Home Affordable Refinance Expanded – 125 Percent LTV Limit

Today the Department of Housing and Urban Development (HUD) and Federal Housing Finance Agency (FHFA) expanded refinance opportunity to homeowners currently owing up to 125% of their home’s value under the Administration’s Home Affordable Refinance initiative.  The existing loan must be owned by Fannie Mae or Freddie Mac and “acceptable” payment history is required.

Highlights from Fannie Mae’s Selling Guides Announcement 09-23: 

Introduction 

The Home Affordable Refinance initiative, which includes the Refi Plus™ and DU Refi Plus™ options, is designed to assist borrowers who have demonstrated an acceptable payment history on their existing Fannie Mae mortgage loan, but due to a decline in property values have been unable to refinance to obtain a lower payment or move to a more stable product. 

With this Announcement, Fannie Mae is continuing its commitment to find ways to allow more borrowers to refinance by increasing the maximum allowable LTV ratio to 125 percent for mortgage loans that qualify for the Refi Plus (manual underwriting) option. 

Maximum LTV Ratio for Refi Plus (Manual Underwriting) 

Fannie Mae is increasing the maximum LTV ratio for Refi Plus to 125 percent. There continue to be no limits on the CLTV or HCLTV ratios. Specific requirements apply to Refi Plus loans with LTV ratios above 105 percent as outlined below. 

Eligible Products 

Refi Plus loans with LTV ratios above 105 percent are limited to fully amortizing fixed-rate 30-year mortgages (specifically terms greater than 15 years up to 30 years). 

[…] 

Required Borrower Benefit  

As stated in Announcement 09-04, Home Affordable Refinance – New Refinance Options for Existing Fannie Mae Loans, the borrower must receive a benefit in the form of either a reduced monthly mortgage payment (principal and interest) or a more stable product (e.g., move to a fixed-rate mortgage from an ARM). This borrower benefit requirement continues to apply to Refi Plus loans with LTV ratios above 105 percent. In general, lenders are encouraged to provide fixed-rate mortgages to borrowers whenever possible (and required to provide fixed-rate mortgages for LTV ratios above 105%), including loans with shorter terms. Moving from a 30-year term loan to a 20- or 25-year term is considered a more stable product and meets the borrower benefit requirement. As a reminder, when the borrower’s new mortgage payment is increasing compared to the existing mortgage payment, the borrower must not have any 30-day delinquency on the existing mortgage in the lesser of 12 months or the life of mortgage loan.

[…]

Effective Date

Refi Plus mortgage loans with LTV ratios that exceed 105 percent are eligible for whole loan and MBS delivery on or after September 1, 2009.

To learn if your loan is owned by Fannie Mae of Freddie Mac, complete the loan lookup forms on each of their websites (click images).

 Resources: 

• Announcement 09-23 (.pdf)
• Refi Plus Pricing Matrix (.pdf)
• LLPA Matrix and AMDC Information – Standard (.pdf)
• Home Affordable Refinance FAQs (Updated) (.pdf)
• FHFA News Release (.pdf)
• HUD News Release (.pdf)

Coverage/Blogs:

• HousingWire: Home Affordable Refinance Eligibility Expanded to 125 Percent LTV
• L.A. Times Blog: U.S. raises home refi plan’s loan-to-value ceiling to 125%

(Update 1: 07/17/2009)

New August 1 Date for Whole Loan Committing of Refi Plus Loans Up to 125 Percent LTV
(Source: Fannie Mae)

To help lenders get started with originating Refi Plus™ loans under the manual underwriting option with LTV ratios of 105.01-125 percent, Fannie Mae will make this option available for whole loan committing beginning August 1 – one month sooner than the September 1 date included in Announcement 09-23: Updates to Home Affordable Refinance – 125 Percent LTV Limit for Refi Plus Loans.

We are providing this advance ability for whole loan committing to address lenders’ needs to obtain secondary market pricing information so they can establish their own pricing for loan originations.

Fannie Mae lenders may use both eCommitting™ and  eCommitONE™ to commit Refi Plus loans with LTVs over 105 percent beginning August 1, and we will accept both whole loan and MBS deliveries of Refi Plus loans with LTVs up to 125 percent beginning on September 1.