Fannie Mae recently introduced a refinance program, called Keys to Recovery that will help borrowers struggling to keep their homes, assist more prospective buyers purchase homes and contribute to stabilizing communities hit hard by the downturn in the mortgage market.

Starting June 1 of this year, Fannie Mae will accept up to 97 percent loan-to-value (LTV) ratios for conventional, conforming mortgages processed through its Desktop Underwriter (DU) automated underwriting system, and 95 percent LTV ratios for loans underwritten outside of DU, in all geographic locations in the United States. The new national down payment policy will replace the policy the company adopted in December 2007, which required higher down payments in markets where home prices are declining. THIS IS HUGE! The new changes will equalize the down payment requirements for borrowers in all parts of the country, regardless of local market conditions.

The new national down payment requirements of 3 or 5 percent will apply to loans for the purchase of single-family, primary residences. Down payment requirements will vary for other occupancy, property and transaction types. The company will implement systems and operational changes over the summer to accommodate the new national policy.

Other initiatives of Key to Recovery include:
o A new refinancing option for Fannie Mae “underwater” borrowers will allow for refinancing up to 120 percent of a property’s current value.
o A renewal and expansion of the company’s partnership with the State Housing Finance Agencies (HFAs) will provide $10 billion in financing for qualified, first-time home buyers.
o In partnership with Self-Help Credit Union, a new initiative will allow families in hard-hit communities to reside in foreclosed properties on a rent-to-own basis.
o Pricing for new jumbo-conforming loans will be flat to conforming for portfolio asset acquisition through the end of the year.

Availability and lender requirements:
o This is not one of Fannie Mae’s Guide products but will be available on a contractual (variance) basis.
o Whole loan execution will be begin August 1, 2008; the availability date for a mortgage-backed security execution is still to be determined.

The loan is not available and here just yet. The lender needs to be a servicer of the Fannie Mae loan, however, correspondent lenders may have this option as well. In the interim, talk to your lender to find out more. Stay tuned — more is to come!

Larry Bettag, Vice President, Cherry Creek Mortgage