Refinance Option Available To Low-Income Borrowers

The Federal Housing Finance Agency announced a new refinance option that will provide low-income borrowers with reduced interest rates and lower monthly payments.

The new option is available to borrowers with Freddie Mac and Fannie Mae backed loans. It includes:

  • A requirement that the lender provides a savings of at least $50 in the borrower’s monthly mortgage payment, and at least a 50-basis point reduction in the borrower’s interest rate.
  • A maximum $500 credit from the lender for an appraisal if the borrower is not eligible for an appraisal waiver (the Enterprises will provide the lender a credit of $500 upon the loan’​s sale to an Enterprise).
  • A waiver of the 50 basis point up-front adverse market refinance fee for borrowers with loan balances at or below $300,000.

Borrowers will be eligible beginning this summer if they meet the following conditions:

  • They must have a one-unit single-family mortgage that is owner-occupied.
  • They must have an income at or below 80 percent of the area median income.
  • They have not missed a payment in the past six months, and no more than one missed payment in the past year.
  • They do not have a mortgage with a loan-to-value ratio greater than 97 percent, a debt-to-income ratio above 65 percent, or a FICO score lower than 620.

“Last year saw a spike in refinances, but more than 2 million low-income families did not take advantage of the record low mortgage rates by refinancing,” Director Mark Calabria said. “This new refinance option is designed to help eligible borrowers who have not already refinanced save between $1,200 and $3,000 a year on their mortgage payment.”