The Federal Housing Finance Agency (FHFA) is offering low-income borrowers with Fannie Mae and Freddie Mac (the Enterprises), single-family mortgages a new refinance option.
The FHFA indicated eligible borrowers would benefit from a reduced interest rate and lower monthly payment, estimating borrowers taking advantage of the new initiative could save an average between $100 and $250 per month.
“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,” FHFA Director Mark Calabria said. “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.”
New refinance option features include, per the FHFA, the lender providing a savings of at least $50 in the borrower’s monthly mortgage payment, and at least a 50-basis point reduction in the borrower’s interest rate; a maximum $500 credit from the lender for an appraisal if the borrower is not eligible for an appraisal waiver; and a waiver of the 50 basis point up-front adverse market refinance fee for borrowers with loan balances at or below $300,000.
Refinancing qualifications include an Enterprise-backed one-unit single-family mortgage that is owner-occupied; an income at or below 80 percent of the area median income; the borrower has not missed a payment in the past six months while having no more than one missed payment in the past 12 months; and the borrower not having a mortgage with a loan-to-value ratio greater than 97 percent, a debt-to-income ratio above 65 percent or a FICO score lower than 620.