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February 9th, 2009 (Modified on February 17th, 2009)

Fannie Works to Streamline Refis

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Last week Fannie Mae introduced a new program that’s designed to streamline the refinance process, allowing more Americans to take advantage of historically low mortgage rates. Fannie’s new “Desktop Underwriter (DU) Refi Plus” program will expand the criteria for refi eligibility (i.e. reduced FICO requirement) by reducing the amount of documentation (such as employment information) required by lenders, even waiving an appraisal in some cases.

While the details on Fannie’s latest initiative are thin, we can already predict that the program will be largely limited to borrowers who can already qualify for open-market refi opportunities. For example, to take full advantage of the “DU Refi Plus,” borrowers must have a loan-to-value (LTV) of less than or equal to 80%.

Although the availability of the program may not generate another refi boom — or even benefit millions as stated by a Fannie spokesman — for those eligible, it should shave some time off the process, allowing lenders and servicers to fill more requests.

From Bloomberg:

“This is not yet the no-appraisal refi wave that many have feared,” Matt Jozoff and Brian Ye, mortgage-bond analysts at New York-based JPMorgan Chase & Co., wrote in note to clients yesterday.

Fannie Mae’s appraisal change doesn’t mean borrowers with less than 20 percent home equity can forgo mortgage insurance, the analysts said. That’s because Fannie Mae will likely use automated models to check home values listed on applications before offering to waive appraisals, the analysts said.

Fannie Mae’s Desktop Underwriter Refi Plus” program is set to begin April 4.

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20 Responses to “Fannie Works to Streamline Refis”

  1. James W Says: February 16th, 2009 at 8:56 am

    This won’t help much if the credit risk pricing adjustments still apply…

  2. Kevin Oakley Says: February 16th, 2009 at 9:53 am

    Question #2

    If I am self employed and cannot qualify for a traditional refi loan on my home, will I be able to apply for a DU Refi Plus “line of credit” loan on my home which I currently own 100%? Thank you.

  3. moi Says: February 17th, 2009 at 10:49 am

    to Kevin Oakley:

    Perhaps. It appears to be a possibility. I have read that there is will be a reduced credit score threshold to qualify and that income documentation is to be relaxed for the self-employed. See Clark Howard’s blurb about it on his blog:

    http://wdbo.com/blogs/wdbo_clark_howard/2009/02/new-options-to-refi.html.

    Good Luck.

  4. Tim Manni Says: February 17th, 2009 at 12:35 pm

    Kevin: Fannie doesn’t write line of credits. The DU Refi Plus Program is only for Fannie-owned loans.

    Unfortunately, there are stricter conditions for self-employed borrowers out there, so you’ll have to find a lender that’s willing to offer a low-doc loan. The DU Refi Plus isn’t a no-doc, it’s still a low-doc.

  5. Tim Manni Says: February 17th, 2009 at 12:37 pm

    James,

    Based on Fannie’s announcement, there’s nothing that says “credit-risk pricing adjustments” won’t apply, so I believe you’re right.

    Thanks for commenting,
    Tim

  6. Dana & Robin Bain Says: March 4th, 2009 at 11:04 pm

    March 4, 2009 Home Affordable Refinance – New Refinance Options for Existing Fannie Mae Loans

    Also Freddie Mac Guides

    https://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2009/0904.pdf

    http://www.freddiemac.com/singlefamily/2009-03-04_advisory.html

    http://www.freddiemac.com/sell/guide/bulletins/pdf/bll095.pdf

    http://www.freddiemac.com/sell/factsheets/relief_refi.html

    3/4/2009 New Rules & Guidelines from Fannie Mae & Freddie Mac regarding refinancing homeowners who owe more than 80% of the value of their homes.

