BluefoxToday blog : New mortgage guidelines coming into focus

New mortgage guidelines coming into focus

On the heels of the latest stimulus package, or whatever it was called this time, Fannie Mae and Freddie Mac have provided the home loan industry more details about their new requirements. Some of the guidelines are actually more borrower-friendly than what was initially believed. Eligible homeowners must have a mortgage that is either held by these agencies in their portfolio or is part of a mortgage bond guaranteed by them. The crucial element is that homeowners seeking to refinance through them have to have a solid payment record, for instance no lates during the last 12 months. 

Among the more flexible aspects is how the credit score, or FICO score, is handled. For a majority of applicants Fannie Mae and Freddie Mac will put aside the usually strict cutoff points, allowing more leeway to get people approved.

They will not require private mortgage insurance, or PMI, on new refinances where the equity is less than 20%. That is very helpful in many hard-hit areas because insurance firms have generally pulled out of them, making refinancing impossible. 

For homeowners with an existing second mortgage, the news is also encouraging. There is no limit how large it can be, but it has to remain on a secondary status behind the first mortgage.

Fannie Mae lets the homeowner shop any of its approved lenders and get the refi done that way. Freddie Mac is different. It requires the use of the current home loan bank or loan servicer. To find out if either one of these two owns or guarantees a particular mortgage, the loan servicer would have that information.

Also, second homes and investment properties from one to four will be eligible now. Previously they were excluded, much to small-time investors' dismay. They have to be presently in Fannie Mae or Freddie Mac portfolio and payments must be current.

These are the program highlights. They are going to be helpful in keeping more at-risk borrowers in their homes. The one rule that was not loosened up was the loan-to-value, or LTV, ratio. It remains at 105% maximum, or the loan balance cannot go over more than 5% of the property's value. That will leave out a lot of homeowners in severely-depressed states like Arizona, California, Florida and Nevada from being eligible to refinance. The prices in them have plunged out of range for many and will probably put these states on a slower road to recovery. 



Provided by: 

Esko Kiuru
Mortgage, real estate and apartment industry analyst - syndicated mortgage, housing and property management blog
My cell: 702-499-1006

Comment balloon 10 commentsEsko Kiuru • March 17 2009 12:12AM


Esko:  I think the requirement that the refi homeowners seeing to refinance through Fannie or Freddie must have have their current mortgage held by these agencies in their portfolio, or as part of a mortgage bond program guaranteed by them... is a great idea.

This requires them to concentrate on their OWN borrowers... to help make those loans even stronger by refinancing their loans to lower their payments... thus making them less of a risk.  Thanks so much for sharing.

Posted by Karen Anne Stone, Fort Worth Real Estate (New Home Hunters of Fort Worth and Tarrant County) over 11 years ago


Thanks for the update.


Posted by William J. Archambault, Jr. (The Real Estate Investment Institute ) over 11 years ago

Good update on the second/home investor side.  Looks like the money availability side of things is making some progress.  The more loosening of requirements/liquidity that can be generated towards lending the more back to normal things can get!  All the best, Tim

Posted by Tim Walsh, Your Trusted Lifetime Real Estate Advisor (RE/MAX Premier) over 11 years ago

As usual, the government giveth and the government taketh away. 

These so called "mortgage modification guidelines" are deliberately designed to exclude, not include. 

They are meant to give the GSEs some statistics and anecdotes for public relations purposes, not make a dent in the millions of American home owners who are losing their homes, their credit and their family place in society.

IMO, these guidelines and similar ones are designed by bitter government functionaries who hate the country and wish to see as many American families in foreclosure as possible to justify their Socialist belief that home owners are a privileged class that must be destroyed. 


Posted by Lenn Harley, Real Estate Broker - Virginia & Maryland (Lenn Harley,, MD & VA Homes and Real Estate) over 11 years ago

Esko, it was my understanding that PMI would still be required on loans with an LTV that was greater than 80%, but that it would stay the same coverage factor of the existing loan even if the risk level was higher, and not that PMI would be eliminated

Posted by George Souto, Your Connecticut Mortgage Expert (George Souto NMLS #65149 FHA, CHFA, VA Mortgages) over 11 years ago


Staying within the Fannie and Freddie families the refinances ought to go smoother.  

Posted by Esko Kiuru over 11 years ago


Any time. Thanks for stopping by.

Posted by Esko Kiuru over 11 years ago


This should help increase demand, which is what we need now.

Posted by Esko Kiuru over 11 years ago


That's an interesting point you are making about the whole thing.

Posted by Esko Kiuru over 11 years ago


There could be some PMI details that are a little hard to interpret at this point.

Posted by Esko Kiuru over 11 years ago