The maximum loan-to-value on conforming mortgages originated under the Home Affordable Refinance Program has increased 20 percent. In addition, borrowers are being given incentives to pay their loans down faster.
Fannie Mae’s and Freddie Mac’s regulator, the Federal Housing Finance Agency, issued a statement today indicating that the maximum HARP LTV was bumped to 125 percent. Previously, the LTV was capped at 105 percent.
A news release from Fannie indicated that loans refinanced under the program will be eligible for delivery after Sept. 1. The loans need to be run through its Refi Plus manual underwriting option. In addition, only existing servicers can process loans with LTVs above 105 percent.
Freddie issued a press release indicating the expanded LTVs will become available on Oct. 1 — though it is a little more flexible about what company processes the loan.
The program was originally launched in March and is part of the Homeowner Affordability and Stability Plan unveiled in February.
“The higher LTV refinancings will allow more homeowners to strengthen their finances by taking advantage of lower mortgage rates,” FHFA Director James Lockhart said in the statement. “The enterprises are also incenting these borrowers to combine a lower mortgage rate with a faster amortization schedule, which will enable them to get ‘above water’ on their mortgages more quickly.”
FHFA encouraged borrowers to cut their negative equity more quickly by taking advantage of rates that are around 0.125 percent better by choosing a 25- or 20-year amortization instead of a 30-year amortization. Fannie said it will offer a 50 basis point loan-level price adjustment for loans with LTVs above 105 percent and terms of either 20 or 25 years, while Freddie said it is providing a special price incentive for 25-year terms.
Freddie indicated that borrowers can finance the lower of $5,000 or 4 percent in closing costs, financing costs and prepaids and escrows. Borrowers who use their current servicer might not need to be underwritten again.
Fannie’s President and Chief Executive Officer Michael J. Williams said many borrowers had been shut out from refinancing because of significant declines in property values.
“By broadening the scope of the initiative, more borrowers will experience savings on their monthly mortgage payments and have a better chance of sustaining homeownership over the long term,” Williams stated.
Shaun Donovan, secretary of the U.S. Department of Housing and Urban Development, said in an announcement that the expanded LTV “will make a critical difference.” He made the announcement from Nevada with two of the state’s prominent Democrats: U.S. Senate Majority Leader Harry Reid and U.S. Rep. Dina Titus.
