FHFA expands mortgage refinance opportunities for low- and medium-income families
The FHFA announced that more borrowers will now qualify for its low-income mortgage refinance program backed by Fannie Mae and Freddie Mac. (Kelsey Ramirez / FOX)
The Federal Housing Finance Agency (FHFA) announced Monday the expansion of Fannie Mae and Freddie Mac’s refinance programs for low- and moderate-income borrowers. These changes are set to increase affordability for homeowners and homebuyers in the U.S., with a focus on underserved communities.
The programs, RefiNow and Refi Possible, allow low- and moderate-income borrowers with home loans backed by Fannie and Freddie. Now, after receiving feedback on the effectiveness of the programs, the FHFA announced it will expand these programs and who is eligible for them.
"By taking advantage of lower interest rates, borrowers can reduce the share of their income they have to use for housing costs," FHFA Acting Director Sandra Thompson said at the MBA Annual conference in San Diego. "This should be a significant priority since we are seeing low-income borrowers paying rates that are 30% higher than other borrowers."
If you want to see if you qualify for the new refinance program under its expanded qualifications, visit Credible to compare lenders and get prequalified. With a lower rate, many homeowners can potentially reduce their monthly mortgage payments.
Program changes to expand refinance opportunities
The new changes enable more homeowners to qualify for a refinance through expanding the loan eligibility options. The FHFA said it will make changes that will allow more lenders to offer the low-income refinance option for homeowners’ principal residence.
It also changed the income requirements for a low-income refinance. The new income threshold level will be raised from those whose current income is less than 80% of the area median income (AMI) to those that make less than 100% AMI, the FHFA said.
"Expanding eligibility for low- and moderate-income families to refinance their mortgage and lower their monthly payments, together with leveraging desktop appraisals to reduce inefficiencies in the mortgage process, are meaningful steps towards overcoming barriers to affordable and sustainable homeownership," Thompson said. "Today’s actions demonstrate that FHFA will continue to act purposefully and in dialogue with its stakeholders to minimize market disruption and ensure its regulated entities operate in a safe and sound manner."
If you are interested in saving on your monthly payment through refinancing your mortgage loan amid today’s low interest rates, visit Credible to compare multiple lenders at once and find the one with the best mortgage rate for you.
Expanding access to sustainable credit
Thompson spoke about expanding access to credit, which means creating programs or loosening regulations that will allow lenders to extend home loans to borrowers with a less-than-perfect credit score or non-traditional credit profiles. This could include self-employed borrowers, the credit invisible or those who have never used credit but have also never been late on a payment.
However, Thompson emphasized that while it is important to expand credit access, it must be done in a safe and sustainable way.
"Certainly, placing a borrower in a loan they are not able to repay is irresponsible," she said. "When I say broad access to credit, as a lifelong regulator, I mean broad access to sustainable credit."
The FHFA’s refinance option is estimated to save borrowers $100 to $250 on their monthly mortgage payments. It also pays for the appraisal cost if needed, saving homeowners an estimated $500 in closing costs.
"We have a duty to identify and overcome barriers to sustainable homeownership and affordable housing, and all of our policies are built on those twin pillars of sustainability and affordability," Thompson said.
If you are interested in seeing if you qualify for a mortgage refinance, contact Credible to speak to a home loan expert and get all of your questions answered.
Have a finance-related question, but don't know who to ask? Email The Credible Money Expert at moneyexpert@credible.com and your question might be answered by Credible in our Money Expert column.