business Editors

SAN FRANCISCO--(BUSINESS WIRE)--Oct. 30, 2000

To expand the secondary market for affordable community-based mortgages nationwide, Fannie Mae (NYSE:FNM), the nation's largest source of financing for home mortgages, today announced a commitment to purchase $2 billion of "MyCommunityMortgage" loans through a suite of flexible mortgage options for low- and moderate-income borrowers purchasing one-to-four unit homes.

Starting December 1, 2000 through a web-based application, participating lenders will get prompt approval recommendations from Fannie Mae on loans that previously would have been negotiated on an individual basis. Fannie Mae then will purchase or securitize the MyCommunityMortgage loans.

MyCommunityMortgage product options give flexibility to lenders by allowing variances that borrowers need to qualify for loans, often unique to particular communities. These variances apply to basic loan features such as loan-to-value ratio, borrower contribution, housing expense-to-income ratio, and others.

For example, the need for down payment assistance may be a critical borrower need in one part of the country, while the need for 2-to-4-family housing may be foremost in another part of the country.

Pilot mortgage lenders include Bank One, First Horizon, First Nationwide, First Union, and North American Mortgage Company.

"We want to work with lenders who are willing to tackle the toughest housing problems in America, which is the focus of our American Dream Commitment," said Dan Mudd, Vice Chairman and Chief Operating Officer of Fannie Mae. "By teaming with lenders, Fannie Mae can not only help increase lending to minorities and other underserved market segments, but we also can assist depository institutions in meeting their own community investment goals and objectives. We look forward to working with our customers to create increased liquidity for Community Reinvestment Act (CRA) -eligible loans."

Private mortgage insurance companies Mortgage Guaranty Insurance Corporation (MGIC), PMI, and Radian were instrumental in the development of underwriting guidelines for the loans and have agreed to insure CRA-eligible loans purchased by Fannie Mae.

MyCommunityMortgage products contain predetermined variance ranges on up to fourteen basic loan features. MyCommunityMortgage loans offer lenders more flexibility through a combination of these variances tailored to address their borrowers' needs.

There are five basic product options for MyCommunityMortgage:

-- Community 97 is a new 97 percent loan-to-value product option for
single-unit borrowers who need to devote more of their income to housing.

-- Community 100 is a new 100 percent loan-to-value product option for
single-unit borrowers who lack cash and reserves, but have good credit.

-- Community 2-Family offers underwriting flexibilities for 2-unit properties
to 95 percent LTV.

-- Community 3- and 4-Family offers underwriting flexibilities for 3- and
4-unit properties to 90 percent LTV.

-- Customized CRA-Eligible Flow Product Option provides lenders with approval
recommendations for CRA-eligible flow product that does not fit within the
parameters of the four options listed above.

As part of its $2 billion pilot, Fannie Mae will purchase up to $500 million in Community 2- to 4-Family from participating lenders.

"The strength of this joint effort between Fannie Mae and First Nationwide will provide a new focus for our affordable housing initiatives," said Terry Klein, President and Chief Executive Officer of First Nationwide. "As a fairly traditional California-based thrift portfolio lender, the flexibility available to us through MyCommunityMortgage will be very effective in broadening our array of CRA products. In the past, using lender grants to sell our 30-year fixed-rate products to Fannie Mae and the secondary market was a challenge. With these new flexibilities, we are confident that this will change in the very near future."

"Two-to-four unit homes play a significant role in the affordable housing market and have a positive impact on neighborhood revitalization," said Richard A. Mirro, Chief Executive Officer of North American Mortgage Company. "We commend Fannie Mae for expanding a previously localized market segment into a national product option."

"For many years, First Horizon and Fannie Mae have worked well together to make the dream of home ownership a reality for numerous consumers," said Carroll Justice, Executive Vice President of First Horizon. "MyCommunityMortgage should help expand these efforts even further especially for low- and moderate-income borrowers with less funds available for down payment."

"Our low- and moderate-income borrowers come from many different communities and have many different needs," said Ernie Montoya, Senior Vice President of Community Lending Administration for Bank One. "Now we can address their needs with products that provides us, and our borrowers, with maximum flexibility."

"First Union is pleased to work with Fannie Mae to enhance our efforts to provide opportunities for homeownership to borrowers in low- and moderate-income communities," said Debra Warren, President and Chief Executive Officer of First Union Mortgage Corporation. "First Union and Fannie Mae have long-standing and successful commitments to these communities."