This week, Fannie Mae published a new frequently asked questions (FAQ) document related to RefiNow, the refinancing product announced by the Federal Housing Finance Agency (FHFA) in 2021 that targets low-income borrowers with single-family mortgages backed by the government-sponsored enterprises (GSEs).
Fannie Mae explains in the document that RefiNow products are not limited to the same servicer as the original loan and notes the differences between RefiNow and HomeReady, the low down payment mortgage. Fannie Mae also created a separate document that compares the features and requirements of RefiNow and HomeReady.
“At a high level, RefiNow would likely be a better refinance option for borrowers with higher DTIs and income up to 100% of the applicable area median income (AMI) limit who have limited funds to pay for upfront appraisal costs,” the document states.
The document also notes that lenders can use a credit report to determine a borrower’s payment history, but “lenders must continue to conduct the additional due diligence necessary to confirm the borrower is current as of the note date.”
Other issues addressed in the document include the transference of mortgage insurance, age requirements for borrowers, using base pay income to qualify for RefiNow, and the applicability of area median income limits for multiple borrowers on a RefiNow transaction.
It also details how a desktop underwriter (DU) assesses the risk associated with a RefiNow transaction, explaining that “DU does not conduct a comprehensive examination of primary and contributory risk factors on the transaction.”
Rather, a DU assesses a RefiNow loan by determining that the loan being refinanced meets the payment history requirements based on a review of the credit report, and that the borrowers comply with applicable waiting periods following “derogatory credit events.”
The FHFA announced the development of RefiNow in April 2021, and lenders offering RefiNow must ensure that the borrower saves at least $50 a month in their mortgage payments while simultaneously dropping their interest rate by at least 50 basis points.