We noted recently the part of the stimulus package that would allow borrowers whose loans were owned by either of the agencies to refinance their properties under more liberal guidelines. This process has been updated.
First, each agency has new "look up" features at their websites that update and streamline the process. The Freddie Mac website address is https://ww3.freddiemac.com/corporate/ and the Fannie Mae website is http://loanlookup.fanniemae.com/loanlookup/
You can determine immediately if one agency or the other owns your loan. The Freddie Mac program requires that you your refinance be done through the existing servicer. The Fannie Mae program, on the other hand, allows virtually any lender to do the refinance. That is good news for Fannie Mae borrowers who obviously have a choice of lenders.
There are two key features that are user-friendly. If the original loan had private mortgage insurance, PMI, then the existing contract will stay with the loan through the refinance. If the loan did not have PMI but the loan to value, LTV, is now greater than 80%. Normally the loan would require PMI now. But under this program PMI is not required if the LTV is greater than 80%.
The program will also allow funding loans up to 105% of the current appraised value. That applies only to no-cash-out refinances where you are just financing the existing loan. Borrowers who want to take cash out of the transaction will be limited to 90% LTV. That's still generous in my view.
It is important to note also that there are pricing adjustments based upon LTV and FICO score. Borrowers with FICO scores under 720 will pay an extra half point in upfront fees. That's still better than paying .5% every year for PMI.
Finally, there is always a problem where an announcement like this is made but they forget to tell the lenders. So you might call your favorite lender and get a response that they haven’t heard about it yet. If so, you should tell them it's on the way and try to get them to initiate your application.
Randy Johnson – Author of How to Save Thousands of Dollars on your Home Mortgage and Savvy Borrowerarticles. Randy is a mortgage broker who has financed over $1 billion
in properties. He writes about home buying and real estate finance
topics for CreditBloggers.com.
Randy Johnson Randy is a Credit.com contributor and seasoned mortgage expert. He writes about home buying, mortgage laws and real estate finance issues. He has financed over $1 billion in properties, is the author of How to Save Thousands of Dollars on your Home Mortgage and he is a feature columnist for Savvy Borrower.
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