Funds cannot be used for down payment
Under a newly announced regulation change, Fannie Mae is opening the door to permit lenders to help cover closing costs, within certain constraints.
Fannie Mae recently sent lenders a set of guidelines stating that they could provide the assistance to borrowers as a gift that is not subject to repayment, according to a report from HousingWire.
The money cannot go toward the down payment or surpass the closing costs, but otherwise there is no cap on the amount.
“We’re making it easier for borrowers to purchase a home by allowing lenders to fund closing costs and prepaid fees,” Fannie Mae Chief Credit Officer for Single-Family Carlos Perez said in a letter to lenders, as reported by HousingWire.
“While there is no limit to the amount of the lender-sourced contributions, the funds cannot be used toward a down payment, cannot exceed the total closing costs, and should not be subject to any form of repayment agreement,” Perez added.
In late March, Fannie Mae downgraded its forecast for first-quarter real GDP growth to 2.2% from the previous 2.7%, noting the persistent housing inventory shortage.
The downgrade also reflects the slowdown in business investment and weakening momentum in domestic demand, which is evidenced most notably by lackluster consumer spending, according to Fannie Mae’s March 2018 Economic and Housing Outlook.