Will Fannie’s rules disrupt Vail Valley ‘smart loans’?
VAIL VALLEY, Colorado – The nation’s biggest mortgage buyer has cast at least some doubt on Eagle County’s new “smart loan” program for energy-efficient home improvements.
A Wednesday “lender letter” from Fannie Mae seems to indicate that the mortgage buyer might not buy mortgages that have “senior liens” attached. In short, those liens take precedence over the mortgage-holder in case a home buyer defaults.
The county’s smart loans are senior liens, because the loans are repaid through property taxes. If the taxes aren’t paid, the county has the first claim on any money earned through foreclosure or tax sales.
To some, Wednesday’s letter sort of contradicts a lender letter from September of last year that indicates Fannie Mae would treat smart loans – “Property Assessed Clean Energy” loans in Fannie’s vernacular – the same way it treats any other special assessment, such as those imposed by neighborhoods for new sidewalks.
The latest letter has lenders nervous. Local mortgage broker Chris Neuswanger has been e-mailing various lenders he works with and at least one has said it won’t originate any new loans for homes with smart loans attached until it gets more information about Fannie’s policy.
“I’m being very cautious,” Neuswanger said. “I won’t originate any loans on these properties until I know more.”
Fannie’s policy affects more areas than Eagle County. Several states have initiated smart loan programs over the last couple of years. In Colorado, Boulder County has had a smart loan program in place since 2008.
That’s why county officials believe the program will eventually pass muster on the mortgage resale market.
“I just think this is another hurdle in the process,” Eagle County Commissioner Jon Stavney. “Banks generally don’t like anything that comes between them and their money.”
But, Stavney said, because Fannie Mae and Freddie Mac are now owned mostly by the federal government, they’re going to be under a lot of political pressure to allow mortgages for homes encumbered by tax liens.
“This program is in line with state priorities with Governor (Bill) Ritter’s ‘New Energy Economy,'” Stavney said. “And the Obama Administration is on line with those programs, too.”
And Eagle County Housing Director Alex Potente said he doesn’t think this week’s lender letter throws much, if any, cold water on smart loans.
“The letter doesn’t say (smart loans) are any different than any other special assessment,” Potente said. “As far as I know, Fannie and Freddie still buy mortgages for properties with other kinds of assessments on them.”
Neuswanger isn’t convinced.
“I think people should be concerned about it,” he said. “If Fannie isn’t going to buy these loans, a buyer may not be able to get a 30-year fixed mortgage on a property.”