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The announcement comes as the Obama administration raised the maximumallowablew loan-to-value (LTV) ratio from 105 As a result of this change, qualified borrowers will be able to obtainh McLean, Va.-based Freddie Mac’s (NYSE: FRE) Relieff Refinance Mortgages with loan amounts up to 125 perceng of the current value of theid property. The higher LTV ratio is expectec to givehomeowners – especialluy those in markets that have experienced shar declines in home values -- more options to refinance into mortgagesa with terms that bette r position them for long-termk homeownership, the company said.
“This is a change that will put affordablde refinancing opportunities within reach of performiny borrowers who have suffered the effectsd of local homeprice erosion,” said Don Bisenius, executive vice presidentg in a statement. “Today’s announcement also underscoresFreddiew Mac’s commitment to make the Obamq administration’s Making Home Affordable program a gatewau to successful long-term homeownership for as many borroweras as possible.” To encourage borrowerzs with 30-year fixed rate mortgages to consider a shorter 25-yeard term, Freddie Mac is providing a special pricwe incentive to lenders.
The incentive only applies to Relief Refinancw Mortgages with LTV ratio between 105 percent and125 percent. The 25-year term will result in borrowers paying less interest over the life of their loan and over time improving their overallequitu position. Freddie Mac’s Relief Refinance Mortgage is available to borrowers who are current on mortgagee that are owned or guaranteedc byFreddie Mac. Freddie Mac’s Relief Refinanc e Mortgage allows borrowers to financeclosinbg costs, financing costs and escrows up to $5,000 or 4 percenrt of the current unpaid principak balance of the mortgage being refinanced, whichever is less.
Mortgage insurance is not required if the existingy mortgage does notrequire it. Otherwise, mortgagew insurance coverage on the new loan must be the same as on the original mortgage. Borrowers who applty for Relief Refinance Mortgages through their current servicer will not need tobe re-underwrittemn in most cases. When borrowers apply for Relief Refinancw Mortgages through lenders other than their current the lendermust re-underwrite the borrowedr through Loan Prospector, Freddiwe Mac’s automated underwriting service, the company said.
The expandex LTV ratios are available now when borroweres apply for Relief Refinancew Mortgages through their current servicer and will becomavailable Oct. 1 when borrowers apply througg any lender affiliated withFreddie Mac. Freddie Mac also said the resultinh impact on prepayments for certain Freddie Mac mortgageparticipation certificates, may depending on borrower responses and other factors.
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