Freddie Mac and Fannie Mae have released
guidance to their lenders on changes to their loan products occasioned by the
expansion and extension of the Home Affordable Refinance Program better known
as HARP2.0. The changes apply to Freddy
Mac's Open Access Relief Refinance Mortgages, both Same Servicer and Open
Access versions and to Fannie Mae's Refi PlusTM and DU Refi PlusTM loans. The
changes will be effective for loan applications dated on or after December 1
however the effective dates relative to Note dates and GSE settlement dates
vary for some of the changes as noted in the actual guidance.
The changes discussed below are
from the information issued by the GSEs and apply to loans with LTV both
greater and less than 80 percent. The
changes outlined below are those articulated by Freddie Mac but they generally
apply to Fannie Mae loans as well and where differences exist they are
summarized below. Affected parties should review the relevant documents (http://www.freddiemac.com/sell/guide/bulletins/pdf/bll1122.pdf
for Freddie and https://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2011/sel1112.pdf
for Fannie) in their entirety for complete descriptions of the changes in
requirements and applicable dates. The changes include but are not
limited to removing the maximum LTV ratio of 125 percent for fixed rate
mortgages (FRM) sold under fixed-rate Cash and fixed-rate Guarantor (the 105
percent maximum LTV for adjustable rate mortgages (ARM) will not be affected)
and extending the expiration date for the program to December 31, 2013.
Sellers who are using the
requirements currently in effect may continue to sell to Freddie Mac if the
mortgage application date is prior to December 1 2011, the Note date is on or
before January 31, 2012, and the settlement date with Freddie Mac is on or
before April 30, 2012. These settlement
dates vary slightly for Fannie Mae.
The following revisions will be
effective for mortgages with settlement dates on or after January 3, 2012. The key change is the elimination of the
requirement that the Seller represent and warrant that the mortgage being
refinanced met certain Freddie Mac eligibility requirements in its Purchase
Documents. Other changes include:
a Borrower benefit provision allowing the Relief Refinance Mortgage to be
originated for the purpose of reducing the monthly payment. In the case of Fannie Mae the benefit may
also be the extension of the loan term.
at least one Borrower have a source of income and that the Seller verify it.
the use of either the appraisal or Automated Valuation Model (AVM) from the
the determination of property value based on a new AVM to Home Value Explorers;
a single 30-day delinquency within the previous 12 months on the mortgage being
refinanced but not within the previous 6 months.
the requirement that the occupancy or the old and new mortgage be the same.
the age requirement for the HVE model estimate from no more than 180 days on
the settlement date to no more than 120 days on the Note date.
requirements where the new mortgage increases the P&I payment by more than
20 percent. These requirements are
spelled out by Fannie Mae to include a minimum credit score of 620, maximum DTI
ratio of 45 percent and verification of income sources and necessary assets to
close (if needed.) In the event there is
more than one product option available the borrower must be qualified using the
one with the lowest payment to determine if the 20 percent rule applies.
specific requirements regarding solicitation, advertising, and other
communication with borrowers.
Section 46.26 of the Guide has
also been updated to reflect changes to Freddie Mac's post funding quality
control review of mortgages.
Effective for mortgages with
settlement dates on or after March 15, 2012 an HVE can be used to determine the
property value of certain two-unit properties as well as one-unit properties.
Fannie Mae has spelled out
addition LTV criteria for HARP2.0 eligibility.
The maximum LTV is eliminated for both 30-year and 15-year FRM. Loans with amortization terms greater than 30
years through 40 years will be limited to an LTV of 105 percent as will ARMS
with initial fixed period or five years or more and terms of 40 years or less. Fannie Mae also removes the requirement that
the borrower on the new loan meet the standard waiting period and
re-establishment of credit criteria following bankruptcy or foreclosure.
fee caps are being adjusted for mortgages with settlement dates on or after
January 3, 2012. The fee for all mortgages with an LTV less than 80 percent and
for Investment Properties remains unchanged at 200 basis points. The delivery fee mortgages with LTV rations
greater than 80 percent has been reduced to:
0 basis points for Non-Investment Property
fixed-rate loans with 20 years or less amortization;
75 basis points for non-Investment Property fixed
rate mortgages with amortization greater than 20 years;
75 basis points for non-Investment Property
mortgages that are ARMs.