GSEs to Offer New Refinancing for High LTV Borrowers

Sorohan, Mike msorohan@mba.org

August 30, 2016

The Federal Housing Finance Agency said Fannie Mae and Freddie Mac will implement a new refinance offering aimed at borrowers with high loan-to-value ratios.

FHFA also announced that the Home Affordable Refinance Program, which was set to expire this Dec. 31, will be extended through September 2017.

The new refinance offering is more targeted than HARP, but as with HARP, eligible borrowers are not subject to a minimum credit score, there is no maximum debt-to-income ratio or maximum LTV and an appraisal in many cases would not be required. Unlike HARP, there are no eligibility cut-off dates connected with the new offering and borrowers will be able to use it more than once to refinance their mortgage. Borrowers with existing HARP loans are not eligible for the new offering unless they have refinanced out of HARP using one of the GSEs' traditional refinance products.

FHFA Director Mel Watt said the new refinance offering will provide much-needed liquidity for borrowers who are current on their mortgage but are unable to refinance through traditional programs because their LTV ratio exceeds the GSEs' maximum limits.

"Providing a sustainable refinance opportunity for high LTV borrowers who have demonstrated responsibility by remaining current on their mortgage makes financial sense both for borrowers and for the Enterprises," Watt said. "This new offering will give borrowers the opportunity to refinance when rates are low, making their mortgages more affordable and thus reducing credit risk exposure for Fannie Mae and Freddie Mac."

To qualify for the new offering, borrowers: (1) must not have missed any mortgage payments in the previous six months; (2) must not have missed more than one payment in the previous 12 months; (3) must have a source of income; and (4) must receive a benefit from the refinance such as a reduction in their monthly mortgage payment.

The new high LTV streamlined refinance offering will not be available to borrowers until October 2017. Therefore, FHFA created a bridge to the program by extending HARP through Sept. 30, 2017.

Watt said the extension was necessary to ensure that high-LTV borrowers who are eligible for HARP would not be without a refinance option until the new program goes online.

FHFA said more than 3.4 million homeowners already having refinanced their mortgage through HARP, but more than 300,000 U.S. homeowners could still refinance through the program.

Fannie Fact Sheet link: https://www.fanniemae.com/content/fact_sheet/high-ltv-refi.pdf.

Freddie Fact Sheet link: http://www.freddiemac.com/singlefamily/factsheets/sell/pdf/enhanced_relief_refinance.pdf.

Share this article