Fannie Mae’s MyCommunityMortgage is “a flexible mortgage product for low- and moderate-income borrowers.” It allowed for 100% financing with no minimum contribution from the borrower and would consider rental income from housemates. In addition to allowing interest only loans it also stretched credit guidelines to allow “extra flexibility”… “including nontraditional credit histories.” And it was even more flexible for teachers, police, firefighters, and health care workers or those with a disability. Perhaps the biggest plus is the reduced premiums for mortgage insurance meaning a lower monthly payment for the homeowner.
But, very recently Fannie Mae has found it necessary to tighten credit standards and increase the costs of these very popular loans. They are still available and can be approved through Fannie’s automated underwriting system (AUS), Desktop Originator, or they can be manually underwritten for situations that demand a more personal touch and insight. In some cases, Fannie Mae’s AUS will return an “Expanded Approval” with different levels of risk associated with each level. Typically each of these levels requires additional cost. We have identified a lender we work with who provides the same cost no matter which risk level the borrower(s) is approved. That can be a considerable savings for a borrower with an Expanded Approval I level loan.