    Please keep in mind this ruling just came out on Wednesday March 4, 2009 and it will take some time for everyone involved to decipher how this will be implemented.

    http://www.bainmortgage.com/MyBlog

  7. ADAM Says: March 10th, 2009 at 9:25 am

    MAJORITY OF PEOPLE WILL NOT QUALITY FOR THIS TYPE OF LOAN,REASONS BEING MOST PEOPLE WHO HAD 20% EQUITY IN THEIR HOME MOST LIKLY HAVE LOST IT, WITH ALL THE NEW GUIDLINES OF THE MI COMPANIES YOU WILL HAVE TOO HAVE FICO MIDDLE SCORES OF 680 PLUS IN ORDER TO GET MI INSURANCE. UNTIL THE MI COMPANIES RELAX THEIR GUIDLINES AS WELL AS FANNIE AND FREDDIE, THE MIDDLE CLASS WILL STILL SUFFER AND WILL NOT BE ABLE TOO TAKE ADVANTAGE OF LOWER INTREST RATES, THE MAJOR BANKS WILL ADD POINTS TO THE RATE MAKING IT NEXT TOO IMPOSBILE TO REFINANCE UNLESS YOU HAVE BIG BUCKS TOO CLOSE.

    YOU WOULD THINK THAT WITH ALL US TAX PAYER’S MONEY BAILING OUT THE RICH, A PROGRAM WOULD BE AVAILABLE TO THE MIDDLE CLASS WHO ARE LIVE DAY TO DAY ON OUR PAYCHECK. AND WONDER IF WE ARE STILL EMPLOYED THE NEXT DAY.

  8. Tim Manni Says: March 10th, 2009 at 11:01 am

    Adam,

    Despite all the controversy surrounding Washington’s latest housing rescue plan, at least they have taken some note of “responsible” borrowers and seem willing to help them, instead just helping the irresponsible. Whether that will actually happen, I don’t know. I believe this program deals more with refis than with loans. Yet I understand your point and I think we agree — those who can’t qualify for the majority of existing refi programs out on the market probably won’t qualify for this one. At this juncture it seems that loan mods aren’t yet the answer.

    Thanks for your comments, hope to hear from you again,
    Tim

  9. Colette Groves Says: April 3rd, 2009 at 7:18 am

    We just purchased home for $210,000 18 months ago, balance of $146,000. We are both employed, nothing changed. However, we were told we cannot re-fi and get 10,000 to pay of debt b/c market values have dropped 10 – 15% and to wait for this DU plus in May. I do NOT understand. What can we do? We wanted the cash out for raising interest on credit cards. Thank you!

  10. Tim Manni Says: April 3rd, 2009 at 3:57 pm

    Hey Collette,

    It’s tough for me give you too much of an accurate response since I don’t know your credit score, what type of house you have (single-family, condo, etc), or what market it is in. But I can tell you this, if you have only contacted one lender, it would do some good to call and shop around to see if other lenders are interested. If you’re looking for a “cash-out” refi, that may prove to be very difficult in today’s market. If your loan is owned by either Fannie or Freddie, it may be better to simply wait a month for the DU Refi-Plus program.

    I hope this was of some help. Thanks for commenting,
    Tim

  11. Cassandra Says: April 6th, 2009 at 10:03 am

    We are 6 figure income, husband wants to refi, has 696 score, we owe 145,450. appraisal came in at 180,000 We were given the options:

    come in with 8K to closing in order to get rid of PMI and get the 4.75 int rate

    continue to pay PMI roll 5k closing cost into refi and get the 4.875 int rate

    *they just tryed to see if we qualified for this new refi plus and said we did not, they still needed our appraisal. I that because we are not the 80/20 required. IF we pay the diff of $1449 to bring us to the 80/20 (180,000 x 80% = 144,000) (145,450 – 144, 000 = 1449) will we be eligible?

  12. Tim Manni Says: April 6th, 2009 at 10:48 am

    Cassandra,

    I believe the program has been pushed back to May 2, 2009.

    Assuming that your mortgage is owned or guaranteed by Fannie Mae, you should be eligible. Whether eligibility will translate into beginning the refi process is up to the individual lender. We encourage all our readers to shop around to different lenders. What one lender agrees to either do, or not do, may be different than what another lender agrees to. Certainly reaching the 80/20 threshold helps, but according to Fannie Mae, the DU Refi Plus program is designed to refi loans with up to an 105% or less LTV.

