FHFA Announces New Refi Option for Low-Income Borrowers with GSE-Backed Mortgages
The Federal Housing Finance Agency on Wednesday announced Fannie Mae and Freddie Mac will implement a new refinance option for low-income borrowers with government-sponsored enterprise-backed single-family mortgages.
FHFA said eligible borrowers will benefit from a reduced interest rate and lower monthly payment. FHFA estimates that borrowers who take advantage of the new refinance option could save an average of between $100 and $250 a month.
The new refinance option 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 GSEs will provide the lender 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.
“Last year saw a spike in refinances, but more than 2 million low-income families did not take advantage of the record low mortgage rates by refinancing,” said FHFA 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.”
To qualify, a borrower must:
- Have an Enterprise-backed 1-unit single-family mortgage that is owner-occupied;
- Have an income at or below 80% of the area median income;
- Have not missed a payment in the past six months, and no more than one missed payment in the past 12 months; and
- 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.
FHFA said the new refinance option will be available to eligible borrowers beginning this summer.
