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On Monday, Fannie Mae and Freddie Mac announced details of programs to back mortgages with down payments as low as 3%.

By Jim Puzzanghera, E. Scott Reckard
December 9, 2010

Housing finance giants Fannie Mae and Freddie Mac on Monday detailed plans to once again back mortgages with down payments as low as 3%, saying the move to make home ownership more accessible contains safeguards to protect against abuses that led to the subprime housing market crash.

The loans would be allowed only for fixed-rate mortgages on single-family homes that would be the borrower’s primary residence and would require full documentation of the ability to repay the mortgage, said officials from the two firms and their regulator, the Federal Housing Finance Agency.

“Our goal is to help additional qualified borrowers gain access to mortgages,” said Andrew Bon Salle, executive vice president for single family underwriting, pricing and capital markets at Fannie Mae.

“We are confident that these loans can be good business for lenders, safe and sound for Fannie Mae and an affordable, responsible option for qualified borrowers,” he said.

Officials said the program was designed to help credit-worthy borrowers, particularly those with low or moderate incomes, who can demonstrate the ability to repay a mortgage but lack the money needed for at least a 5% down payment.

The two firms will offer somewhat different programs.

Freddie Mac’s program, called Home Possible Advantage, is open to anyone who meets certain requirements, but first-time home buyers must participate in a home ownership education and counseling program. All participants will have to pay for private mortgage insurance.

Homeowners with Freddie Mac mortgages could also refinance under the program, but would not be able to take any cash out as part of the process.

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