New Freddie Mac Refinancing Guidelines

Freddie Macnreleased new guidelines this week with revised rules regarding mortgage refinance and underwriting requirements.

The announcement said Freddie Mac will make certain changes for refinance Mortgages, beginning with mortgages with settlement dates on or after May 1, 2011.

According to the new guidelines, Freddie Mac will require verification of funds for all refinance mortgages. And because of its commitment to responsible lending, Freddie Mac says it will eliminate Freddie Mac-owned streamlined refinance mortgages.

Currently, streamlined refinance mortgages allow servicers to offer loan-to-value (LTV) ratios up to 95 percent and the ability to roll in all closing costs, financing costs and prepaids/escrows in to the refinance mortgage.

For added flexibility sellers can also provide cash back to the borrower up to 2 percent of the refinance mortgage amount or $2,000, whichever is less. Freddie Mac will no longer purchase such mortgages after the beginning of May.

The agency will also require that a purchase money mortgage be seasoned for 120 days in order to be refinanced as a “no cash-out” refinance mortgage.

Additionally, Freddie Mac released updated guidelines for sellers. According to the release, since the agency is eliminating Freddie-Mac owned streamlined refinances, they are also discontinuing the special characteristic codes associated with that refinance option.

Freddie Mac also has updated requirements for the refinance of mortgages secured by properties subject to Property Assessed Clean Energy (PACE) obligations. PACE homes have solar panels on the roofs and reduce energy costs for the homeowners.

Deborah Bremner
The Bremner Group at Coldwell Banker
REALTOR, 00588885,
(O) 310-571-1364 DIRECT
(D) (310) 800-2954

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