Actions by Fannie Mae, Lenders Won’t Help Many Home Buyers Here

Lenders and investors are taking a few small steps to open the doors of home ownership to more people, but those steps are not expected to bring houses within the grasp of many more buyers in Orange County, the nation’s most expensive housing market.

In one effort, the Federal National Mortgage Assn., commonly known as Fannie Mae, has relaxed its loan qualification rules for buyers who make down payments of less than 10% of the purchase price.

In another effort, some savings and loans, such as California Federal S&L; and Home Savings of America, are offering 40-year mortgages as a way to lower monthly payments.

Fannie Mae, which buys about a third of all mortgages sold in the country, has changed a guideline to allow buyers putting less than 10% down to make a higher monthly housing payment.

Under the new guideline, those buyers can have monthly payments of 28% of their gross monthly income. The 28% ratio previously had applied only to buyers who put at least 10% down on their home purchases. The ratio had been 25% for those making smaller down payments.

Recent industry experience indicates that there is little difference between the ability of borrowers held to the 25% ratio to repay loans and the ability of other borrowers who devote 26% to 28% of their income to house payments, according to Fannie Mae.

Fannie Mae hopes the new guideline will help in three ways: It figures borrowers will be able to qualify for bigger mortgages, to qualify for the same mortgages with less annual income or to qualify at a higher interest rate.

For instance, someone with annual income of $40,000 who takes out a loan at a 10.5% interest rate could afford a 10% bigger mortgage under the new guideline, according to Fannie Mae estimates.

Or, a home buyer who wants to borrow $120,000 at 10.5% would have to earn $52,700 a year to qualify under the 25% guideline. But under the new guideline, the buyer would qualify with the lower annual income of $47,000.

Or, a buyer who earns $50,000 a year and applies for a $114,000 mortgage at 10% would still qualify if the interest rate jumped to 12%.

But Fannie Mae’s effort could be academic, at least in Orange County, where just 16% of the families have enough income to qualify to buy a median-priced home of $234,934 with a 20% down payment. The change isn’t expected to have much impact, mortgage lenders and industry analysts said.

Fannie Mae’s guideline simply falls in line with other secondary buyers of mortgages who already use the 28% ratio, they said. In addition, Fannie Mae is not a major player in the purchase of California mortgages.

Also, Fannie Mae can buy only conforming loans--those of no more than $168,700. Most buyers in the county borrow more than that.

Finally, most home loans today have adjustable-rate mortgages, which S&Ls; tend to keep in their own portfolio and not sell to Fannie Mae or other buyers. That means they do not have to follow guidelines established by the secondary market, said Stephen P. Renock IV, a senior vice president at Shearson Lehman Hutton Mortgage Co. in Newport Beach.

“If the new guideline affected 5% of loans here, it would be a lot,” said Kenneth Agid, owner of the Marketing Department, a housing consulting firm in Irvine.

Both consultants also give short shrift to the 40-year mortgages. They point out that the savings for a loan on a median-priced county home would be about $50 a month, which isn’t much considering typical monthly payments of $1,600 or more.