New Refinance Rules to Aid Borrowers
The federal government has recently eased up on some of the eligibility requirements for its home loan refinancing program. In the beginning of July 2009, the U.S. Department of Housing and Urban Development extended the Home Affordable Refinance Program to borrowers who are up to 25% more in debt to their home than the property is worth as long as their mortgages are guaranteed by Fannie Mae and Freddie Mac.
The previous threshold was 105% of the homes value, or owing 5% more than the home is actually worth.
Under the Making Home Affordable Program, there are two available options to eligible borrowers: (i) they can refinance their mortgage; or (ii) they can modify their loan by lowering their interest rate, extending the duration of the loan or reduce the principal on the loan.
It is currently estimated that only 200,000 of the 4 to 5 million Americans that are having difficulty saving their homes are enrolled in the program. Furthermore it is estimated that 10 percent, or 20,000 of these program participants are refinancing.
Only borrowers who have not missed a payment by more than 30 days in the last year, and are backed by a government sponsored lender, are eligible for the program.
Fannie Mae and Freddie Mac normally do not allow borrowers who owe more than 80% of the value of their home to refinance. These two lenders constitute around 50% of the outstanding mortgages in the country, and about 20% of all the seriously delinquent loans, on which no payment has been made during the past two months.
Here are the eligibility requirements:
- To qualify for refinancing under the Making Home Affordable Program, the borrower must have their loan secured by Fannie Mae or Freddie Mac. To find out if your loan is secured through either of these entities, contact your lender.
- The home must have no more than four single-family units, as some multifamily properties are able to qualify.
- All mortgage payments must be current. The borrower cannot have any late payments more than 30 days past due.
- The outstanding primary mortgage loan principal cannot exceed more than 125% of the home’s current market value that is up from the 105% limit in February.
See more:
If You Need to Refinance A Mortgage There Are New Rules
What You Should Know About Refinance
Should You Refinance? See if You Can Hit the Trifecta
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