The Three Percent Solution

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14 | Th e M Rep o RT T he next time young homebuyers unable to make a down payment of anywhere from 5 percent to 20 percent walk into Peter Hettinga's real estate office in Ontario, California, he may have just the solution for them: a mortgage with a 3 percent down payment made available by the nation's housing agencies, Fannie Mae and Freddie Mac. It's mostly younger house hunters, Hettinga says, who want to buy a home but can't afford much up front. "We get a lot of calls from people … they just don't have that kind of money to put down," the real estate agent explained when discussing today's mortgage market and its down payment require- ments. Offering the option of a 3 percent down payment is not exactly bad news for Hettinga. But it's not exactly good news either. One thing he is sure of: it's not the panacea the housing industry is looking for to draw streams of buy- ers back to the market. Even Fannie Mae acknowl- edged that only a limited pool of applicants will benefit. "We anticipate that this option will account for a relatively small percentage of our loan acquisi- tions, but that it will help bor- rowers who can afford a monthly payment, but may not have the resources for a larger down pay- ment," Fannie Mae spokesperson Keosha Burns told MReport. Of course, differing views on whether the 3 percent down pay- ment introduced by the GSEs in December is a suitable and safe stimulus have ignited a slow-boiling debate. News of its re-emergence was met with both subtle welcome and mild skepticism. "We saw it as a positive, and welcomed it because it obvi- ously creates more homeowner- ship opportunities," said Malcolm Hollensteiner, director of retail lending sales and production with TD Bank. It launched its own 3 percent down payment program to issue high quality mortgages while keeping those loans on portfolio. "The major deterrent to home- ownership is down payment," he added. "Any loan program that allows creditworthy homeowners to purchase a property and expe- rience the American dream with a 3 percent down payment—we encourage that." Not only does the 3 percent down payment attract those who cannot come up with more money, it also allows consumers who want to take advantage of current lower interest rates to save more cash on the front end. "With the interest rates as low as they are today, which will increase affordability, this makes lower down payment options even more attractive," Hollensteiner said. Fannie Mae sees the product as the revamped version of an existing one. "Fannie Mae has been respon- sibly purchasing lower down payment loans for many years," said Burns. "We accepted 97 peercent LTV loans from any approved lender through 2013, and continued to ac- cept 97 percent LTV loans through When Fannie Mae and Freddie Mac announced in December that they will start backing mortgages with 3 percent down payments, policymakers touted the move as a way to stimulate the housing market. But so far, all it's stimulated is debate. cover story cover story The

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