The U.S. has traditionally had one of the richest arrays of mortgage products available, offering a variety of adjustable rate mortgages, amortization choices and terms, and long-term fixed-rate mortgages. As a result of the mortgage crisis, the market shifted to primarily fixed-rate mortgages, mainly driven by the historically low mortgage rates. As this shift is likely to remain under new guidelines from Washington, it is important for those implementing the regulations to consider whether such a dramatic and permanent shift in the mortgage market will do more harm than good.

Last week Fannie Mae relaxed the standards on a program that used to be very popular.

Around 2005, a common conventional loan product for purchases had been the loan which buyers loved. Some folks avoided the mortgage insurance (MI) premium by doing what is called an 80/20 loan which involved getting a second mortgage for the 20%. After the mortgage meltdown we lost both of these programs.

Keep in mind, one of the biggest reasons for the foreclosure crisis in the U.S. was due to the mismatch between borrowers and particular loan programs that they choose; not the existence of the loan features themselves. We still have a wide variety of ARM programs and many people benefit from them.

The new program is the new Flex 97. The Flex 97 and is not really a new program but is available again since MI is now available at a 97% loan to value purchase. Additionally, the down payment of 3% can be a gift. There is no upfront MI like the FHA product and the loan limit is $417k except for the high cost areas where the limit is higher. You must have good credit in order to qualify for this loan.

For more details and payment information feel free to contact me.

Jay A. Kumar

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