Mortgage Rules Eased

Refinancing with Cash Out to Pay Off Student Loans

Formerly paying off debt, including Edu loans or Equity Lines of Credit, etc. via refinancing your home and using some of your equity was considered a “cash out” transaction and depending on the amount of remaining equity and credit score, increased your interest rate and/or your costs of the loan.  Recently Fannie Mae issued a bulletin that they would no longer consider paying off a “student loan” a “cash out” transaction.  This is huge.  I am not holding my breath on Equity Lines of Credit receiving the same treatment, but at least the fox guarding the student loan hen house has provided some respite.  If you have a client or family member buried in student loans, please call me right away to discuss.  Like many rule changes, they have a tendency to change the other direction as soon as the markets change again.

Fannie Mae and ‘Debts Paid by Others’ 

Numerous headaches have occurred as a result of having to qualify borrowers with obligations for which they don’t actually pay (someone else makes the payment), due to the borrower having a ‘contingent liability’.

In these instances, and in order to omit the co-signed debt, 12 months of cancelled checks or bank statements had to be provided by the person who was making the payment – and the person making the payment had to be the primary obligor on the account.

For example: When a Parent gets a car loan for their daughter or son, they had to qualify with that payment even though the daughter or son was making the payment satisfactorily (because the child was not an actual obligor for the debt).

Recently Fannie Mae eased the requirement for these situations, allowing certain debts paid by others to be omitted – even when the person making the payment is NOT obligated on the debt!

No Condo Reviews for Some Condos

If you have a condo and also a Fannie Mae loan on it, and wish to refinance, by using another Fannie Mae loan product, and not taking any cash out, you may be able to get a waiver on the “condo review or certification”.  This is very substantial if there is litigation/lawsuits in the complex, or a higher delinquency in Homeowner’s dues than are allowed, or an investor with more than a certain per cent of units owned in the complex, etc. No Review or Cert!  In the past this could have hindered a homeowner from refinancing to a lower rate or a shorter term.  Now, you may just be able to do that!

Spread the word!

NEW Non-Warrantable Condo Products

Condos that do NOT meet the normal guidelines due to litigation, delinquent HOA dues, etc. have had a fixed rate product, at just slightly higher than market rate, up to conforming loan limits. But now we have some high balance and Jumbo products available for those situations as well.  J

All the best,