The much-anticipated guideline updates to the federal refinance initiative have been released by the Federal National Mortgage Association and the Federal Home Loan Mortgage Corp.
Last month, the Federal Housing Finance Agency announced enhancements to the Home Affordable Refinance Program. Changes to the program, which was launched in March 2009 as part of the Homeowner Affordability and Stability Plan, included the elimination of a maximum loan-to-value ratio and the waiver of representations and warranties.
In Selling Guide Announcement SEL-2011-12, Fannie Mae said that the extension to the program means that the note date must be on or before Dec. 31, 2013, and whole-loan purchases must occur by April 30, 2014. Mortgages placed in mortgage-backed securities pools must be done so by April 1, 2014.
The program becomes effective on loans with application dates on or after Dec. 1.
In addition to the elimination of maximum LTVs on both 15- and 30-year mortgages, there are no limits on the maximum CLTV or HCLTV. Fixed-rate mortgages with amortizations up to 40 years will be limited to 105 percent LTVs as will ARMs with initial fixed periods greater than or equal to five years and terms up to 40 years.
As previously spelled out by FHFA, no 30-day lates are allowed during the past six months, and one 30-day late is allowed during the past year.
Borrowers who have a payment increase in excess of 20 percent will be limited to a maximum debt-to-income ratio of 45 percent and a minimum 620 credit score. Asset verification will be required if cash is needed at closing.
Fannie said it is removing the requirements for standard waiting periods and credit re-establishment for borrowers with a bankruptcy or foreclosure. Also being eliminated are loan level price adjustments and adverse market deliver charges on loans with terms that don’t exceed 20 years. For loan with terms greater than 20 years, the combined LLPAs and AMDC is being reduced to 0.75 percent.
Fannie noted that its Desktop Underwriter will be updated in March 2012 with the new guidelines.
“Until such time as DU is updated, DU loan casefiles that receive an ineligible recommendation due to an LTV ratio above 125 percent will not be eligible for delivery,” the bulletin stated.
The Washington, D.C.-based company also announced enhancements to its Refi Plus and DU Refi Plus mortgage loans with LTVs higher than 80 percent.
Lenders that opt to reach out to borrowers are required to include specific language about HARP enhancements and how to determine whether the borrowers’ loans are owned by Fannie or Freddie Mac.
Freddie outlined changes to its HARP guidelines in Bulletin Number 2011-22. The bulletin also outlined changes to its Freddie Mac Relief Refinance Mortgage — Same Servicer and Relief Refinance Mortgage — Open Access offerings.
Related:
LTV, Appraisal and Reps/Warranty Requirements Removed from HARP
Requirements for loan-to-value limits, mandatory appraisals and representations and warranties have been removed from the Home Affordable Refinance Program.
