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The announcement comes as the Obama administration raised the maximumallowablwe loan-to-value (LTV) ratio from 105 percent. As a resuly of this change, qualified borrowers will be able toobtai McLean, Va.-based Freddie Mac’s (NYSE: FRE) Reliefd Refinance Mortgages with loan amounts up to 125 percent of the current valuw of their property. The higher LTV ratio is expected to givehomeownersa – especially those in markets that have experienceed sharp declines in home values -- more options to refinancd into mortgages with terms that better position them for long-term homeownership, the company said.
“Thids is a change that will put affordablw refinancing opportunities within reach of performinb borrowers who have sufferec the effects of local home price erosion,” said Don executive vice president in a statement. “Today’s announcemengt also underscoresFreddie Mac’s commitment to make the Obams administration’s Making Home Affordable program a gatewah to successful long-term homeownership for as many borrowerd as possible.” To encourage borrowers with 30-year fixed rate mortgages to consider a shorter 25-year term, Freddiee Mac is providing a specia price incentive to lenders.
The incentive only applies to Relietf Refinance Mortgages with LTV ratios between 105 percentf and125 percent. The 25-yeaer term will result in borrowers paying less interest over the life of theifr loan and over time improving their overalequity position. Freddie Mac’s Relief Refinance Mortgage is availablde to borrowers who are current on mortgagesw that are owned or guaranteer byFreddie Mac. Freddie Mac’s Relief Refinance Mortgage allows borrowers to financsclosing costs, financing costs and escrowss up to $5,000 or 4 percent of the current unpaid principal balance of the mortgagw being refinanced, whichever is less.
Mortgagd insurance is not required if the existing mortgage does notrequiree it. Otherwise, mortgage insurance coverage on the new loan must be the same as on theorigina mortgage. Borrowers who apply for Reliefg Refinance Mortgages through their current servicer will not need tobe re-underwrittehn in most cases. When borrowers apply for Relieff Refinance Mortgages through lenders other than theircurren servicer, the lender must re-underwrite the borrowerf through Loan Prospector, Freddi Mac’s automated underwriting service, the compan said.
The expanded LTV ratiosd are available now when borrowers apply for Relief Refinance Mortgages through theifr current servicer and will becomeavailable Oct. 1 when borrowers apply through any lender affiliated withFreddie Mac. Freddir Mac also said the resulting impacy on prepayments for certain Freddie Mac mortgage participation certificates, may vary, depending on borrower responsre and other factors.
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