For those who weren’t able to take advantage of the refi boom over the span of the COVID-19 shutdowns, don’t fret, help is on the way!
After an amazing year for refinances that generally benefited more affluent borrowers, the Federal Housing Finance Agency revealed it is employing a new refinance product that focuses on low-income borrowers with single-family mortgages backed by Fannie Mae and Freddie Mac. The regulatory agency has specified that this new product will aid borrowers who weren’t able to refinance during the pandemic-driven, historically low rates of 2020 and early 2021.
In accordance with this new refinance opportunity, lenders will have to guarantee that the borrower acheives the following through a refinance:
- $50 per month in savings off their mortgage payment; and
- .5% minimum reduction in interest rate. For instance, a rate of say 3.25% must go down to at least 2.75% with this new product.
- Appraisal credit
The Federal Housing Finance Agency will demand that lenders offer a $500 credit for an appraisal if the borrower is not eligible for an appraisal waiver. Fannie Mae or Freddie Mac will reimburse the lender after the loan is sold to them.
Fannie Mae CEO Hugh Frater says, “Fannie Mae looks forward to implementing their new RefiNow option as soon as possible to ensure all eligible homeowners are able to avail themselves of this money saving opportunity.”
Fannie Mae further announced that the RefiNow program will begin on June 5th.
Moreover, as part of this new RefiNow program, the FHFA will waive its divisive adverse market refinance fee for borrowers with loan balances at or below $300,000. The fee of 50 basis points, instituted in December, was met with a hostile response from the mortgage industry as it forced the average consumer to shell out nearly $1,400 more than they would’ve paid previously. It’s supposed reason for implementation had to do with “risk management” associated with high levels of production lenders dealt with over the course of the COVID-19 forced shutdowns.
“Fannie Mae looks forward to implementing their new RefiNow option as soon as possible to ensure all eligible homeowners are able to avail themselves of this money saving opportunity.”
FHFA Director Mark Calabria says, “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. This new refi 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 for this option, a borrower must own a mortgage backed by a government-sponsored enterprise such as Fannie Mae and Freddie Mac. In addition, a borrower must have an income at or below 80% of the area’s median income and have been current on their mortgage payments for the last 6 months, with no more than 1 payment missed in the last 12. Borrowers also must have a FICO score at or above 620, not have a mortgage with a loan-to-value ratio greater than 97%, and a debt-to-income ratio no higher than 65%.
Chairwoman of Fannie Mae’s board, Sheila Bair had this to say, “Racial and income disparities in refinance take-up rates have persisted for far too long. With this initiative, we strive to narrow the gap. We thank FHFA for its strong leadership to help all eligible homeowners reduce their monthly housing costs by taking advantage of the historically low mortgage rates.” Fannie Mae helps make the 30-year fixed-rate mortgage and affordable rental housing possible for millions of people all over the country. They help to make the refinancing and purchasing process easier, while reducing costs and risk. “RefiNow will help borrowers by removing barriers, improving affordability, and promoting sustainable ownership,” says Malloy Evans, Senior Vice President and Single-Family Chief Credit Risk Officer for Fannie Mae.
RefiNow may potentially be a strategic move by Fannie and Freddie. If rates are to continue to slowly rise, potential borrowers may be deterred from the refinance market. Naturally, with more options comes more volume as Fannie Mae’s economic and strategic research group estimated refinance origination volumes in 2022 to total $1.1 trillion, a 48% decline from 2021 and a $40 billion downward revision from last March’s forecast.
SELFi is happy to offer the new RefiNow product beginning June 5th. Please visit SELFi.com for real time rates from our partnered lenders and take advantage of this new product if applicable to your home!
Subscribe to our mailing list
Stay up-to-date on interest rates, loan options, and money saving tips.