Fannie Mae Streamline Refinance Program – General Update

In response to all the inquiries I have received over the pending Fannie Mae Streamline Refinance program, here is a general update.

Fannie Mae has set guidelines that at this point seem to differ significantly from what the actual investors are considering moving forward.   These investors are the major banks and secondary market purchasers of everyone™s mortgage debt.   They are the end of the line when it comes to what makes prudent financial sense in the real world.   (Those with the gold make the rules.)   Regardless of what our politicians want, bankers like myself will have to abide by the rules set by these gold-holding investors, and so do you.   I can tell you that they will probably have an answer for us before the end of April, as they have indicated they will begin purchasing these loans in May.  

1. The major issue is loan-to-value.   Fannie Mae would like to see 105% financing, the investors want to stay below 95%.

2. Only Fannie Mae compatible loans, where the borrowers are absolutely current on their payments will be considered a bona fide candidate for this program.

3. Mortgage Insurance on your current loan is likely to continue as-is, regardless of your home™s current value.   If you do not have mortgage insurance now, chances are you will not need it on the refinance.

4. No cash-out or limited cash-out will likely be the standard.

5. Credit reports will be pulled and the minimum score requirement has not been set.

6. Some investors will limit the number of properties OWNED to a maximum of 4.

7. If you have a second mortgage, you will not be allowed to create a new second loan, or  the loan officer  will be required to have the current second loan resubordinated, maintaining a first position with the new loan (this could be problematic for the bank holding your second note).

8. The Rate/Risk factor has not been finalized.

© 2009 Michael S. Amers

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