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Freddie Mac Expands Home Loans and Protections

Freddie Mac wants you to cash in with a low down payment loan but not from a predatory lender.

'P' stands for partnerships and protection, if you're Freddie Mac, one of the nation's largest sources of mortgage financing. Teaming with a bunch of nonprofit, state and federal agencies, Freddie is spelling out a major program to promote $100 million in affordable loans for home purchases and rehabilitation in hurricane-ravaged Eastern North Carolina, as well as the "Don't Borrow Trouble" campaign to fight predatory lending nationwide. Homeowners and home purchasers will have access to more loan options from reputable lenders, in North Carolina and other states.

"This is a dynamic initiative designed to address a range of homeownership obstacles, from the availability of down payment funds, learning how to avoid predatory loans, to getting homeownership and credit counseling services that ensure long and successful homeownership," said Craig Nickerson, vice president for Community Development Lending at Freddie Mac.

The loan initiative is a blend of flexible, low down-payment mortgage loans, pre- and post-purchase counseling, and real estate services including referrals and financing to rehab homes damaged by Hurricane Floyd and other storms last year. Through local lenders and nonprofit agencies, homebuyers can get access to Carolina Community Goldİ, a loan program that allows a person to purchase a home for as little as $1,000 of their own funds, when combined with financial assistance from a variety of other sources. For borrowers with strong credit but little money in the bank, Freddie Mac's Alt 97 program is available nationwide through participating lenders. All that requires is a three percent down payment, but it is not required that the cash come from a borrower's own funds.

Freddie also has a partnership with local agencies of the National Foundation for Credit Counseling, for hopeful homebuyers who want to improve their credit and become homeowners. The initiative includes CreditWorksSM, a debt management and mortgage loan program. By completing a debt management program you can obtain market-rate mortgage financing, and avoid higher cost or questionable mortgages offered to persons without a good credit history.  According to studies, 40% of borrowers in this category actually could qualify for a conventional loan. 

Safe, affordable rehabilitation loans are a key goal, Freddie says, particularly for homeowners still trying to recover from damages done by Hurricane Floyd more than one year ago. Too many homeowners who seek financing are accepting predatory loan products, according to Freddie, and this initiative will help victims of storm damage from being victimized a second time by predatory lenders.

The problem of deceptive loan marketing and predatory lending in the "sub-prime" loan market has got the attention of Fannie Mae and Freddie Mac, the two major secondary loan companies that set guidelines for mortgage loans they purchase. Freddie and Fannie are no longer purchasing loans that involve such abuses as excessive fees or prepayment penalties, or requiring borrowers to buy credit life insurance as a condition of obtaining a mortgage. Freddie Mac also offers the Don't Borrow Trouble tool-kit, a campaign that educates borrowers about how to identify predatory loans, and avoid them so that homeownership remains a dream and does not turn into a nightmare of delinquency, foreclosure and possible bankruptcy. Borrowers interested in learning more about Don't Borrow Trouble can call 1-800-218-6499.

Sources used to create this article include Freddie Mac.