• Mark Dallmann

Now Open: Fannie Mae Debuts RefiNow Option for Low Income Homeowners

Homeowners who haven’t capitalized on historically low mortgage rates are getting another chance to lower their monthly payments under Fannie Mae’s new RefiNow™ option.

The organization launched the initiative on June 5 in collaboration with Freddie Mac and under the Federal Housing Finance Agency (FHFA). The program offers low-income homeowners with Fannie Mae-backed mortgages an opportunity to refinance and save money on their loan payments.

“Many homeowners in low-income brackets may believe they can’t afford to refinance, be convinced they won’t qualify or be unaware of the potential monthly savings,” said Katrina Jones, vice president of Racial Equity Strategy & Impact, Fannie Mae, in a statement.

According to Fannie Mae, any approved seller can offer RefiNow to qualifying homeowners. Homeowners can find out if the current loan on their home is owned by Fannie Mae using the Loan Lookup tool, and learn more about refinancing options at Fannie Mae’s website KnowYourOptions.com.

“They may be surprised to learn they have options to make their monthly housing payments more affordable, and they can begin by contacting any mortgage lender of their choice to explore refinancing now,” Jones said.

Benefits for Borrowers

According to previous statements from Fannie Mae experts, lower-income borrowers typically refinance at a slower pace than higher-income borrowers, which leads to missed opportunities to save on housing costs.

Eligible homeowners stand to save between $100 and $250 a month with the help of the new refinancing option, according to FHFA, which claimed the program would remove barriers and improve affordability for homeowners nationwide.

“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,” said FHFA Director Mark Calabria in an April press release initially announcing the new program. “This new refinance 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.”

An added benefit is a waiver of the 50 basis point up-front adverse market refinance fee for borrowers with loan balances at or below $300,000.

Applicants will also receive a $500 credit from Fannie Mae when the loan is purchased if an appraisal was obtained for the transaction. Fannie Mae will send the credit directly to the lender, who must then pass the credit to the homeowner.

Eligibility Standards

While the program is designed to help low-income homeowners, there are a few stipulations that homeowners must meet to qualify.

Households earning at or below 80% of the area median income are eligible for the program as long as they fit other components of the criteria. That includes being up to date on payments.

Homeowners who missed a mortgage payment in the past six months, or more than one missed payment in the past year, won’t qualify for the option, according to Fannie Mae’s Lender Letter.

“We encourage all homeowners impacted by COVID-19 to contact their mortgage servicer to discuss their options and determine the best solution for their situation,” read an email statement from Fannie Mae to RISMedia.

Homeowners must also have a loan-to-value ratio up to 97%, a debt-to-income ratio of 65% or less and a minimum 620 FICO score.

Optimistic Outlook

Industry experts appear to be optimistic about the impact of a new federally backed mortgage refinancing program and its potential implications for homeowners.

“Housing affordability is an issue, not just for folks getting into the market, but oftentimes folks who have gotten into the market and can benefit from lower rates and lower monthly payments,” says Jordan Levine, VP and chief economist at the California Association of REALTORS® (C.A.R.).

According to Levine, C.A.R. is supportive of any programs aimed at improving housing affordability across the board.

“The reduction of the fees, I think, is the biggest benefit that might have been holding some folks back,” Levine says. “The adverse market fee-paying for an appraisal and that sort of thing is a real incentive because, in some way, the refinance down to a lower rate is its incentive, and I think that’s good for motivating folks who are on the fence or reluctant because of that initial cost.”

According to Lawrence Yun, chief economist for the National Association of REALTORS®, the program will serve as an effort to overcome “human inertia.”

“It’s straightforward math on whether there will be dollar savings,” Yun tells RISMedia. “Some Americans have been busy with their daily work and life activities and may have been postponing the decision. Others are less aware of the net benefits. So to spread awareness and streamline the refi process is good for the people impacted and good for the broader economy as more dollars can be spent elsewhere.”

If you would like a referral to a lender who can answer your questions, give me a call.

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