Fannie Mae sets sights on boosting millennial homeownership

Speculation about when greater numbers of millennials (the generation aged 18-34) would enter the housing market received a jolt of reality late last year. That’s when Trulia released a report, based on the latest census data, which revealed that nearly 40% of millennials continued to live with their parents – the highest percentage of that age group in 75 years. Despite a growing economy and an improved job outlook, tremendous numbers of millennials appear to be in no hurry to leave the nest.

Of course, with college expenses at all-time highs, one significant factor has been the enormous burden of student loan debt weighing upon millennials. According to an article in Forbes, student loan debt stands at a staggering $1.3 trillion, more than auto loans or credit cards. Among consumer debt categories, only mortgage loan debt ranks higher. More than 44 million Americans owe on their student loans, and the college class of 2016 walked off the podium with an average of more than $37,000 in debt to go with that diploma.

Enter a new program from Fannie Mae. Launched late last year, the Student Loan Payoff ReFi option lets homeowners refinance their existing mortgage so that they can pay off their student loan. Through the option, currently marketed only through SoFi Lending Corporation (which began as a student lender), payments are made directly to the servicer of student debt. Because mortgage rates are much lower than rates for student loans, the additional mortgage debt means borrowers still come out ahead.

Now, according to a report from Housing Wire, Fannie Mae may be gearing up to expand the loan option to other lenders. In addition, it’s contemplating two other programs, both of which would help new borrowers carrying student debt qualify for mortgages by impacting debt-to-income ratios related to student loans, and allowing student loan payments on credit reports to be taken into consideration by lenders.

The developments could potentially result in transforming the student debt landscape and finally unleash a new generation of homeowners.


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