Fannie Mae changes homeowner education requirements

Fannie Mae announced Wednesday that, starting in 2022, it will allow third-parties to fulfill the homeownership education requirement on some affordable mortgages.

Third-party homeownership education providers will still have to be aligned with the National Industry Standards for Homeownership Education and Counseling or with the Department of Housing and Urban Development Housing Counseling Program, if it is not a HUD-approved counseling agency. 

Since 2015, Fannie Mae has required borrowers to complete the course through Framework Homeownership, which started in 2012 as a partnership between Housing Partnership Network and Minnesota Homeownership Center. In 2019, Fannie Mae began waiving the $75 fee for Framework’s course.

A Framework spokesperson said more than 1.2 million homebuyers have used its educational program.

“We are happy that Fannie Mae has used Framework to prove the efficacy of homebuyer education and as a social enterprise we applaud all efforts to get homebuyer education into more people’s hands,” a Framework spokesperson said. The spokesperson added that getting a Framework certificate “saves lenders time and hassle at the last minute before closing because it’s more flexible and widely accepted.”

Fannie Mae currently requires first-time homebuyers purchasing a home with more than 95% financing to complete a homeownership education course. It’s also a must for first-time homebuyers using Fannie Mae’s flagship affordable finance program, HomeReady, which allows ultra-low down payments. The same goes for first-time homebuyers who use Fannie Mae’s HFA Preferred program, which is administered by housing finance agencies for low to moderate-income borrowers.

Fannie Mae also requires the course for borrowers with no credit score, although that’s not typical, since the average borrower in the mortgage giant’s loan portfolio now has a 752 FICO score. The course is also mandatory if the borrowers use non-traditional credit sources, like rental, utility, or child care payments, to establish a credit history.

Homeownership education, in contrast with loan counseling and other programs to help borrowers keep their housing, is meant to prepare prospective borrowers for the complex process of buying a home. Buying a home can be especially intimidating for first-time, first-generation homebuyers who do not have the benefit of family members to guide them through the process.

Prospective borrowers have persistent misperceptions about what is needed to qualify for a mortgage, which can create a barrier for first-time homebuyers. A 2019 Fannie Mae study found that borrowers still overestimate the minimum down payment and credit score to get mortgage financing.