Okay, here’s the latest on what I know and what I don’t on the 105% refi plan. I’m going to attempt to summarize a 10 page document, so I’m only going to hit the “highlights” of it:
The things that I know about the plan:
- The loan to value is indeed max’d out at 105% but with a second mortgage, it can go higher than that (frankly unlimited) if the second mortgage holder will agree to it and if the second mortgage was already in place. You can’t put a new second mortgage in place right now.
- There are three “levels” of potential appraisals: What Freddie Mac calls the “Home Value Explorer.” or a new appraisal or the existing appraisal. There’s some verbiage in the Freddie Mac docs about certifications that the lender has to make about the existing appraisal, so I don’t know what that involves yet.
- The borrower’s mortgage payment history can have no 30 day late payments in the last 12 months.
- The only loan that can be paid off is the existing first mortgage plus up to $2500 toward closing costs and escrows.
- The new mortgage has to be done with the same servicer as the existing mortgage. So, unfortunately for borrowers, you can’t shop around on this type of loan. Update on 3/9/2009 – per my conversation with Rhonda Porter, it appears that Freddie is saying they have to use the same servicer, but if the loan is currently owned by Fannie, then they can use anyone who sells to Fannie. I was just on a conference call (internal) that said we expect to have more details from Fannie by week’s end.
- There are some “kind of” confusing guidelines about mortgage insurance and my initial read of it says that there might be some questions on mortgage insurance. If there was mortgage insurance, it sounds like there would need to be mortgage insurance again, but we don’t know that the mortgage insurance companies will “reissue” the insurance.
- Primary residence loans that were sold to Fannie Mae or Freddie Mac are eligible. There are other restrictions too.
The things that I don’t know (about the plan):
- The documents I read call for a “Market Condition Delivery Fee” but I don’t know how much that will be and what impact that will have on the interest rate.
- It appears that we don’t know exactly what underwriting criteria will be used besides for at least a 620 credit score and 12 month positive payment history on the mortgage (if the loan is less than 12 months old, then it had to have been 0 x 30 days the whole life of the loan.
If you have questions about it and your loan is with Fifth Third Bank, call me at (616) 292-7559. I’ll post more about the program as I know more.
Thanks!
Tom Vanderwell
P.S. This information is compiled from Freddie Mac Bulletin 2009-5
James Boyer says:
Scary, Will you be writting lots of these in the near future??
March 4, 2009 — 9:20 pm
Tom Vanderwell says:
James,
I don’t know. Ask me again in a few weeks.
Tom
March 5, 2009 — 5:38 am
John Kalinowski says:
Tom- I don’t understand this part of the plan: “The borrower’s mortgage payment history can have no 30 day late payments in the last 12 months.”
Why do these people need “foreclosure protection”? If you’ve had no late payments in the last 12 months, why are you in danger of foreclosure?
March 5, 2009 — 6:24 pm
Cheryl Johnson says:
John, I swear, I am convinced that there are high-ranking government officials, as well as media talking-heads, who absolutely do not understand that there is a connection between “foreclosure” and “not-making-monthly-payments-when-due”.
They sometimes speak as if “foreclosure” were some kind of aggressive virus, striking down unsuspecting victims without any warning.
March 5, 2009 — 7:22 pm
John Kalinowski says:
Cheryl, Isn’t foreclosure Latin for “victim”? Let’s ask Greg…
March 5, 2009 — 8:26 pm
Rhonda Porter says:
Tom, with Fannie Mae, the consumer is not stuck with their current mortgage servicer:
DU Refi Plus™
DU Refi Plus is a refinance of an existing Fannie Mae loan by any lender using Desktop Underwriter® (DU®) for underwriting; the lender does not have to be the current servicer of the mortgage loan.
March 9, 2009 — 8:11 am
Tom Vanderwell says:
Rhonda,
That’s interesting. “My bank” is predominantly a Freddie bank and we’re hearing that it’s a manual underwrite, not using LP or DU and it has to be done through the same servicer (meaning I can’t do one that’s with Wells right now).
I find it interesting that Fannie and Freddie are apparently coming from different angles on how to get this done……
Tom
March 9, 2009 — 8:20 am
Rhonda Porter says:
Tom, I’m hearing that Freddie currently has that position…but Fannie is clear on their guidelines for DU Refi Plus. A majority of my business has been Fannie AND Fannie Mae has a much larger marketshare than Freddie Mac… so hopefully this will mean more opportunities for all mortgage originators.
https://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2009/0904.pdf
Your BANK would take that position. And it will be curious to see how many banks will try to cut out wholesale and only offer this to their retail division.
I’m sure mortgage brokers and correspondents will take serious note of the banks who take this type of action.
March 9, 2009 — 8:28 am
Tom Vanderwell says:
“I’m hearing that Freddie currently has that position…but Fannie is clear on their guidelines for DU Refi Plus. A majority of my business has been Fannie AND Fannie Mae has a much larger marketshare than Freddie Mac… so hopefully this will mean more opportunities for all mortgage originators”
Post has been updated to reflect that. That’s exactly why I called it what I know and what I don’t know. Learn something every day…..
In reviewing the link that you provided, here’s what else I’ve learned:
Fannie has two types of refi options through this program. One can be done by anyone, the other one needs to be done through the existing servicer. It appears to me that the biggest difference is the need to run DU (through anyone) vs. the need to only verify mortgage payment history.
Fannie appears to look at the entire credit profile (no matter which program someone goes on while Freddie just looks at the last 12 month payment history on the mortgage.
On the conference call that I had about this this morning, they said, “This is not a normal refi program, this is a risk reduction program.” Right or wrong, it’s all about making it easier to keep the loan from going bad…….
Thanks for the discussion!
Tom
March 9, 2009 — 10:02 am
Rhonda Porter says:
Tom, it will be interesting to see which banks will allow brokers and correspondent lenders have the piece of refi business they’re allowed to originate with this program “DU Refi Plus”.
If banks with wholesale departments elect to only allow their retail division to handle this and exclude outside originators from DU Refi Plus, I don’t know how they can ever step foot in a mortgage brokers office again…even if it’s not a significant amount of business. It’s a loud and clear statement…in fact, if I were a wholesale rep employed by a bank that is hoarding DU Refi Plus, I’d be extra concern about the future of my position of the company (they’re probably getting ready to dump wholesale).
Consumers should have the option of selecting their mortgage professional and not be forced back to the servicer/bank who they are currently making their mortgage payments to. I am encouraging consumers to check with their preferred mortgage originator first. They can help determine if the mortgage is Freddie (in which case they’re stuck w/the servicer) or Fannie. And a that point, see if they qualify for Refi DU Plus which gives the home owner the freedom to work with who they choose.
March 9, 2009 — 10:48 am