Announcing Availability of LTV Ratios Up to 125% for All Relief Refinance MortgagesJuly 1, 2009 Single-Family Advisory Message
Today the Federal Housing Finance Agency and the U.S. Department of Housing and Urban Development announced availability of LTV ratios up to 125 percent for all Home Affordable Refinance offerings. This expanded eligibility will apply to both the Same Servicer and Open Access options under the Freddie Mac Relief Refinance MortgageSM, our business implementation of the Home Affordable Refinance.
With this expansion of Relief Refinance Mortgages, you will be able to help more borrowers take advantage of refinancing into a more affordable and stable mortgage, particularly borrowers located in communities hardest hit by declining home values where access to affordable refinancing options remains a barrier.
When discussing refinancing options with borrowers at the higher LTV ratios previewed today, we urge you to review the benefits of refinancing into a 25-year fixed-rate mortgage instead of a 30-year fixed-rate mortgage. While this shorter term may result in the same or a slightly higher payment, borrowers will pay less interest over the life of the loan and improve, over time, their equity position.
To incent borrowers to consider this shorter amortization term, we will lower the Relief Refinance Mortgage delivery fee cap by 50 basis points to 150 basis points for qualified borrowers who refinance from a 30-year fixed-rate mortgage into a 25-year fixed-rate mortgage. We encourage you to pass on the savings to borrowers.
Preview of Additional Updates to Relief Refinance Mortgages
We are also previewing updates to Guide Exhibit 19, Postsettlement Delivery Fees, and our delivery requirements for all Relief Refinance Mortgages with LTV ratios greater than 105 percent and up to and including 125 percent.
As indicated below, we are updating the Mortgages With High LTV Ratios delivery fee grid to add a new 200 basis point delivery fee for mortgages with LTV ratios greater than 105 percent:
MORTGAGES WITH HIGH LTV RATIOS Effective for settlements on or after October 1, 2009 |
|||
|---|---|---|---|
Product |
LTV Ratios |
||
>95% & < 97% |
> 97% & < 105 % |
>105 % |
|
All Eligible Product |
0.50% |
1.00% |
2.00% |
Relief Refinance Mortgages at these higher LTV ratios must be sold through the selling system and are available for sale under the following executions:
- Fixed-Rate Cash
- Fixed-Rate Guarantor
- WAC ARM Cash
- WAC ARM Guarantor
Please note that we will require Relief Refinance Mortgages with LTV ratios greater than 105 percent to be pooled separately in PC pools comprised entirely of Relief Refinance Mortgages with LTV ratios greater than 105 percent. We do not anticipate these PC pools will be eligible for sale in the TBA market.
Effective Dates
The following effective dates apply to Relief Refinance Mortgages with LTV ratios greater than 105 percent and up to and including 125 percent:
- For Relief Refinance Mortgages – Same Servicer, you may begin accepting applications immediately, effective for Freddie Mac settlements on or after October 1, 2009.
- For Relief Refinance Mortgages – Open Access, you may begin accepting applications for submission to Loan Prospector® on or after October 1, 2009, effective for Freddie Mac settlements on or after October 1, 2009.
Relief Refinance Mortgages with LTV ratios greater than 105 percent and up to and including 125 percent must meet all eligibility and underwriting requirements in Guide Chapters A24 and B24 as applicable.
We are providing you with this information today so you can begin to prepare for these upcoming changes. We will be announcing detailed pooling and delivery requirements for Relief Refinance Mortgages with these higher LTV ratios in an upcoming Guide Bulletin.