Tuesday, September 27, 2016

By John Voket

Mortgage borrowers with high loan-to-value (LTV) ratios now have more options when it comes to refinancing.

The offering, recently announced by the Federal Housing Finance Agency (FHFA) and to be implemented by Fannie Mae and Freddie Mac (“the Enterprises”), will provide much-needed liquidity to borrowers current on their mortgage but unable to refinance through conventional programs because their LTV ratio exceeds the Enterprises’ maximum limits.

FHFA Director Mel Watt says providing a sustainable refinance opportunity for high-LTV borrowers who have demonstrated responsibility by remaining current on their mortgage makes financial sense, both for borrowers and for the Enterprises.

In order to qualify for the new offering, borrowers:

• Must not have missed any mortgage payments in the previous six months;
• Must not have missed more than one payment in the previous 12 months;
• Must have a source of income; and
• Must receive a benefit from the refinance, such as a reduction in their monthly mortgage payment.

Full details will be available in the coming months through the Enterprises, but the offering will make use of the lessons learned from the Home Affordable Refinance Program (HARP) and its streamlined approach to refinancing. The new offering is more targeted than HARP, but as with HARP, eligible borrowers are not subject to a minimum credit score, there is no maximum debt-to-income ratio or maximum LTV, and an appraisal often will not be required. Unlike HARP, however, there is no eligibility cut-off date. Borrowers with existing HARP loans are not eligible for the new offering unless they have refinanced out of HARP using one of the Enterprises traditional refinance products.

The new high-LTV refinance offering will be available to borrowers until October 2017.  For more information, visit HARP.gov, follow @FHFA on Twitter, LinkedIn and YouTube, or consult with a real estate professional.
 

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