Fannie Mae and Freddie Mac put out some details for lenders on the new Home Affordable Refinance program. (The full documents can be found here.) As has been announced, the Home Affordable Refinance program is the part of the Obama refinance plan for borrowers who are not in trouble but who, because of home values dropping, have less than 20% equity and thus cannot refinance into the low interest rate loans that are available now. See here for the things that still disqualify borrowers from refinancing. Borrowers who cannot refinance can request a loan modification from their current lender(s).
Here are some interesting tidbits about the new Home Affordable Refinance program:
1. If your middle credit score is below 680-700 the risk-based pricing will likely preclude you from this particular program. The FHA program is still available for borrowers who have credit scores from 620 to 700.
2. If you owe more on your first mortgage than your home is worth this program will probably not work. While the program allows for you to refinance your first for up to 105% of the current value of the home, that extra 5% is mostly there to cover closing costs on the refinance loan.
3. If you have a second mortgage the fees associated with a Home Affordable Refinance may make the program untenable. The program allows you to refinance the first mortgage and keep your second mortgage in place but there are substantial pricing penalties if the amount of your first and second mortgage combined is greater than 95% of the current value of the home. Note: If your first and second add up to more than the value of your home you can still refinance the first mortgage through the FHA program with no penalties as long as the second mortgage holder is willing to subordinate their loan (meaning willing to remain in second lien position).
4. If your mortgage does not have mortgage insurance now your new Home Affordable Refinance loan does not need mortgage insurance either even if your loan to value is greater than 80%. However if you do have mortgage insurance now that insurance is supposed to transfer to the new loan under the program.
5. The program won’t really kick in until April by most accounts. While Fannie and Freddie have announced the guidelines it will take a while for the banks and investors to ramp up and be ready to start funding the new loans.
Please contact us or comment below with any other questions.
April 5th, 2009 at 5:13 am
where do i start to get a fannie mae/freddie mac refi. who do i call/write? i have only one mortgage on the property but it is adjustable . when the payments went up i could not afford them.