Fannie Launches Custom Home Pilot

Fannie Mae is investing $75 million in a pilot program aimed at capitalizing on the red-hot -- and surprisingly large -- custom home market.Under the experimental program, borrowers will be allowed to finance both the construction and permanent phases of their new homes with a single 30-year mortgage. The loan also will permit borrowers to lock in a single mortgage rate and save time and money because only one loan approval and one closing is required. Lenders will be able to sell the mortgages to Fannie Mae as soon as the loans are closed, so they, too, will be able to offset the possibility that they could lose the permanent loan if rates should rise before construction is completed. The new product was announced at the Western Secondary Market and Lending Conference (see item above). The construction-to-permanent mortgages, as the loan is called, "will help more people who want to build their own homes by eliminating some of the paperwork, cost, and worry," said Robert Sahadi, vice president of Fannie Mae's National Housing Impact Division. "These people will no longer need to worry about requalifying if rates increase, obtaining new appraisals or incurring additional costs." According to the National Association of Home Builders, 29% of last year's new home production was built either by individuals acting as their own contractors or contractors building one-of-a-kind houses -- 12%, or 131,000 units, by the owners and 17%, or 189,000 units, by custom builders. Fannie Mae's website address is http://www.fanniemae.com.