FHFA Unveils New Refinance Option For Low-Income Families
The new refinance option includes a requirement that the lender provides a savings of at least $50 in the borrower’s monthly mortgage payment, and at least a 50-basis point reduction in the borrower’s interest rate, a maximum $500 credit from the lender for an appraisal if the borrower is not eligible for an appraisal waiver (the Enterprises will provide the lender a credit of $500 upon the loan’s sale to an Enterprise) and a waiver of the 50 basis point up-front adverse market refinance fee for borrowers with loan balances at or below $300,000, according to a press release.
"Last year saw a spike in refinances, but more than 2 million low-income families did not take advantage of the record low mortgage rates by refinancing," said director Mark Calabria. "This new refinance option is designed to help eligible borrowers who have not already refinanced save between $1,200 and $3,000 a year on their mortgage payment."
"Millions of homeowners have benefited from refinancing to reduce their monthly mortgage payment and build long-term wealth," said Donna Corley, executive vice president and head of Single-Family Business at Freddie Mac, in a statement following the FHFA's announcement. "Freddie Mac’s new Refi Possible mortgage creates more equitable opportunities by making it easier for homeowners in lower-income brackets to refinance their mortgage. Refi Possible reaches many homeowners who can benefit from refinancing and provides flexibilities that incentivize our clients to serve these eligible borrowers moving forward. Our goal is to expand access to credit responsibly and make sure we are supporting sustainable homeownership."
"Our primary concern has always been that the refinance fee negatively affected borrowers, particularly lower-income borrowers," said Joe Pigg, the American Bankers Association’s senior vice president of mortgage finance. "We welcome this action by the FHFA which will limit the scope of homeowners impacted."
Qualification requirements include: having an Enterprise-backed 1-unit single-family mortgage that is owner-occupied, having an income at or below 80% of the area median income, having not missed a payment in the past six months, and no more than one missed payment in the past 12 months; and not having a mortgage with a loan-to-value ratio greater than 97%, a debt-to-income ratio above 65%, or a FICO score lower than 620.
The Enterprise's new refinance option will be available to eligible borrowers beginning this summer.
Click here to learn more about the new option.
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