Fannie Mae opens way to facilitate mortgages

Home buyers and sellers are receiving "good news" and "bad news" from the federal government. The bad news, of course, is high interest rates on home-mortgages loans, sparked by the government's efforts to put the brakes on inflation.

"Despite the incoming Reagan administration's commitment to fighting inflation and improving the economy, mortgage rates will remain in the range of unaffordable to unacceptable for the next few months," says Merrill Butler, president of the National Association of Home Builders.

"Most of the blame for the current housing slump must be pegged to the federal government's mismanagement of fiscal and monetary policies," he adds.

Superhigh interest rates are also having a strong negative impact on sales of previously owned homes (resales). "It has brought a temporary halt to the recent housing recovery," according to Jack Carlson, executive vice-president of the National Association of Realtors.

The good news from the federal government is that new and innovative plans are being developed and offered that will help buyers finance the purchase of a home, despite the high cost of interest.

The most recent of such plans is designed to help home buyers and sellers in cases where the seller is able and willing to carry back the total mortgage loan. In these seller-financed transactions, the seller plays the role of the lender.

In many tight-market cases, this is virtually the only way to sell a house. But the problem that confronts many sellers is the need for cash. They canht afford to settle for a piece of paper that promises them monthly payments.They need cash to swing the deal on their new home.

Now a major new plan has emerged that will permit the seller to carry back the first-mortgage financing on his home and still "cash out" on the sale transaction. In other words, the seller can totally finance the buyer and still wind up the deal with nearly all cash in hand.

The plan is offered by the Federal National Mortgage Association (FNMA), known as Fannie Mae within the real-estate trade.

Fannie Mae is the nation's largest buyer of existing home-mortgage loans. After an FNMA-approved lending institution -- a savings and loan association, for example -- makes a mortgage loan to a home buyer, the lender often turns around and sells the mortgage to Fannie Mae.

This generates funds for the lender to use in making mortgage loans to more home buyers.

Now, for the first time, Fannie Mae has instituted a plan to buy mortgages taken back by the home seller to finance the purchase of his home. The buyer is happy with a seller-financed transaction, and the seller turns his financing "paper" into instant cash.

Obviously, there are a few strings attached to Fannie Mae's warm-hearted offer.

For starters, the sellers's mortgage loan must be made on FNMa standard documents. The loan must meet FNMA credit and appraisal standards and it must be serviced by an FNMA-approved lender.

There are costs for selling the mortgage to Fannie Mae as well. If the interest rate is below the currently prevailing rate, the mortgage will be bought at a discount.

The amount of discount depends on the differential between the mortgage and prevailing interest rates. Also, the servicing FNMA-approved institution that arranges the sale to Fannie Mae will chrge a fee.

Despite the costs, the new plan is considered a major breakthrough in making seller-financing a viable way to sell a home.

It can make the difference between a salable or nonsalable home in a tight money market.