The Mortgage Broker's Guide to RefiNow™
Thanks to the launch of Fannie Mae's® new RefiNow™ refinance option, a considerable number of low-income borrowers who previously didn't qualify to refinance their mortgages during the Refi Boom of 2020 can now get into the mix for lower interest rates and reduced monthly payments.
According to the FHFA, that number surpasses 2 million families!
That creates a lot of opportunity for independent mortgage brokers to grow their business and help more families achieve financially healthy, happy homeownership. Right off the bat, it's a great reason for brokers to reach out to their current Fannie Mae borrowers, as well as extend their outreach efforts throughout their respective communities.
To best use the RefiNow program to grow your business, it's important that you understand what goes into it. In a recent Elevate LIVE event, Homepoint Senior Managing Director of Strategic Partnerships, Lesley Alli, provided mortgage brokers a deep dive into the RefiNow program as it is offered through Homepoint. (You can watch the full event replay right here.)
Five key benefits of RefiNow
- Requires a reduction in the borrower's interest rate of at least 50 basis points and a reduction in their monthly mortgage payment of at least $50.
- Loans at or below $300,000 will receive a waiver of the 50-basis point adverse market fee.
- For transactions that require a standard full appraisal, the borrower will receive a $500 credit at closing to help defray the costs.
- Up to $5,000 in closing costs, prepaid items, or points can be included in the total refinance amount.
- Borrowers can keep their remaining loan term—off year loan terms are allowed.
RefiNow is available for conforming loans with Approve/Eligible RefiNow-specific findings. The borrower's current loan must be owned by Fannie Mae to be eligible for RefiNow.
One key flexibility of the program is that there is additional opportunity for borrowers who have DTIs up to 65%. That is a significant difference between the standard conventional or affordable loan program.
RefiNow eligibility key points:
- The borrower(s) income must be <=80% of the area median income (AMI)
- Conforming loans with Approve/Eligible RefiNow DU findings
- Limited Cash-out Refinance of performing Fannie Mae loan seasoned between 12 and 120 months (no more than $250 back at closing)
- Must be the same borrowers refinancing
- Maximum $5,000 of financed closing costs, prepaids, and points
- One-unit, single family, primary residences, including condos, PUDs, townhomes, and manufactured homes
- 65% maximum DTI
- LTV up to 97% and a minimum 620 FICO score (minimum 660 FICO score for manufactured homes)
- Standard eligibility and qualification requirements for appraisal, MI, etc. apply
Top 6 Questions that Mortgage Brokers are Asking about RefiNow
1. How does RefiNow compare to other refinance products in the market, and how can you determine what would work best for borrowers?
RefiNow is another available option in your conventional product waterfall. It is designed to support low-income borrowers who previously didn't qualify to refinance their mortgages during the Refi Boom by providing reduced cost and additional qualification flexibilities.
RefiNow has similar features to existing affordable lending programs like HomeReady and Home Possible. For borrowers with credit scores less than 680 or if they have a credit score of over 680 but their LTV is over 90%, HomeReady may still be a better option given the program's pricing caps and reduced mortgage insurance requirements. So brokers should consider the borrowers' needs before choosing which program to recommend.
2. What type of questions should brokers be asking borrowers to determine if they are a fit?
If you have a borrower that appears to qualify for the program, be sure to confirm that they meet the specific requirements—they don't want cash back; they would benefit specifically from some of the cost savings; the loan is owned by Fannie Mae; their income is at or below 80% of the AMI.
Note, the 2021 AMI limits were just updated on June 5th. So, even if you were familiar with the requirement in your area, you will still want to check. If you have a full 1003, DU will determine all of the eligibility for you.
3. What are some ways that brokers can market this program?
First, brokers should revisit any Fannie Mae borrower that you may not have been able to help recently due to DTI restrictions. That increase in DTI is going to open up a lot of opportunity.
Brokers can also look at existing Fannie Mae borrowers to see if they may be able to remove mortgage insurance. Given the significant recent home price appreciation and because the borrower would get a $500 credit towards the cost of the appraisal, this really could be a great opportunity to improve the monthly payment of a borrower by eliminating that mortgage insurance payment altogether.
Brokers should also look back through their conforming pipelines from over a year ago and see if there might be borrowers there that would be at least 50 basis points better in rate today.
4. Did Homepoint make any new enhancements to the program?
Yes, Homepoint chose to make this product as flexible as possible, including not adding additional overlays and allowing off-year loan terms so the borrower can keep their same loan term.
This means if a borrower has 27 years left on their current loan, they don't need to have a new 30-year loan taken out as part of this refinance transaction. They can have a new RefiNow 27-year loan.
5. How does the borrower receive the $500 appraisal fee credit?
The credit comes from Fannie Mae to Homepoint and from Homepoint to the borrower. The borrower will have to provide the appraisal fee upfront, then they'll receive the credit at closing, and it will be on the closing disclosure.
6. If I determine that HomeReady would be a better fit for my borrower, how do ensure that I receive the correct DU findings?
DU's default waterfall will assess a borrower for the RefiNow program first and if they qualify DU will provide that approval and findings. If you decide that HomeReady is a better option, you will need to tell DU to ignore the RefiNow program by entering the words "Standard LCOR" in the Product Description field in lender section 3 of DU. This will bypass the RefiNow program findings and assess the borrower for other conventional programs like HomeReady.
Watch the full replay of this special RefiNow Elevate Live event.
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