So, What Is The Fannie Mae Refi Plus Program All About?
So, in the early part of 2009, Fannie Mae, the largest holder of mortgage notes in the U.S.A announced a program where they would make refinancing easier and possible for homeowners whose mortgages are already backed by Fannie Mae.
The main benefits of the programs are many. You see, although mortgage rates are at historic lows right now, there are millions of homeowners who can not take advantage of the new money saving refi rates. The reasons are two-fold really.
Why Is The Program Necessary?
1) The values of many homes have fallen to a point where the amount owed on the home mortgage is more than the house is worth. Back in the good old days, Fannie Mae had the popular My Community programs which allowed the purchasing or refinancing of a home with a 100% loan to value ratio. Meaning, there was zero equity needed.
That popular program along with many others are long gone now. The most Fannie Mae will currently lend is up to 95% of a home’s value on a purchase. And to be honest, I am not really sure how much they will lend on a refinance today, as things are changing so rapidly.
2) Over the past year, Fannie Mae and Freddie Mac have gotten much tougher on credit score requirements. Where once you were able to secure one of these loans with a credit score lower than 580, that is no longer the case. For the most part, if your credit score falls below 620 you are out of luck.
3) As we all know, the lack of income documentation requirements (aka No Income Documentation Loans) are a big part of the reason we are in this mess to begin with. But, in the beginning, there was a good reason for no income loans. They were designed to help self employed individuals buy homes.
Because self employed people have so many deductions on there tax returns, their net income usually is not sufficient to qualify for a mortgage. However their actual income is. Therefore No income verification loans were developed to allow those individuals still buy homes they can actually afford.
How Can You Benefit From The DU Refi Plus Program?
With all these factors in mind, Fannie Mae announced a new program called Fannie Mae Refi Plus. Freddie Mac announced a similar program as well. The announcements of the new programs were made in February of this year.
The Refi plus program would go a long way in helping homeowners who are not able to take advantage of today’s low interest rates due to the reasons mentioned above. The new program would allow the following:
1) It would allow homeowners who owe more than their home is worth to still refinance their home up to a loan to value of 105%.
2) It would lower minimum credit score requirements to 580 and maybe even lower.
3) It would ease the income documentation requirements making it easier for the self employed to still qualify.
This applies to mortgages that are currently owned or backed by Fannie Mae or Freddie Mac. The mortgage has to be in good standing. This is not a loan modification program.
How Can You Apply For The Fannie Mae Refi Plus Program?
Although this program went into effect on April 4th of this year, I have not yet seen any lenders actually participating in it up to this point. I have heard that Wells Fargo is now allowing it although I have no proof of that.
So right now, I and many of my clients are waiting to see if this wonderful Fannie Mar Refi Plus program will actually come to fruition. If the history of many of the other borrower bail out programs is any indication, I would say “Don’t Hold Your Breath”