Government-backed mortgage lender Fannie Mae has released its latest list of requirements for mortgage applicants, in a move to ensure that the US property market continues its upward swing.
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These new changes will affect home borrowers in the US who are applying for interest-only loans or Adjustable Rate Mortgages (ARMs).
Borrowers who wish to avail interest-only loans will be required to have a 30-percent down payment for the sale price, and the lender will only purchase ARMs to ensure that the borrowers can still pay their mortgage obligations if the interest rates increase.
Homeowners with ARMs should have to prove their ability to pay their obligations if the interest rates increase by two points higher than the original rate, or if the loan reaches its cap rate.
Marianne Sullivan, Fannie Mae’s senior, vice president for single family credit policy and risk management, said that, "these policy changes reflect [the lender’s] intention to continue providing liquidity to different market segments by ensuring that support for ARM products remains in appropriate circumstances."
According to the Wall Street Journal, the average rate for a Treasury-indexed hybrid ARM is 4.03 percent.