Updates to Fannie Mae’s Automated Underwriting System Could Boost Resale Restricted Homeownership

We’re excited to learn that starting August 15th, lenders will be able to use Fannie Mae’s automated underwriting system, Desktop Underwriter ®, on loans made to homebuyers using ground leases or deed-restricted covenants that stipulate resale restrictions. If you administer a community land trust or a program that sells homes below market-rate under a deed-restricted covenant, you’ll want to share this news with your local lenders right away. Help ensure your homebuyers have sufficient competitive options when shopping for mortgage lending products.

Resale-restricted homeownership programs have faced difficulty in ensuring homebuyers have access to appropriate first mortgage products. Even with eligible buyers and an inventory of quality homes, it’s been challenging for these programs to recruit mortgage lending partners. Over the past several years, members have been informing us that this challenge has grown into a significant barrier and have spearheaded various local efforts to educate lenders about the benefits of community land trusts and deed-restricted programs.

Until now, these types of Fannie Mae loans required manual underwriting, which placed administrative burden on lenders. Now that Fannie Mae’s Desktop Underwriter has incorporated a feature to support automated underwriting of loans secured by properties in resale-restricted programs, lenders will experience greater efficiency and substantially lessened risk when they originate and sell these loans to Fannie Mae.

These changes should substantially increase the number of lenders willing to partner with resale-restricted programs. If you’ve been struggling to help your homebuyers find sufficient mortgage financing opportunities, now is a great time to engage with the lenders in your community. Here are a few ideas for sharing this news:

  • Connect with current and prospective lenders. Start the conversation by sharing this announcement from our partners at the National Community Land Trust Network.
  • Send the name, institution, and e-mail of current or prospective mortgage lending partners to Emily@cltnetwork.org, and they will be invited to a webinar training led by Fannie Mae on originating loans for resale-restricted programs.
  • Update your lender outreach materials to include information about Fannie Mae’s automated underwriting system and distribute this to your network.

Let us know if you have other suggestions. Know that we’ll be working with Fannie Mae to develop additional resources to help you and your lenders better understand the impact of this change, so stay tuned!

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