    As far as mortgage insurance goes, this is from http://www.efanniemae.com:

    When the original LTV on the existing Fannie Mae loan was greater than 80 percent, and the existing Fannie Mae loan currently has MI, the lender may either obtain the amount of MI coverage in effect on the existing Fannie Mae loan or the standard level of mortgage insurance coverage. DU will issue the following message specifying the amount of MI coverage required on these loan casefiles:

    Mortgage insurance is required for this DU Refi Plus loan casefile. The lender may either obtain the level of mortgage insurance coverage that is in effect on the existing Fannie Mae loan of %, or % coverage. Verify the mortgage insurance premium is accurately reflected in the loan application.

    When the original LTV on the existing Fannie Mae loan was greater than 80 percent, and the existing Fannie Mae loan does not appear to have MI based on the information currently available to DU, the lender will be required to confirm that the loan does not have MI. If the lender determines the existing loan does not have MI, no MI is required.

    I hope this was of some help. If you want to learn more, click on the link above.

    Thanks for reading and commenting,
    Tim

  13. sally fisher Says: April 15th, 2009 at 10:27 am

    I have recently applied for refi of two properties, one with a 90% LTV and the other, 82% LTV. My credit is exceptional. On April 11th of this year I signed a good faith estimate requiring PMI. An hour after signing, I declared my interest in the DU Refi Plus. Though the underwriting process had not yet began, I was denied this program which would have eliminated the need for PMI. I was given vague and ambiguous answers by NatCity personnel that left me with the impression that no one simply wanted to bother with me. I was told by other mortgage professionals that this program was available throughout the nation and if my lender wasn’t offering it,I should “find another lender.” I was told that National City was only offering this to their existing mortgage customers only. My existing mortgages are in fact, fannie mae mortgages and I have been a bank customer of NatCity since my local branch was purchased 11 years ago. It is difficult for me to switch lenders at this point since I have already spent $740 in application & appraisal fees. I have also secured a favorable rate which I can no longer duplicate. I am also told that it is prohibited to target specific applicants. If I am not eligable, then who are the lucky individuals that will benifit from this?

  14. Tim Manni Says: April 15th, 2009 at 12:18 pm

    Sally,

    We’re sorry to hear of your hardships, you’re not alone. We also encourage that you speak to an alternate lender if one has denied you. It’s best to check your eligibility before moving forward. You can do that at “http://www.makinghomeaffordable.gov/eligibility.html”

    It’s hard to tell why you were denied for the DU Refi Plus. You need to demand concrete answers from NatCity to make sure they aren’t denying for unjust reasons.

    Unfortunately, just b/c these programs exist doesn’t mean that lenders will be quick to utilize them. Best of luck and keep us posted.

    Thanks for commenting,
    Tim

  15. There’s A Reason Refis Aren’t Getting Any Attention | Mortgage Loan Refinance Guru Says: October 26th, 2009 at 11:46 pm

    [...] Freddie Mac just recently began accepting loans with the 125% LTV. High customer volume as well as a number of logistical complications have also stalled the program [...]

  16. randy simpson Says: October 28th, 2009 at 10:26 pm

    im trying to find out more on the refiplus program

  17. s2kreno Says: February 21st, 2010 at 10:44 pm

    Fannie Mae has a separate LLPA matrix for DU Refi Plus that it also uses for HARP refis — it limits the adjustments to 2% in most cases (1.5% for 15-year loans).

  18. Tim Manni Says: February 22nd, 2010 at 10:35 am

    Thanks Reno!

  19. Lois Says: April 7th, 2012 at 12:01 am

    We currently have a intrest rate of 6.125 with BA 21yrs left it is conventional fixed.We would like to refi for 15yrs and are not quit sure who to trust or were to go to find HELP we owe 153,000.00 ! think its worth about 250,000.00 could we qualify for Fanni Mae or can you recomend were to look for help We can trust? TY

  20. Tim Manni Says: April 11th, 2012 at 11:28 am

    Lois,

    We can’t tell you specifically where to look or who to trust, but start by contacting your current servicer and then shop around for the best refinance deal.

    I would also recommend checking out our “Tri-Refi Refinance Calculator.” It will show you how to best finance your refinance: http://www.hsh.com/refinance-calculator

    Thanks for commenting, good luck,
    Tim

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HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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