The Federal Housing Finance Agency (FHFA) has unveiled a new refinance option for low-income borrowers who missed out on the refi boom last year.
FHFA has announced that Fannie Mae and Freddie Mac are working to ease credit standards and waive certain fees for borrowers looking to refinance their loans. The agency said that eligible borrowers who apply for the program could save an average of $100 to $250 on monthly mortgage payments.
“Last year saw a spike in refinances, but more than two 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.”
The program also 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 with 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.
The refinancing option will be rolled out this summer to GSE borrowers with incomes at or below 80% of the area median income. Another condition is that applicants must 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. They are also required not to have missed a payment in the past six months and no more than one missed payment in the past 12 months.