The Federal Housing Finance Agency (FHFA) says Fannie Mae and Freddie Mac will be rolling out a new refinancing option for low-income borrowers with GSE-backed single-family mortgages.
The FHFA estimates that borrowers who take advantage of the new refinance option could save an average of between $100 and $250 a month, thanks reduced interest rates and lower monthly payments.
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. (Fannie and Freddie will provide the lender a credit of $500 upon the loan’s sale); and
- A waiver of the 50-basis-point up-front adverse market refinance fee for borrowers with loan balances at or below $300,000.
“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,” says FHFA 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.”
To qualify, a borrower must:
- have a GSE-backed one-unit single-family mortgage that is owner-occupied;
- have an income at or below 80% of the area median income;
- have not missed a payment in the past six months, and no more than one missed payment in the past 12 months; and
- not have 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 new refinance option will be available to eligible borrowers beginning this summer.
“We look forward to implementing Fannie Mae’s new RefiNow option as soon as possible to ensure all eligible homeowners are able to avail themselves of this money saving opportunity,” says Hugh R. Frater, CEO of Fannie Mae.
“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,” adds Freddie Mac’s Donna Corley. “Refi Possible reaches many homeowners who can benefit from refinancing and provides flexibilities that incentivize our clients to serve these eligible borrowers moving forward.”