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CBC Mortgage Agency offers temporary rate buydowns on FHA loans

FHA loan
FHA loan

CBC Mortgage Agency – a federally chartered housing finance agency – will offer two temporary rate buydown features for its down payment assistance (DPA) program for Federal Housing Administration (FHA) loans.

The agency is the first to provide either a 2-1 rate buydown or a 1-0 rate buydown on a DPA program.

“The addition of a 2-1 and a 1-0 buydown feature is CBC Mortgage Agency’s continued response to the ongoing effect of the higher interest rates,” said Cari Zwick, CBC Mortgage Agency’s national program director.

“We’ve had a lot of requests for a buydown feature, and we hope it provides some relief to buyers during the current state of the housing market,” Zwick added.

As origination volume receded in 2023, numerous lenders have rolled out temporary rate buydowns.

United Wholesale Mortgage and Rocket Mortgage offer lender-paid temporary rate buydown options in addition to seller-funded buydowns.

Guild Mortgage, loanDepot and NewRez are also among the lenders that either cover the difference in mortgage payments or offer the option of seller- or builder-paid temporary rate buydowns.

The rollout of a temporary rate buydown feature from CBC Mortgage Agency comes on the heels of the agency cutting interest rates on repayable second mortgages used for its DPA program last month.

The rate reduction was aimed at helping to lower borrowing costs, especially for borrowers in low- to moderate-income communities, the agency said in November.

CBC Mortgage Agency is the provider of the Chenoa Fund, a national DPA program that comes in a repayable and forgivable option.

The Chenoa Fund DPA program offers a 10-year repayable option on the second loan with a mortgage rate that’s 2% higher than that of an FHA first mortgage. The second mortgage requires a monthly payment.

The forgivable option for a Chenoa Fund DPA has a 30-year term with a 0% interest rate. The loan, which doesn’t require a monthly payment on the second mortgage, is removed from the second-lien position either after 36 or 120 consecutive on-time payments on the FHA first mortgage, depending on the DPA loan amount.

Founded in 2013, CBC Mortgage Agency’s Chenoa Fund program completed more than 40,000 mortgage transactions since its inception, according to its website.