FHFA Announces Expanded Refinance Eligibility and Desktop Appraisals
Written By: Joel Palmer, Op-Ed Writer
The Federal Housing Finance Agency (FHFA) is expanding eligibility for its refinance programs and incorporating desktop appraisals into the GSE Selling Guides.
The agency made the announcement last week, promoting the measures as a way to advance two of its goals under the Biden administration: making housing more affordable and home ownership more sustainable.
“Expanding eligibility for low- and moderate-income families to refinance their mortgage and lower their monthly payments, together with leveraging desktop appraisals to reduce inefficiencies in the mortgage process, are meaningful steps towards overcoming barriers to affordable and sustainable homeownership," said FHFA Acting Director Sandra L. Thompson.
FHFA said that over the coming months, Fannie Mae and Freddie Mac will expand certain eligibility requirements for their RefiNow and Refi Possible refinance programs aimed at assisting low-income borrowers. The programs are currently limited to borrowers with income at or below 80 percent of area median income. The new threshold will be 100 percent.
“Through our monitoring of the effects of the pandemic on different borrowers, we identified a concerning trend: while many borrowers have taken advantage of the opportunity provided by the past year's low interest rates to refinance their mortgage, segments of the population are at risk of being left behind. We know through our long experience, including the Great Recession, that for those struggling with a mortgage, a meaningful payment reduction is the single greatest predictor of successful performance,” said Thompson during a speech to last week’s Mortgage Bankers Association Annual Convention and Expo.
“However, during this historic refi boom, we found that there was actually a drop in the share of refinance loans made to borrowers below 100 percent of AMI. These borrowers risk being left on the sidelines during a generational opportunity to lock in more sustainable monthly payments. And these are often the very people who could most benefit from adding breathing room to their budget.”
FHFA also announced that both enterprises will incorporate desktop appraisals into their Selling Guides in early 2022. The use of desktop appraisals was one of several temporary flexibilities initiated last year in response to the COVID-19 pandemic. FHFA said a review of data collected from the use of loan flexibilities as well as public comments on appraisal-related policies, contributed to the decision to make desktop appraisals permanent.
About the Author
As an NAMP® Opinion Editorial Contributor, Joel Palmer is a freelance writer who spent 10 years as a business and financial reporter and another 10 years in marketing for the insurance and financial services industries. He regularly writes about the mortgage industry, as well as residential and commercial real estate, investments, and retirement income planning. He has also ghostwritten books on starting a business, marketing, and retirement income planning.
