Real Estate News

New student loan rules from Fannie Mae could spur on homeownership

Published: 28 Apr 2017

Student debts are often mentioned as a financial burden, especially for millennial would-be home buyers. On April 25, Fannie Mae announced a program that would allow new owners to work against the balance of their student loans and possibly acquire a home in spite of this. It might not be the only factor that encourages younger buyers, but it could be a strong argument.

In a release, Fannie Mae explained the three "innovative solutions" it's unveiling to make student debt less of a barrier. These include a refinancing option that would negotiate a mortgage while paying off debt, as well as a program that doesn't penalize borrowers for certain non-mortgage debts and a payment calculation option.

The organization's Vice President of Customer Solutions, Jonathan Lawless, explained how these programs are meant to play for the concerned borrower.

"We understand the significant role that a monthly student loan payment plays in a potential home buyer's consideration to take on a mortgage, and we want to be a part of the solution," Lawless said. "These new policies provide three flexible payment solutions to future and current homeowners and, in turn, allow lenders to serve more borrowers."

A lengthier document said that Fannie Mae was also changing many of its policies, to be effective immediately. Under the cash-out refinance option for student loans, borrowers could possibly lower their monthly debt through the refinancing program.

However, the loan in question has to meet certain requirements, such as direct personal borrower obligation. This amount also reportedly has to be paid in full and the owner cannot pay off delinquent taxes during this time. On the other hand, the new policy also reportedly cuts back the timing restrictions that previously applied to refinancing restrictions regarding when a property had last been listed for sale.