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July 31st, 2012

Freddie Mac announces new refinance effort

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ApprovedFreddie Mac announced Tuesday that they plan to “build on the success” of HARP “by aligning requirements for mortgages with loan-to-value ratios that are equal to or less than 80 percent with those for mortgages with LTV ratios greater than 80 percent.”

As was the case with HARP 2.0, Freddie’s recent refinance changes will again seek to eliminate representation and warranties. “Reps and warranties” define lender obligations when a loan goes bad. Since HARP 2.0 already aims at shifting responsibility from the banks to the government, it’s unclear at this time what more this update will try to accomplish reagrding reps and warranties. Perhaps whereas as HARP 2.0 sought to shift some or most of the reps and warranties from lenders to the government, this update seeks to eliminate them entirely for banks.

According to Freddie Mac, details won’t be released to lenders until mid-September.

A few facts

Here are some “news facts” included in Freddie’s press release:

  • The pending Relief Refinance Mortgage changes are intended to eliminate operational complexities and streamline the program so lenders can make refinancing more accessible to borrowers with Freddie Mac owned- or guaranteed mortgages.
  • The HARP 2.0 component of the Relief Refinance program is targeted to borrowers with LTVs above 80 percent.
  • The program changes are based on lender feedback on HARP 2.0, the enhanced version of the original HARP program announced by FHFA in November 2011.

“Once implemented the changes will give lenders a new measure of certainty and ease when they help borrowers with Freddie Mac owned- or guaranteed- mortgages take advantage of today’s historically low mortgage rates,” said Paul Mullings, senior vice president and interim head of single family at Freddie Mac.

“This will help us build on the success of the HARP 2.0 and Relief Refinance Mortgage programs of helping more than 1.3 million Freddie Mac borrowers.  Today’s announcement further underscores Freddie Mac’s vital role in making affordable mortgage financing available to America’s homeowners and future homebuyers.”

No principal reductions for Fannie, Freddie

In other Fannie and Freddie news, the GSEs’ regulator has decided not to use principal reductions as a tool to help struggling homeowners.

“We concluded that the potential benefit was too small and uncertain, relative to the known and unknown costs and risks,” said Edward J. DeMarco, acting director of the Federal Housing Finance Agency.

Safe to say, many in the Obama Administration are quite disappointed. Treasury Secretary Timothy Geithner made his opinions known in a letter to DeMarco on Tuesday.

I’m sure that the lack of principal reductions will only force Freddie and Fannie to explore even more and more ways to expand their refinance efforts.

More to come…

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One Response to “Freddie Mac announces new refinance effort”

  1. Frank Lewis Says: March 25th, 2013 at 11:11 am

    How about removing the “credit enhancement” stipulation that prevents a Freddie Mac backed mortgage from using Open Access to refinance?

    My lender has decided that since I have a Balloon loan that I am not eligible per their internal guidelines to participate in HARP but will allow Fixed Rate (30 / 15 yr) borrowers to participate. Seems a little unfair to me.

    Oh well I will keep paying the $200 that I could save by refinancing in quarters.

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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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