By Jody Shenn
Friday, February 6, 2009
Fannie Mae will loosen rules for homeowners seeking to lower their mortgage payments by refinancing.
The District company, which accounts for more than 40 percent of the $12 trillion in U.S. residential mortgage debt, is seeking to break a "logjam" in refinancing and allow more homeowners to take advantage of near-record low interest rates, according to Brian Faith, a spokesman for Fannie Mae, which like its rival, Freddie Mac, is under government control.
The increased flexibility for borrowers isn't enough to significantly harm mortgage-bond investors and mortgage insurers, analysts said.
"This is not yet the no-appraisal refi wave that many have feared," Matt Jozoff and Brian Ye, mortgage-bond analysts at J.P. Morgan Chase, wrote in note to clients yesterday.
Fannie Mae will drop some credit-score requirements, reduce income-documentation standards and waive the need for appraisals in some cases, according to a notice to lenders it distributed this week. The changes apply to loans that the company owns or guarantees.
Fannie Mae will probably use automated models to check home values listed on applications before offering to waive appraisals, analysts said.
The changes will also include allowing borrowers seeking to take out a loan that is 80 percent of the value of the home or less to qualify for refinancing with credit scores below its 580 minimum.
FICO credit scores as measured by Fair Isaac Corp. range from 300 to 850. The program also will lower income-documentation requirements to one current pay stub.
The program, DU Refi Plus, will start April 4.