New Refi Program Could Help Lower-Income Owners

WASHINGTON – Fannie Mae will launch RefiNow on June 5 – a refinance program that could help lower-income homeowners save hundreds of dollars a month on their mortgage payments.

The program aims to help about 2 million homeowners lower the interest rates on their mortgages, with eligible owners saving about $100 to $250 per month, according to the Federal Housing Finance Agency, Fannie Mae’s regulator.

Among the eligibility requirements, homeowners must earn 80% or less of their area’s median income to apply. Borrowers also must have a Fannie Mae–backed mortgage (use the loan lookup tool to find out). They must be current on their mortgage and not missed a payment in the past six months. The mortgage also can’t have a loan-to-value ratio above 97%, and their FICO credit scores must be at least 620.

“Lower-income borrowers typically refinance at a slower pace than higher-income borrowers, potentially missing an opportunity to save on housing costs,” says Malloy Evans, senior vice president and single-family chief credit risk officer at Fannie Mae. “Fannie Mae’s new RefiNow option will help homeowners refinance by removing some of those barriers, improving affordability and promoting sustainable homeownership.”

Under the program, participating lenders must reduce eligible borrowers’ interest rate by at least one-half of a percentage point. It could be higher, however. Lenders must also waive the adverse market refinance fee for borrowers whose loan balance is no more than $300,000 and provide a credit of up to $500 if the borrower is ineligible for an appraisal waiver.

Lenders aren’t required to participate in RefiNow, however.

The other major loan holder in the U.S., Freddie Mac, saying it will start to offer its own refinance program later this summer.

Source: Fannie Mae and “Fannie Mae’s Refinance Program for Lower-Income Homeowners Starts Next Week. Here’s What to Know,” CNBC (May 27, 2021)

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