Fannie Mae to allow third-party homeownership education courses

Fannie Mae has said it will allow third-party operators to provide the homeownership education courses that many buyers are compelled to take to secure a mortgage.

The organization said the third-party homeownership education providers will 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 they are not HUD-approved entities.

Under Fannie Mae’s rules, first-time homebuyers who purchase a home with more than 95% financing are required to complete a homeownersip education course. The course is also a requirement for buyers under Fannie Mae’s affordable finance program that provides a path to homeownership for people that haven’t been able to save a down payment. Low-to-moderate income first-time buyers who use Fannie Mae’s HFA Preferred program must also complete the course.

Borrowers who do not have a credit score must also take the homeownership course, though, and it’s also mandatory for those who use non-traditional credit sources such as rental, utility and childcare payments to establish their credit history.

The idea with homeownership education is to teach borrowers about the complex process of buying a home. It’s quite different from loan counseling programs that are designed to help borrowers keep their homes once they have. Fannie Mae argues that buying a home can be an intimidating process for first-time buyers that don’t have the benefit of family members to guide them through it.

Fannie Mae points out that many prospective borrowers have persistent misconceptions on what’s needed to qualify for a mortgage, and says that creates a barrier for first-time home buyers. A recent study found that most borrowers still overestimate the minimum down payment and credit score requirements to obtain a mortgage, for example.

Up until now, Fannie Mae has always insisted that borrowers take the homeownership course through an organization called Framework Homeownership. The course used to cost $75 per person, but Fannie Mae began waiving that fee in 2019.

To date, more than 1.2 million home buyers have completed the homeownership course, Fannie May says.