Measures aim to advance homeownership affordability for underserved borrowers
The Federal Housing Finance Agency (FHFA) has announced that Fannie Mae and Freddie Mac’s low-income refinance programs will be expanded to include borrowers making at or below 100% of the area median income (AMI) – up from 80% AMI.
Over the coming months, the government-sponsored enterprises (GSE) will expand certain eligibility requirements for their RefiNow and Refi Possible programs, which are now available to both low- and moderate-income homeowners with a GSE-backed single-family mortgage.
According to Freddie Mac, borrowers will benefit from a reduced interest rate and lower mortgage payment, and those who have not refinanced can save an estimated $100 to $250 a month. The FHFA also said that it will require the GSEs to modify other requirements to address operational frictions for lenders.
“We introduced RefiNow earlier this year as an option for lower-income homeowners who often miss out on refinancing options to reduce their monthly mortgage payments and increase their potential monthly savings. The enhancements… help expand the reach of RefiNow to additional creditworthy homeowners, further enabling equitable and sustainable access to homeownership,” head of Fannie Mae Single-Family Malloy Evans said.
“Freddie Mac is taking action to ensure more deserving homeowners can benefit from today’s low mortgage rate environment through refinancing,” said Donna Corley, executive vice president and head of Freddie Mac Single-Family. “Working with our lender clients and the Federal Housing Finance Agency, we are now able to help even more lower-income households reduce their interest rate and their monthly mortgage payment through our Refi Possible solution. Our priority is to create more equitable opportunities that responsibly support sustainable homeownership.”
In addition to expanded eligibility, Fannie and Freddie will incorporate desktop appraisals into their selling guides for new purchase loans starting in early 2022. According to the FHFA, this decision was the result of a thorough review of data collected from the use of the loan flexibilities, as well as input received from the Request for Input (RFI) and public listening session on appraisal-related policies, practices, and processes.
“Expanding eligibility for low- and moderate-income families to refinance their mortgage and lower their monthly payments, together with leveraging desktop appraisals to reduce inefficiencies in the mortgage process, are meaningful steps towards overcoming barriers to affordable and sustainable homeownership,” said FHFA acting director Sandra Thompson. “Today’s actions demonstrate that FHFA will continue to act purposefully and in dialogue with its stakeholders to minimize market disruption and ensure its regulated entities operate in a safe and sound manner.”