The Federal Housing Finance Agency (FHFA) has modified the streamlined mortgage refinance program for borrowers with high loan-to-value (LTV) ratios, the agency announced last week.
The High LTV Streamlined Refinance Program was established by FHFA on Aug. 25, 2016 to provide liquidity for borrowers who are current on their mortgage but are unable to refinance because their loans have LTV ratios that exceed the maximum limits set by Fannie Mae and Freddie Mac.
The modifications made last week establish an eligibility date which makes the program available for loans originated on or after Oct. 1, 2017. The eligibility date was necessary to preserve the objectives of both Fannie Mae’s and Freddie Mac’s credit risk transfer (CRT) program. Under the CRT program, they transfer a portion of risk on $1.6 trillion of unpaid principal balance with a combined risk in force of nearly $54.2 billion as of March 2017.
Fannie and Freddie will modify the structure of future CRT transactions to accommodate the High LTV Streamlined Refinance program by allowing the newly refinanced loans to return to the reference pools in place of loans that prepaid. This will help preserve credit loss protection on the loans without unwinding the protection paid for through CRT transactions.
The changes made to the High LTV Streamlined Refinance program offers both assistance to underwater borrowers while protecting taxpayers.
Further, to ensure that high LTV borrowers who are eligible for the Home Affordable Refinance Program (HARP) continue to have a refinance option, FHFA is also directing Fannie and Freddie to extend HARP through Dec. 31, 2018. More than 3.4 million homeowners have refinanced their mortgages through HARP.