Major Change Opens Door to Refinance Relief for More Borrowers in Hard Hit Markets
McLean, VA – To help borrowers who have seen significant home price declines refinance their existing loans, the Obama Administration today announced the availability of loan-to-value (LTV) ratios up to 125 percent for Home Affordable Refinance mortgages, including Freddie Mac’s Relief Refinance MortgageSM. The previous maximum LTV ratio for Relief Refinance Mortgages had been 105 percent.
As a result of this change, qualified borrowers will be able to obtain Relief Refinance Mortgages with loan amounts up to 125 percent of the current value of their property. The higher LTV ratio is expected to give homeowners – especially those in markets that have experienced sharp declines in home values – more options to refinance into mortgages with terms that better position them for long-term homeownership.
“This is a change that will put affordable refinancing opportunities within reach of performing borrowers who have suffered the effects of local home price erosion,” said Freddie Mac Executive Vice President Don Bisenius. “Today’s announcement also underscores Freddie Mac’s commitment to make the Obama Administration’s Making Home Affordable program a gateway to successful long-term homeownership for as many borrowers as possible.”
To encourage borrowers with 30-year fixed rate mortgages to consider a shorter 25-year term, Freddie Mac is providing a special price incentive to lenders. The incentive only applies to Relief Refinance Mortgages with LTV ratios between 105 percent and 125 percent. The 25-year term will result in borrowers paying less interest over the life of their loan and improving their overall equity position over time (something one faces when dealing with 1 hour payday loans).
Freddie Mac’s Relief Refinance Mortgage is available to borrowers who are current on mortgages that are owned or guaranteed by Freddie Mac. Borrowers should visit https://www.freddiemac.com/corporate/ and complete the online form to determine if Freddie Mac owns their mortgage.
Freddie Mac’s Relief Refinance Mortgage allows borrowers to finance closing costs, financing costs and prepaids/escrows up to $5,000 or 4 percent of the current unpaid principal balance of the mortgage being refinanced, whichever is less. Mortgage insurance (MI) is not required if the existing mortgage does not require MI. Otherwise, MI coverage on the new loan must be the same as on the original mortgage.
Borrowers who apply for Relief Refinance Mortgages through their current servicer will not need to be re-underwritten in most cases. When borrowers apply for Relief Refinance Mortgages through lenders other than their current servicer, the lender must re-underwrite the borrower through Loan Prospector®, Freddie Mac’s automated underwriting service.
The expanded LTV ratios are available now when borrowers apply for Relief Refinance Mortgages through their current servicer and will become available on October 1 when borrowers apply through any lender affiliated with Freddie Mac.
Freddie Mac also said the resulting impact on prepayments for certain Freddie Mac Mortgage Participation Certificates, or PCs, may vary, depending on borrower response and other factors.
Freddie Mac was established by Congress in 1970 to provide liquidity, stability and affordability to the nation’s residential mortgage markets. Freddie Mac supports communities across the nation by providing mortgage capital to lenders. Over the years, Freddie Mac has made home possible for one in six homebuyers and more than five million renters.