USDA Home Loans Blog

Fannie Mae is set to release the Home Saver Advance program in May of 2008. This is their latest example of their commitment to homeowner preservation. The Advance program is an unsecured personal loan, available to approved fannie mae servicers for eligible borrowers to help bring a delinduent loan current. It provides funds to cure arrearages of principal, interest, taxes, and insurance. The advance is documented by a promissory note signed by the borrower, payable over 15 years at 5% interest! No payments or interest accrual for the first 6 months.

The program is designed for borrowers who have fallen behind on their mortgage, but are able to resume regular payments once their loan is brought current. It will streamline the workout process for applicable loans, as it provides an option for earlier resolution for delinquent loans.

•Loan amounts up to the lesser of 15% or $15,000 of the original unpaid balance for delinquent PITI(principle, interest, taxes, insurance), escrow advances, & advances of attorney fees and costs plus up to 6 months of unpaid HOA fees or 12 months if the HOA fees are paid once per year

•Advances may not include late charges or other ancillary fees

•The full loan amount is applied directly to arrearage(borrower never receives funds in hand)

•Truth in Lending and promissory note are executed at time of agreement w/ borrower

•Note rate fixed at 5% with 6 month period of no interest/no payment period

•Amortization period of 14.5 years after the initial 6 month period

•Workout fee paid to servicer is $600

•Fannie Mae will contract w/ a 3rd party to service the promissory notes

Eligibility

Advance can be made in connection with any mortgage loan that is purchased by Fannie Mae, including portfolio loans, if the mortgage meets the following:

•Mortgage is delinquent in an amount equal to or greater than 2 full payments of PITI

•Mortgage must be seasoned with a minimum of 6 monthly payments made since the closing of the loan

•Mortgage may secure a principal residence, 2nd home, or investment property-owner occupied is not required

•Mortgage may generally be any type of loan(fixed, adjustable-rate, interest only, etc.)

There are NO LTV restrictions or property valuation requirements

Borrower Eligibilty

•Borrower has successfully resolved reason for delinquency

•Demonstrates a long-term financial ability to resume making payments on 1st mortgage and other debts, including any subordinate loans.(verbal confirmation is acceptable)

•Borrower has surplus income to support an additional monthly payment of at least $200 but does not have the ability to cure the arrearage using a repayment plan within a period of 9 months

•The borrower is willing to participate in program

•Borrower does not have a current outstanding Homesaver note. Homesaver option can only be used once during the life of the particular first mortgage loan

Borrowers involved in an active bancruptcy proceeding or who have had the debt previously discharged in bancruptcy are not eligible.