Data Facts periodically shares external information to educate our lending clients on upcoming changes, shifts, and relevant news in the mortgage lending services industry that affects how they do business.
~Originally posted at Mortgage News Daily by Jann Swanson.
At $1.4 trillion, student loan debt represents the U.S.'s second largest debt market behind mortgages and, in several recent surveys, younger respondents have said those loans are a large reason they are unable to save up a downpayment to buy a home. The debt won't easily go away, but Fannie Mae now says it would like to make those loans a slightly little less painful presence in borrowers' lives.
Fannie Mae is announcing policies that will assist homeowners and potential homebuyers with student loan obligations to qualify for a mortgage. The company notes the significant increase in that kind of debt over the last decade has created challenges and put up obstacles to homeownership. In acknowledgement that "one size does not fit all." the new policy provides borrowers three options from which, depending on individual circumstances, they can choose.
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- Student Loan Cash-Out Refinance: Offers homeowners the flexibility to pay off high interest rate student loan debt while potentially refinancing to a lower mortgage interest rate.
- Debt Paid by Others: Widens borrower eligibility to qualify for a home loan by excluding from the borrower's debt-to-income ratio non-mortgage debt, such as credit cards, auto loans, and student loans, paid by someone else.
- Student Debt Payment Calculation: Makes it more likely for borrowers with student debt to qualify for a loan by allowing lenders to accept student loan payment information on credit reports.
"We understand the significant role that a monthly student loan debt payment plays in a potential home buyer's consideration to take on a mortgage, and we want to be a part of the solution," said Jonathan Lawless, Vice President of Customer Solutions, Fannie Mae. "These new policies provide three flexible payment solutions to future and current homeowners and, in turn, allow lenders to serve more borrowers."