The Fannie Mae refinance plus program

Fannie Mae Refi Plus (also known as Fannie Mae Refinance Plus and FNMA Refi Plus) is the HARP or Home Affordable Refinance Program offered through Fannie Mae, or the Federal National Mortgage Association.

Purpose Of The Fannie Mae Refinance Program

The FNMA Refi Plus program was created as a way to help stimulate the housing economy by making it easier for lenders to refinance loans already in their portfolio. One way the Fannie Mae Refi Plus Program does this is by allowing homeowners to refinance, even if the value of their home now is less than the amount they still owe on their existing mortgage. Through the program, lenders with Fannie Mae backed mortgages will now be allowed to consider making refinance loans for homes with a loan to value ratio (LTV) of up to 125%. That means the home could be a full 1/4 less valuable than the amount owed on the loan and still be eligible for a FNMA Refi Plus loan.

Besides the first benefits already stated above, the ability to refinance a mortgage higher than the current value of the home, there are a couple of other key benefits to FNMA Refi Plus as well. A Fannie Mae Refi Plus loan may have a lower monthly interest and principal payment than their existing mortgage and/or it may get a homeowner out of a riskier (i.e. subprime) mortgage in favor of a more stable, fixed rate refinance mortgage. All Fannie Mae Refi Plus rates are fixed rates.

Other benefits are that applicants do not need perfect credit, and may not even need a home appraisal done to qualify (with a PIW or Property Inspection Waiver). The lenders who make Fannie Mae Refi Plus loans also benefit from the transaction by reducing their risk of default on the loan.

Qualifying For The Fannie Mae Refi Plus Program

The biggest (or at least first) qualification for the Fannie Mae Refi Plus Program is that your existing mortgage already be in the Fannie Mae portfolio.

As part of the secondary mortgage market, Fannie Mae buys up existing loans in the primary mortgage market. Fannie Mae then becomes your new de facto lender. That means it is possible you could be eligible to get a Fannie Mae Refi Plus loan even if your existing mortgage loan wasn’t originally made with Fannie Mae. If Fannie Mae purchased your mortgage from your lender, then you may qualify for the Fannie Mae Refinance Plus Program. The Fannie Mae website has a free online look-up tool you can use to determine whether or not Fannie Mae does currently hold your loan or not.

Fannie Mae Mortgage Refinance Rules & Guidelines

Fannie Mae Mortgage Refinance Rules: Recent Changes, But Much Remains the Same
The Federal National Mortgage Association, more commonly known as Fannie Mae, is a government-sponsored enterprise that helps to finance mortgages in what is known as the secondary mortgage market. Rather than making loans directly to individuals, Fannie Mae makes funds available to the banks and lending institutions; these financial institutions then, in turn, provide mortgages and refinance arrangements to consumers. Because Fannie Mae plays such a large role in the mortgage market, the mortgage refinance rules established by Fannie Mae affect a significant number of loans throughout the country.

Fannie Mae refinance mortgage program & guidelines

One of the newest Fannie Mae mortgage refinance options is the Home Affordable Refinance Program, or HARP. First unveiled in 2009, HARP relaxes certain Fannie Mae mortgage refinancing rules in order to allow distressed homeowners the opportunity to refinance their current mortgage and relieve their financial difficulties. According to Fannie Mae officials, the HARP initiative is intended to allow struggling homeowners to refinance Fannie Mae mortgage loans even in cases where the loan-to-value ratio exceeds 80 percent, and to loosen mortgage refinancing rules to allow 125% loan-to-value refinances with approved mortgage insurance arrangements.

Major changes and recent updates

Starting in early 2009, Fannie Mae mortgage refinance rules were relaxed to allow individuals with bad or no credit history a better chance to refinance their existing mortgages. Fannie Mae funds about 40 percent of the mortgages currently in existence in the United States; thus, changes in the Fannie Mae refinance mortgage program impact a large number of mortgages and typically prompt other lending institutions and mortgage holders to follow suit as well. The loosening of the purse strings at Fannie Mae was intended to encourage more lending throughout the country. However, certain aspects of the HARP plan and other refinancing rules have allowed banks to deny refinance or modification applications even when Fannie Mae mortgage refinance rules would have allowed them.

Some things will stay the same

Only employed individuals will be eligible for these new Fannie Mae mortgage refinance arrangements; for self employed refinance mortgage loans, individuals will typically have to apply to private lenders and follow their mortgage refinance rules. Additionally, Fannie Mae mortgage refinance rules prohibit refinances by individuals who are not current on their mortgage payments or who have had serious delinquencies on their mortgage payments over the preceding twelve months. This limits the number of potential refinance candidates significantly and may be a factor in the relatively small number of mortgage holders who have taken advantage of this plan.

Overall, the Fannie Mae mortgage rules are expected to remain largely unchanged. Certain financial and eligibility accommodations have been made to allow more homeowners to refinance their Fannie Mae mortgage to a new, lower rate. For the majority, however, the changes to mortgage refinance rules are expected to have little or no effect on the long-term cost of the mortgage loan.

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