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FHFA Expands Eligibility Requirements for RefiNow and Refi Possible Refinance Programs

FHFA Expands Eligibility Requirements for RefiNow and Refi Possible Refinance Programs

In a major shot in the arm for the US home financial services sector, The Federal Housing Finance Agency (FHFA) has announced two measures to sustainably advance the affordability of homeownership for mortgage borrowers across the nation. These measures would benefit the homeowners belonging to the underserved communities. As part of the announcement, the FHFA has expanded the eligibility for Fannie Mae’s and Freddie Mac’s refinance programs for low- and moderate-income borrowers and restores desktop appraisal flexibility.

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What New FHFA Eligibility Requirements Mean to Homeowners and Borrowers

Fannie Mae and Freddie Mac (the Enterprises) will expand certain eligibility requirements for their RefiNow and Refi Possible refinance programs aimed at assisting low-income borrowers. Additionally, the Enterprises will be incorporating desktop appraisals into their selling guides for new purchase loans.

The announcement is based on FHFA’s vision to make lending smoother and transparent. Good lending policy depends on how the institutions deliver on promises of sustainability and affordability.

In an official statement issued by ​​Sandra L. Thompson, Acting Director, FHFA, “Our Agency [FHFA] is charged with ensuring that they fulfill their missions by responsibly promoting equitable access to mortgage credit throughout the Nation, including to underserved communities, through safe and sound business practices.”

Sandra continued, “Each of these pillars is necessary for safe, sound, and effective financing, and each strengthens the other. After all, a loan that a borrower cannot afford is unsustainable: it will stop performing. And loan products, like some of those sold in the first decade of the 2000s that reset from low teaser rates up to unsustainable payment schedules, or contained no income documentation, cannot reasonably be called affordable.”

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You can read Sandra’s statement here.

When the Enterprises established their RefiNow and Refi Possible programs for low-income borrowers, area median income (AMI) requirements were limited to borrowers with current income at or below 80 percent.

The latest FHFA announcement expands the income threshold to include some moderate-income borrowers, with incomes at or below 100 percent of AMI. In addition, the Enterprises are modifying other requirements to address certain operational frictions for lenders.

Second, both Enterprises will incorporate desktop appraisals into their Selling Guides for many new purchase loans starting in early 2022. The use of desktop appraisals by the Enterprises was one of several temporary flexibilities initiated last year in response to the COVID-19 pandemic. This decision is the result of a thorough review of data collected from the use of the loan flexibilities, as well as input received from the Request for Input (RFI) and public listening session on appraisal-related policies, practices, and processes.

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FHFA will continue to ensure the safety and soundness of its regulated entities as they support the housing finance market while ensuring equitable access to safe, decent, and affordable housing opportunities.

Fannie Mae and Freddie Mac (the Enterprises) will expand certain eligibility requirements for their RefiNow and Refi Possible refinance programs aimed at assisting low-income borrowers.

[To share your insights with us, please write to sghosh@martechseries.com]

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