Mortgage borrowers with high loan-to-value ratios will soon have a new refinance option through Fannie Mae and Freddie Mac, the Federal Housing Finance Agency announced today. The new option — which will be available in October 2017 — will assist borrowers that are unable to refinance through traditional programs because their LTV ratio exceeds the GSEs’ maximum limits. FHFA also announced that Fannie and Freddie will extend their Home Affordable Refinance Programs through Sept. 20, 2017, to bridge the gap between the two programs (HARP was set to expire at the end of 2016).
To qualify for this new refinance option, borrowers must have been current on their mortgage payments for the previous six months; must not have missed more than one payment in the previous year; must have a source of income; and must receive a benefit from the refinance such as a reduction in their monthly payment, a lower interest rate or a shorter amortization term.
As with HARP refinances, borrowers will not be subject to minimum credit scores, maximum debt-to-income ratios or LTVs and, in most cases, an appraisal will not be required. There are no eligibility cut-off dates connected with the new offering, and borrowers can use the program for multiple refinances. Existing HARP customers must refinance out of HARP with one of the GSEs’ traditional refinance product before they can be eligible for this new offering.