home subscribe advertise reprints e-mail help RSS about us LOG IN

Mortgage News


Mortgage News

HOT Topics









site map

twitter linkedin
facebook google+

Mortgage News

News by Subject
Complete list of specialty news sections.

Purchase Subscription
Subscribe to MortgageDaily.com and get immediate access to all news, statistics and archives.

Mortgage Advertising
Reach mortgage executives, loan originators and other people tied to mortgage industry.

Consumer Mortgage News
Free mortgage news for prospective borrowers.

Mortgage Newsletter
Free e-mail newsletter with the latest headlines from MortgageDaily.com.

Mortgage News Reprints
Put entire MortgageDaily.com stories in your online or printed newsletter or publication.

Mortgage Feedget RSS code
Condensed MortgageDaily.com stories free on your Web site or for your RSS reader.

News Archives
Archive of MortgageDaily.com stories by month going back to 1999.

Press Releases
Reports and announcements from MortgageDaily.com.

Mortgage Statistics
Data and statistics for real estate finance.

Mortgage Directories
Directories of lenders, branch operators and mortgage service providers.

Mortgage Graphs
Directories of lenders, branch operators and mortgage service providers.

Refinance News | Refinance Share Statistics
News about refinancing programs, pricing and production. Stories about the H o m e
Affordable Refinance Program, H A R P 2.0 and other Making Home Affordable coverage.

Conforming Cash-out Changes

Fannie revises refinance guidelines and pricing

September 25, 2002


The nation's biggest mortgage player is making some not-so-good changes to its guidelines for cash-out mortgages.

In an announcement yesterday about eligibility standards for refinance mortgages, Fannie Mae said it will raise its pricing on cash-out refinance loans. The changes will affect mortgages delivered on or after February 1, 2003. The price increases on cash-out loans, which have been recently cited as a source of strength in an otherwise weak economy, range from 0.25% to 0.50%.

In addition, Fannie said loans where a first lien and nonpurchase-money second lien are consolidated will now be treated as cash-out. Previously, these loans were treated as limited cash-out refinance loans. This change also takes effect on February 1st of next year.

To qualify for the revised limited cash-out refinance category, only an existing first mortgage, purchase-money second mortgage, closing costs and less than 2% cash back to the borrower (up to $2,000) can be financed in the new loan. Lenders will now need to provide written confirmation, such as a HUD-1 settlement statement, that the proceeds of a subordinate lien were used to purchase the property.

On the upside, Fannie said it will expand the loan-to-value ratios on limited cash-out refinances to the same level as purchase money mortgages, which are as high as 100%.

The changes are the result of an extensive assessment by Fannie of the credit risks associated with various types of refinance mortgages. The company said a refinance loan where the balance increases in the neighborhood of 20% or more from the prior balance is three times more likely to default than a refinance that increased the balance 3% or less. In addition, Fannie noted that inaccurate appraisal values are more likely to occur in a cash-out transaction.

Fannie said that its Desktop Underwriter will be updated in December to reflect the pricing changes.

The Washington D.C.-based company said its goal is to align its "eligibility and pricing policies more closely with the risk profile of the particular mortgage transaction."

Freddie Mac, one of two other government sponsored housing enterprises (GSE's) (the Federal Home Loan Bank is the third), reported in its second quarter refinance survey that 67% of sampled refinance loans it purchased included at least 5% cash-out.

FM Watch, the coalition of banks and mortgage companies that attempt to keep the GSE's on a level playing field in terms of cost of funds, previously criticized the GSE's for home equity lending. Gerald L. Friedman, chairman of the group, noted at a previous subprime conference that it was not congress's intention for Fannie or Freddie to purchase loans used to finance personal and household goods -- such as cash-out loans.

The Wall Street Journal (WSJ) has been a regular critic of the mortgage giant recently, saying that Fannie is exposed to too much interest-rate risk. A recent announcement from the mortgage giant, indicating that its duration gap -- a measure of how well its interest-rate risk is hedged -- widened to 14 months compared to its target range of about six months, was recently cited by WSJ as further evidence of excessive exposure.

Fannie's decision affects a significant portion of the total mortgage industry. The company reported that business volume -- which is the mortgages it purchased for portfolio plus mortgage-backed security issues acquired by other investors -- was $159.8 billion during the second quarter of this year. On an annualized basis, this equates to $639.2 billion -- a pretty big chunk of the total $2.18 trillion U.S. production currently estimated by the Mortgage Bankers Association of America for the industry this year.

Sam Garcia has been in mortgage lending since 1980, and is publisher of MortgageDaily.com. He also owns and operates CloseNow.com, a real estate portal site.

email: [email protected]

SUBSCRIBERS: Edit Subscription | Subscription Help | or call 214.521.1300

Subscribe Contact Us Site Map

Copyright © 2017 Mortgage Daily, D a l l a s
Subsribers Only:

AMC directory

ARM indexes

mortgage company directory

mortgage regulations

net branch directory

p r i c i n g engine directory

wholesale lender directory

More Mortgage News Resources (full site map):

advertising news

appraisal news

bank news

biggest lenders

commercial mortgage news

corporate mortgage news

credit news

FHA news

financial regulation news

foreclosure news

GSE news

jumbo mortgage news

interest rates

loan modification news

loan originator survey

LOS Newsletter


mortgage associations

mortgage-backed securities

mortgage books

mortgage brokers

mortgage compliance

mortgage conferences

mortgage directories

mortgage education

mortgage employment

mortgage employment index

mortgage executives

mortgage fraud

mortgage fraud blog

mortgage fraud local news

Mortgage Fraud Index

Mortgage Graveyard

mortgage insurance news

mortgage lawsuits

mortgage leads

mortgage lender ranking

mortgage licenses

mortgage litigation

Mortgage Litigation Index

Mortgage Market Index

mortgage mergers

mortgage news

mortgage politics

mortgage press releases

mortgage production

mortgage public relations

mortgage rates

mortgage servicing

mortgage statistics

mortgage technology

mortgage video

mortgage Webinars

net branch

net branch directory

nonprime news

origination news

originator tools

real estate news

refinance news

reverse mortgage news

secondary marketing

social media

servicing news

subprime news

wholesale lenders