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GSE Enacts Bond Program to Support Affordable Housing

Freddie Mac plans to offer at least $3 billion in single-family affordable housing bonds, a new program designed to support affordable homeownership and serve historically underserved markets. To underscore this effort, today the company will offer approximately $285 million in Uniform Mortgage-Backed Securities (UMBS) backed by loans purchased through its Home Possible program.

“Freddie Mac is committed to creating additional opportunities for families to access quality housing—and today we are announcing a major action in support of that goal,” said Michael DeVito, CEO of Freddie Mac. “Through this new, multi-billion-dollar affordable housing bond program, we are providing focused liquidity, stability and affordability designed to bring sustainable homeownership opportunities to lower-income borrowers across the country. This is also intended to give investors a vehicle to invest in underserved communities.”

Freddie Mac’s Home Possible mortgage offers a three percent down payment solution, which helps very low- to low-income potential homebuyers overcome the leading barrier to homeownership: affording a down payment. Home Possible mortgages are only available to families with income at or below 80% of area median income.”

In addition to a down payment requirement of as little as 3%, Home Possible offers very low- to low-income borrowers significant additional benefits, including:

  • Lower mortgage insurance coverage requirements, which enable a lower monthly payment, and support affordable and sustainable homeownership. Mortgage insurance is cancelable upon reaching 20% equity, potentially saving thousands over the life of the loan.
  • Reduced credit fees, which enable a lower borrower monthly payment.
  • Flexible sources of down payments, such as down payment assistance, gifts, and sweat equity, which can be used for down payment and closing costs.
  • Responsible homeownership through required education and counseling for first time homebuyers, which can be fulfilled by products such as CreditSmart Homebuyer U.

“This bond offering is another way Freddie Mac is bringing additional support to the housing market—and are part of our comprehensive effort intended to address longstanding issues of inequality in housing,” said Pam Perry, VP of Single-Family Equitable Housing. “In the future, look for us to expand this offering and strengthen our commitment to this important work.”

Freddie Mac purchased more than 80,000 Home Possible mortgages through the first half of 2021, making homeownership possible for more than 623,000 families through $121 billion in Home Possible mortgages since 2015.

Their latest offering of securities entirely backed by Home Possible loans builds on existing Impact Bonds issuances by Freddie Mac Multifamily, which include Green Bonds, Sustainability Bonds, and Social Bonds. Multifamily created Impact Bonds to support the division’s mission-driven work and has issued more than $8.5 billion through these vehicles to date.

About Author: Eric C. Peck

Eric C. Peck has 20-plus years’ experience covering the mortgage industry, he most recently served as Editor-in-Chief for The Mortgage Press and National Mortgage Professional Magazine. Peck graduated from the New York Institute of Technology where he received his B.A. in Communication Arts/Media. After graduating, he began his professional career with Videography Magazine before landing in the mortgage space. Peck has edited three published books and has served as Copy Editor for Entrepreneur.com.
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