Fannie Mae expected to soon introduce new construction loan program
Mortgage giant Fannie Mae could be on the verge of introducing a pilot program to change the way it buys residential construction loans.
The GSE could implement these programs in order to help with the lack of affordable homes available for sale, according to an article by Joe Light for Bloomberg.
Fannie Mae could now be looking at moving up the sale of the construction loan, in order to finalize the sale, according to the article.
From the article:
For its first pilot program, Fannie is trying to eliminate some of the hurdles borrowers face in constructing a home. Typically, if a borrower hires a builder, he or she gets a temporary loan from a bank. When the home is complete, the bank or another lender can then refinance the loan into a mortgage.
Lenders can also make a mortgage with the intention of selling it to Fannie, but they aren’t able to do so until the home is finished. Lenders don’t always want to take that risk with new construction because it can force them to hold a loan on their own books for months.
Under the new program, Fannie Mae would buy the loan on the first day of construction, possibly making the loan easier to get and cheaper. The borrower wouldn’t begin making payments until after they moved into the home.
Land Gorilla, a construction loan management software company, explained this could bring major change to the construction lending industry.