Fannie Tightens Interest-Only Requirements

Fannie Mae announced Friday that it plans to require borrowers using interest-only mortgages to put down 30 percent of the sale price.

Fannie Mae also said it will only buy adjustable-rate mortgages underwritten to require that borrowers could afford the loans even if interest rates reset to the higher of either:

1. The loan’s initial interest rate plus two percentage points.
2. The cap, the maximum the interest rate can rise.

"Our goal is to make sure consumers can sustain their mortgages and remain in their homes over the long-term, while helping our lender partners offer a range of mortgage products for qualified borrowers," says Marianne Sullivan, senior vice president of Single Family Credit Policy and Risk Management at Fannie Mae, in a prepared release.

Source: CNN Money.com, Les Christie (04/30/2010)