Fannie Mae: Selling and Servicing Flexibilities Available to Homeowners Impacted by the Flint, Michigan Water Crisis
February 11, 2016
On January 5, 2016, the Governor of Michigan declared a state of emergency for the city of Flint due to the city’s water quality. Contaminants from pipes, including lead, have leached into the water system rendering the water unsafe to drink. As a result, the city’s water infrastructure and internal plumbing in many residences have been contaminated. Fannie Mae is actively monitoring the evolving Federal, state, and local government funding proposals and remediation efforts that will help residents recover from this event.
Fannie Mae is committed to working with lenders to provide access to credit for borrowers in Flint. Fannie Mae has several products and options that borrowers can use to purchase homes, or refinance or repair their existing homes. Fannie Mae continues to buy mortgage loans secured by properties in Flint and the surrounding areas.
This Notice reminds servicers about existing disaster-related flexibilities and sellers about products and options that homeowners or potential borrowers can take advantage of for properties in Flint. Refer to the Frequently Asked Questions that address appraisal and property eligibility considerations for more information.
Disaster-Related Servicing Flexibilities
Fannie Mae reminds servicers of the array of workout options available to assist borrowers who may be struggling to make their monthly mortgage payment as a result of recent events in Flint. This includes granting disaster relief when a borrower may have been impacted by a catastrophe that was caused by nature or a person other than the borrower.
A servicer is authorized to temporarily suspend or reduce a borrower’s mortgage payments for up to 90 days if the servicer believes a disaster has adversely affected the value or habitability of the property or if the disaster has temporarily impacted the homeowner’s ability to make payments on his or her mortgage loan. Servicers are reminded to establish contact with the homeowner within 90 days of granting disaster relief to determine if additional assistance, such as a mortgage loan modification or repayment plan, is necessary. For more information, see the Servicing Guide, D1-3-02, Providing Relief to a Borrower Who is Affected by a Disaster; and F-2-12, Fannie Mae’s Workout Hierarchy.
DU Refi Plus™ and Refi Plus™ Program Mortgage Loans
DU Refi Plus and Refi Plus mortgage loans are eligible for appraisal flexibilities under the standard requirements. Properties in Flint are eligible for delivery to Fannie Mae in “as is” condition.
Borrowers meeting certain income requirements are eligible for HomeReady mortgages. This program allows additional flexibilities for down payment and income sources, which may be helpful for borrowers in Flint. HomeReady, as well as standard eligibility, permits loans with LTV ratios up to 97%.
Borrowers in Flint can also use proceeds from HomeStyle Renovation mortgages to remediate or repair impacted plumbing in addition to other renovations or improvements they may be planning.
Borrowers can combine flexibilities available under different products, for example HomeStyle Renovation can be combined with a HomeReady mortgage.
Community Seconds® and Grant Programs
Borrowers in Flint can use proceeds from Community Seconds and other grant programs to repair or remediate their homes. The maximum CLTV ratio is 105% when a Community Seconds mortgage is in place.
Fannie Mae is committed to providing liquidity and certainty to its customers and the housing finance market, and will continue to do so as remediation efforts in Flint evolve. Lenders and servicers should contact their account teams with questions regarding existing lending flexibilities and servicer options.
Source: Fannie Mae