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.
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.