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22 | Th e M Rep o RT Feature Freddie Mac's Home Possible Mortgage F reddie Mac offers first-time homebuyers and low- to moderate-income borrowers a purchase or refinance (no cash- out) loan option that requires only 5 percent down through its Home Possible Mortgage program. The GSE promotes its Home Possible Mortgages to lenders as a way to "increase your origination volume, lower your costs, and increase your Community Reinvestment Act-eligible volume." Home Possible Mortgage loans are available only to owner-oc- cupants who, as of the note date, do not have an individual or joint ownership interest in any other residential properties. The bor- rower's annual income must be equal to or less than the area me- dian income; however, exceptions to the income requirement come into play when the property is located in an "Underserved Area," as designated by the CFPB. The GSE's Home Possible Mortgages provide for more stable monthly payments with their fixed rates, although 5/1 (2/2/5 caps), 7/1, and 10/1 adjustable-rate mortgages (ARMs) are also op- tions. Whether carrying a fixed or adjustable rate, the loan's original maturity cannot be greater than 30 years. The program also offers lower coverage levels for mortgage insurance, various funding op- tions for closing costs, and flexible debt-to-income ratio conditions. Homeownership education is required before the note date for at least one qualifying borrower if all borrowers are first-time homebuy- ers. And additional flexibilities are built into the program for teach- ers, firefighters, law enforcement officers, healthcare workers, and members of the U.S. Armed Forces. Fannie Mae's My CommunityMortgage F annie Mae offers MyCommunityMortgages with low or no down payment to help low- and middle-income families achieve homeownership. Options are also available for consumers whose income or credit history prevents them from qualifying for a traditional mortgage. With a MyCommunityMortgage, no loan-level-price adjustments (LLPAs) are made to compensate for risk because of the borrower's credit score, the down payment size, property type, or because of subordinate loans. The same interest-rate pricing is applied across the board. Like Freddie's, Fannie's program includes fixed-rate as well as 5/1 (2/2/5 caps), 7/1, and 10/1 ARM loans with a term of up to 30 years. It also mimics the occupancy and ownership interest requirements of Freddie Mac's offering. Fannie Mae's program offers reduced mortgage insurance coverage levels, down payment/closing cost assistance, and exceptions to the minimum credit score requirement of 660. Special mortgage options are also available for public employees and borrowers with disabilities. If all borrowers are first-time homebuyers or if all borrowers are relying solely on nontra- ditional credit to qualify for the mortgage loan, at least one borrower must complete pre- purchase homebuyer education and counseling. State-Led Homeownership Programs A number of state programs have been put in place to ensure credit availability for certain borrowers. Unveiled in June 2013, Massachusetts' Homeownership Compact is a prime example. It creates a shared goal between the state and its participating financial institutions—including Citizens Bank, Sovereign Bank, Eastern Bank, Rockland Bank and Trust, Enterprise Bank, and Blue Hills Bank—of providing 10,000 mortgage loans over the next five years to first-time homebuyers with household incomes below the area median income. "As Massachusetts emerges from the Great Recession, the availability of mortgage financing on reasonable terms serving fam- ilies at a range of household in- comes is critical to the future of the Commonwealth and to the strength of our local communi- ties," according to MassHousing and the Massachusetts Housing Partnership (MHP). In conjunction, MHP transitioned its two-loan structure to one mortgage, simplifying the program for first- time homebuyers and making it easier for participating lenders to underwrite and administer the loans. The one-loan structure also makes it possible for the loans to be sold on the secondary market, something that couldn't be done previously. Clark Ziegler, executive director of the MHP, said the state was "trying to do something that was much more reflective of the current state of bank regulation," while maintaining the original two- loan program's identity in terms of interest rates and payments for borrowers. The CFPB singled out MHP by name in explaining that certain mortgage products with outstanding loan histories would be exempt from the Ability-to-Repay rule. Because of MHP's track record of success and tight underwriting, banks that issue ONE Mortgage loans aren't saddled with additional liability from the regulator. "Part of what [CFPB] is saying is that the programs like ours, there's built-in discipline and quality control," Ziegler said. "This is a public mission, to help borrowers and make sure that they're successful. So to put banks through the wringer when that's already hardwired into what we do, doesn't make sense." Officials for the state-run initiative stated, "While irrespon- sible mortgage lending by largely unregulated financial institu- tions was a primary cause of the national financial crisis, respon- sible mortgage lending by banks and credit unions doing business in Massachusetts kept our local With 2001 credit standards in effect, an additional 1.2 million loans would have been originated annually in recent years. —The Urban Institute's Housing Finance Policy Center