Introduction of the RefiNow Option
Today, Fannie Mae released Lender Letter 2021-10, Introduction of the RefiNow Option, communicating to its single-family sellers information about this new refinance option.
In coordination with Freddie Mac and under the guidance of the Federal Housing Finance Agency (FHFA), Fannie Mae is introducing the RefiNow™ limited cash out refinance option that offers expanded eligibility to benefit borrowers at or below 80% of the area median income (AMI) limit and help more borrowers take advantage of the current low interest rate environment.
Fannie Mae will begin purchasing RefiNow whole loans and loans in MBS on or after June 5, 2021.
RefiNow benefits include:
- A minimum of a 50-basis point reduction in the borrower’s interest rate and a savings of at least $50 in the borrower’s monthly mortgage payment, inclusive of principal, interest, and mortgage insurance (if applicable) when refinancing at available market rates
- A $500 credit provided to the lender, to be passed on to the borrower, at the time the loan is purchased if an appraisal was obtained for the transaction
Eligibility requirements include, but are not limited to:
- The borrower(s) current income to qualify for the new loan must be less than or equal to 80% of the applicable AMI limit for the subject property's location
- The debt-to-income (DTI) ratio must be less than or equal to 65%
- For the loan being refinanced, the borrower cannot have had any 30-day mortgage delinquencies in the most recent six-month period and no more than one 30-day delinquency in months 7 through 12
- The loan being refinanced must be a conventional mortgage loan owned or securitized by Fannie Mae and must be seasoned at least 12 months, but no more than 10 years from the original loan note date to the new loan note date
- The new loan must be a fixed-rate loan secured by a one-unit principal residence
- Standard Fannie Mae Selling Guide parameters such as a maximum loan-to-value (LTV) ratio per the Eligibility Matrix and minimum FICO score of 620 apply
- Standard loan-level price adjustments apply; however, the Adverse Market Refinance Fee will be waived for loan amounts up to $300K (today, loans are exempt from the fee if they are HomeReady® or have an original principal amount of less than $125k)
- RefiNow is intended to be a flexibility eligible to homeowners for one-time use
Further details are available in Lender Letter 2021-10.
For credit risk transfer (CRT) transactions, these loans will be treated as refinances and as a result the current loan will be removed from the CRT reference pool once the refinance takes place.
RefiNow loans will be TBA-eligible. Fannie Mae aims to identify these loans through our Data Dynamics® platform and/or standard MBS disclosures in the future and will communicate updates regarding enhancements on a later date.
In FHFA's press release, FHFA stated that 2 million low-income borrowers did not take advantage of the record low mortgage rates by refinancing. We are providing analysis that attempts to estimate the size of the potentially eligible loan population, based on various note rates and other assumptions (click here for analysis). These assumptions result in a range of outcomes that do not readily align with the 2 million number. Data provided in this analysis is an estimate of loans currently in Fannie Mae MBS pools as of March 31, 2021 that may be potentially eligible for RefiNow based on various assumption as outlined in document.
For questions, please contact the Fannie Mae Investor Help Line at 1-800-232-6643, Option 3 or by e-mail.