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Fannie Mae Limits Cash-out Refi's

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liznindy

Senior Member
Joined
Jan 15, 2002
Professional Status
Certified Residential Appraiser
State
Indiana
Interesting article (by James M. Woodard, Copley News Services) in the Real Estate section of last Sunday's paper...."Clearly, refinance mortgages are an important part of the mortgage finance process," it was stated in a Fannie Mae report, "Consumers not only are refinancing more often, but are often electing to cash out some of their equity as well. Indeed, the relative share of refinance business that involves cash-out funds has grown, as has the amount of equity that consumers are taking out. Over the years, research indicates that some policy and pricing changes are warranted to assure that we adequately address the risks associated with this type of business.''

The article goes on to say, "Therefore, beginning in February, Fannie Mae will only accept cash-out mortgage loans that include the following:

It will only pay off the oustanding principal balance of an existing first mortgage.

It can also pay off the principal balance oa any subordinate mortgage that was used in whole to acquire the property.

It can finance the closing costs (including prepaid expenses) and provide cash back to the borrower in an amount no more than the lesser of 2 percent of the balance of the new refinance mortgage or $2000.

"These changes align our eligibility requirements more closely with the risk profile of the particular mortgage transaction", the Fannie Mae report noted. "Lenders are cautioned that appraisals in such transactions should be scrutinized with particular care to ensure that the value conclusions are solidly supported by appropriate comparables."



Am I reading this article correctly? I am amazed that Fannie Mae is evidently not going to refi homes in which the borrower is wanting to get some equity from their home and is limiting the loan amounts to payoff (+$2000)....what about the person who has paid the mortgage down over 10-15 years and now wants the equity for other purposes??!!

I guess this is Fannie Mae's response to inflated appraisals and somehow I don't blame them. I am just surprised that they are limiting their market.

I am going to have to find the Fannie Mae report quoted in the article.
 
Joined
Jan 13, 2002
Professional Status
Retired Appraiser
State
Florida
Refi biz will drop off drastically now. Much safer for all involved, but appraisal biz will also drop off drastically.

I believe the lenders are holding back on putting the foreclosures on the market also. Many are doing 'short sales' and the investor clubs are pushing hard teaching how to contact lenders to do these. They won't need appraisals either.

Hmmmm..... :?:
 

Bill_FL

Senior Member
Joined
Aug 23, 2002
Professional Status
Certified General Appraiser
State
Florida
The tool used for taking equity out is usually an equity line. These are not Fannie sold loans, rather stay in house as a second. I do not think you will find much of a difference. Banks rarely did large cash out firsts.
 

George W Dodd

Senior Member
Joined
Jul 9, 2002
Professional Status
Certified Residential Appraiser
State
Virginia
I'm in agreement with Bill. The easy way around this is to take an equity line (2nd or 3rd) and then refinance the two which would be inline with Fannie's guidelines.
 

Willie

Senior Member
Joined
May 30, 2002
Professional Status
Certified General Appraiser
State
Tennessee
Pamela, I hope you are wrong. But don't doubt it. I guess we will know in a couple of months who is right. I do hope it is those that don't think it will matter much.
 

Restrain

Elite Member
Joined
Jan 22, 2002
Professional Status
Certified General Appraiser
State
Florida
If Fannie won't do these, Freddie will. Nothing will change and that's the bottom line.
 

liznindy

Senior Member
Joined
Jan 15, 2002
Professional Status
Certified Residential Appraiser
State
Indiana
George,

If I am interpreting their new guidelines correctly, Fannie Mae will not do a refinance to pay off equity lines ....Any second mortgage or such which can be refinanced must have been utilized in the purchase of the home initially. (Reread guidelines, my comment is clear as mud :? )
 

Karl

Elite Member
Joined
Jan 15, 2002
Professional Status
Licensed Appraiser
State
Arizona
When it has to do with government how can your interpatation be any clearer than mud Due to the fact that what they say is what they mean as long as what they mean is what they say. Attend any government forum ask a question & see if the answer doesn't come back in a perfect circle. They aLWAYS answer your question U just have no idea what the answer has to do with the question. I am sure they already have another ruling to superseed the ruling so that everything is the way it was or needs to be for a certain situation.
 
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