The FHFA announced that Fannie Mae and Freddie Mac will offer a new refinancing product for low-income homeowners starting this summer.
The Federal Housing Finance Agency (FHFA) announced that Fannie Mae and Freddie Mac will launch a new refinancing program for low-income borrowers to lower their interest rates and monthly payments.
The offering will be available for single-family homes, and the FHFA estimates that borrowers taking advantage of the new refinancing option could save between $ 100 and $ 250 per month on average.
“Racial and income disparities in refinancing rates have existed for far too long,” said Sheila Bair, chairwoman of the Fannie Mae board of directors. “With this initiative we want to close the gap. We thank the FHFA for their strong leadership in helping all eligible homeowners lower their monthly housing costs by taking advantage of historically low mortgage rates. “
The new refinancing option includes:
- A requirement that the lender provide a saving of at least $ 50 on the borrower’s monthly mortgage payment and a reduction in the borrower’s interest rate of at least 50 basis points
- A maximum credit of $ 500 from the lender for a valuation if the borrower is not eligible for a valuation waiver (Fannie Mae and Freddie Mac companies give the lender a loan of $ 500 when the loan is sold to a company).
- A waiver of 50 basis points in advance adverse market refinancing fee for borrowers with a loan balance of $ 300,000 or less
“Over the past year there has been an increase in refinancing, but more than 2 million low-income families failed to refinance record-low mortgage rates,” said FHFA Director Mark Calabria. “This new refinancing option is designed to help eligible borrowers who have not yet refinanced save between $ 1,200 and $ 3,000 annually on their mortgage payments.”
The refinancing product will be available from Fannie Mae and Freddie Mac in summer 2021. Qualifications include:
- Have a company-backed single-family mortgage with a unit that is self-owned
- Have an income of 80 percent or less of the area median income
- Didn’t miss a payment in the past six months and didn’t miss more than one payment in the past 12 months
- No mortgage with a credit-to-return ratio greater than 97 percent, a debt-to-income ratio greater than 65 percent, or a FICO score less than 620
“Millions of homeowners have benefited from the refinancing to reduce their monthly mortgage payments and build long-term wealth,” said Donna Corley, Freddie Mac executive vice president and director of the single family business. “Freddie Mac’s new Refi Possible mortgage creates fairer opportunities by making it easier for lower income homeowners to refinance their mortgages.
“Refi Possible reaches many homeowners who can benefit from the refinance and offers flexibility that encourages our customers to serve these eligible borrowers in the future,” said Corley. “Our goal is to responsibly expand access to credit and ensure that we support sustainable home ownership.”
The FHFA is launching this new initiative despite running out of previous COVID flexibilities that have helped many homeowners who were unable to make their mortgage payments during the pandemic. The FHFA announced last week that Fannie Mae and Freddie Mac will be extending some temporary lending flexibilities through May 31, 2021.
This extension of the flexibilities, which should previously end on April 30th, 2021 after the last extension of the FHFA, will be the final extension. The FHFA stated that use of these flexibilities has slowed as the economy recovers and that it is expected to end all temporary sales flexibilities on May 31, 2021.
Email Kelsey Ramírez