Fannie Mae’s Refi Plus™

Finally, a bail-out for people who actually pay their bills.

As the mortgage meltdown unfolded, most of us wondered why the only people or entities that were getting bailed-out were those that seemed to have caused the problem in the first place–those who weren’t paying their bills on time. Well, that has finally changed. At the request of President Obama, Fannie Mae developed a refinance product that allows homeowners whose mortgages are current to take advantage of historically-low interest rates, even if they may not qualify under traditional lending guidelines due to the recent drop in home values. We will give a little background information, and then explain who might benefit from and who qualifies for this product.

A little Bit of Background

There are two companies that make all the rules for conforming loans: Fannie Mae and Freddie Mac. Those two companies were created by the government to provide an outlet to whom banks and mortgage companies could sell their loans. Whether you know it, your conventional conforming loan is most likely owned or backed by one of these two companies.

Both Fannie Mae and Freddie Mac have developed their own, distinct response to President Obama’s request to help good-credit homeowners refinance their mortgage. Fannie Mae’s approach is far more wide-reaching than Freddie Mac’s. Fannie Mae’s product allows borrowers to shop for the most competitively-priced loan among thousands of lenders. Freddie Mac requires their borrowers to refinance with their existing lender. For that reason, we are critical of Freddie Mac’s approach. Those whose loans are owned by Freddie Mac and are interested in this product have NO opportunity to shop for the best rate with multiple lenders. Box Home Loans only offers the Fannie Mae product.

The Meat and Potatoes

So who actually benefits and who qualifies for the Fannie Mae’s program? We can summarize it this way: if the value of your home is a concern or an obstacle to a potential refinance, then this program could be of great value to you. If your home value is of no or little concern, then your options are wide-open, and you can qualify for a regular refinance.

The product benefits those. . .

• whose new loan amount will be no greater than 105% of their home’s value. Historically, you could only refinance with a conforming loan if your loan was no greater than 95% of your home’s value.
• who currently do not have private mortgage insurance. This is the big one! With this product, if you do not currently pay mortgage insurance, you will not have mortgage insurance on your new loan!* Many homeowner’s have not refinanced because their home value has dropped, and any new loan would come with mortgage insurance. That is not the case with this product. If you walk in the door with no mortgage insurance, you will walk out the door with no mortgage insurance!
• who currently have mortgage insurance, but would have to qualify for greater mortgage insurance coverage because their home value has dropped.
• who want to save money. Believe it or not, these types of loans can sometimes be less expensive, as we sometimes don’t even need an appraisal of your property.

To qualify, you must . . .

• have good credit (Fannie Mae doesn’t require a minimum credit score, but Box Home Loans still requires a minimum 700 credit score)
• have a conforming loan that is currently owned or backed by Fannie Mae (see below). If your current loan is FHA, Rural Housing, VA, or a non-conforming loan of any kind, you do not qualify for this program. However, please contact us regardless of what type of loan you currently have, as you may still qualify for a traditional refinance, where the existing loan type is irrelevant.
• have your new loan that is less than 105% LTV.
• refinance only your existing mortgage and closing costs. You cannot take cash out or pay off any second mortgages with this loan.
• have acquired your current loan before March 1, 2009.

What You Need to Do

Find out if your loan is owned by Fannie Mae. How do you know if your loan is owned or backed by Fannie Mae? You can contact us and we’ll look it up for you, or you can utilize Fannie Mae’s Loan Look-Up Tool online (http://loanlookup.fanniemae.com/loanlookup/ )The Look-Up tool allows you to see instantly if your loan is backed or owned by Fannie Mae. We highly recommend that before you look up your loan on Fannie Mae’s website that you grab a copy of your mortgage statement so that you can enter the address exactly as it appears on your statement. If Fannie Mae recognizes your address and if they own your loan, they will tell you have they have found a “match.” This match does not imply that you qualify for this mortgage refinance, but it does tell you that you have taken the first step toward qualifying–you have a Fannie Mortgage.

Contact us to learn if you are eligible for this product. Once you verify that Fannie Mae owns your mortgage, apply online or over the phone. Once we have your application, we will pre-approve your loan to discover if you are eligible for this product or whether you are eligible for a traditional refinance. On a traditional refinance, we can typically pre-approve on our first phone call. However, with this refinance we have to do a little more “homework” up-front to learn if you are eligible for the refinance. This typically takes us 24 hours or less.

Lock Your Rate. Once you are pre-approved for the product, we can lock your rate either online** or over the phone.

FAQ

• Does this program cost more money? No. We offer the same rates and fees that you see on our Rates and Fees Pages. If anything, the closing cost may be less on certain loans. Sometimes, Fannie Mae doesn’t require an appraisal.
• Can I Take Cash Out? No. This loan can only be used to pay off your existing first mortgage, and closing costs.
• Can I finance my closing costs? Yes. All costs, points, and pre-paid times (taxes, insurance, interest) can be financed.
• What if I have a second mortgage? You cannot finance a second mortgage into your new loan, and you cannot acquire a new second mortgage simultaneously with this new loan. Please note that because of the increasing resistance of second mortgage lenders to subordinate, Box Home Loans will not do a loan that requires the subordination of an existing second mortgage. However, Fannie Mae will allow you to subordinate a second mortgage, and we would be happy to refer you to a lender who does allow this feature.
• If I don’t have mortgage insurance now, will I need it on my new loan if I don’t have 20% equity in my home? No. If your loan is currently backed by Fannie Mae, you will not need mortgage insurance on your new loan.
• What if I am currently paying mortgage insurance based on a loan-to-value of 85% when I got my last loan, but now my loan-to-value is 95%? Will I have to pay a higher mortgage insurance premium? If you learn the answer to this question, please let us know!. In theory, Fannie Mae states the mortgage insurance coverage is supposed to be the same on your new loan as it was on your old loan. However, the mortgage insurance companies have not yet fully weighed in on this issue, and thus it still an unknown. We expect this particular issue to be resolved soon. For now, we are pre-approving clients in this situation, and getting them ready to pull the trigger as soon as the mortgage insurance companies and Fannie Mae clarify how this is going to work. We expect to know by the middle of May, 2009. The only borrowers that will be immediately eligible for this product are those who currently have NO mortgage insurance.

 

* Some restrictions apply. If your loan-to-value (LTV) exceeded 80% the last time you financed your home, but your lender offered you “lender-paid” mortgage insurance, you will be required to pay mortgage insurance now if your new loan exceeds 80% LTV.

** Until future upgrades to our website unfold, to lock your rate online, you must have created your application online. Loan applications taken over the phone must be locked with one of our representatives over the phone.