Fannie and Freddie Offer Refinance Programs Underwater Homeowners

Written By: Joel Palmer, Op-Ed Writer

Both Freddie Mac and Fannie Mae have programs that provide refinance options for borrowers whose loan-to-value ratio on a new mortgage would exceed the maximum allowed for standard limited no cash-out refinances.

The programs were announced last year in conjunction with the end of the the Federal Housing Finance Agency’s Home Affordable Refinance Program (HARP). Both programs are set to expire in September 2019.

The Fannie Mae High Loan-to-Value Refinance Option and the Freddie Mac Enhanced Relief Refinance Mortgage are available for borrowers who can benefit from refinancing in at least one of the following ways:

•Reduced monthly principal and interest payment

•Lower interest rate

•Shorter amortization term

•More stable mortgage product, such as moving from an adjustable interest rate to a fixed interest rate

Both programs require that the original mortgage be owned or securitized by the same entity. Fannie Mae refinances must be of Fannie Mae mortgages and the same goes for the Freddie Mac program.

The eligibility requirements for both programs also include:

•At least 15 months have passed between the note date of the original mortgage and the note date of the refinance.

•The mortgage had to be originated on or after October 1, 2017.

•Borrowers must be current on their payments and have no 30-day delinquencies within six months. In addition, there can be no more than one 30-day delinquency in the previous year and it can be no greater than 30 days.

•Existing mortgages originated as part of HARP are not eligible.

•Under the Freddie Mac program, the mortgage being refinanced must not be a Freddie Mac Relief Refinance Mortgage.

•Under the Fannie Mae program, the mortgage being refinanced must not have been previously delivered as a Fannie Mae DU Refi Plus or Refi Plus mortgage.

The minimum LTV ratios for the Fannie Mae program are:

•1-unit principal residence — 97.01%

•2-unit principal residence — 85.01%

•3-4 unit principal residence — 75.01%

•1-unit second home — 90.01%

•1-4 unit investment property — 75.01%

The minimum LTV ratios for the Freddie Mac program are:

•1-unit principal residence — 97.01%

•2-unit principal residence — 85.01%

•3-4 unit principal residence — 80.01%

•1-unit second home — 90.01%

•1 unit investment property — 85.01%

•2-4 unit investment property — 75.01%

For both programs, there is no maximum LTV for fixed-rate mortgages. For those refinancing into an adjustable-rate mortgage (ARM) the maximum amount is equal to 105 percent of the property’s value.

About the Author

As an NAMP® Opinion Editorial Contributor, Joel Palmer is a freelance writer who spent 10 years as a business and financial reporter and another 10 years in marketing for the insurance and financial services industries. He regularly writes about the mortgage industry, as well as residential and commercial real estate, investments, and retirement income planning. He has also ghostwritten books on starting a business, marketing, and retirement income planning.

Opinion-Editorial (Op-Ed) Disclaimer For NAMP® Library Articles: The views and opinions expressed in the NAMP® Library articles are those of the authors and do not necessarily reflect any official NAMP® policy or position. Examples of analysis performed within this article are only examples. They should not be utilized in real-world application as they are based only on very limited and dated open source information. Assumptions made within the analysis are not reflective of the position of NAMP®. Nothing contained in this article should be considered legal advice.