Why Haven’t Loan Officers Been Told These Facts?
FNMA RefiNow: Expanding refinance eligibility for qualifying homeowners
RefiNow: Expanding refinance eligibility for qualifying homeowners
Don’t miss out on enhanced underwriting for low-moderate-income households.
The refinance market is tough to predict. However, preparations to capitalize on rate improvements are in your control. It is essential to understand refinancing enhancements before the rates drop. For example, FNMA and FHLMC offer price improvements for many different refinance transactions, such as FNMA’s RefiNow and FHLMC’s Refi Possible®.
Your ability to identify developing markets early in the rate trend may be foundational to your transaction volume.
Take a look at the FNMA RefiNow program below.
Borrower Requirements
- The borrower(s) income must be less than or equal to 100% of the applicable AMI limit for the subject property’s location.
- In determining whether a loan is eligible under the borrower income limits, the lender must consider the income from all borrowers who will sign the note,to the extent that the income is considered in evaluating creditworthiness for the new loan.
- The lender must use the same methodology in determining income eligibility for a RefiNow loan as they use in reporting “Monthly Income” in Loan Delivery.
- No minimum credit score is required.
- No 30-day mortgage delinquencies in the most recent 6-month period.
- No more than one 30-day delinquency in months 7 through 12.
- The DTI ratio must be less than or equal to 65%.
- Non-occupant borrowers are permitted.
Existing Loan Requirements
- Be a conventional mortgage loan owned or securitized by Fannie Mae.
- Be seasoned at least 12 months (from the original note date to new loan note date).
- Not be subject to recourse, repurchase agreement, indemnification, outstanding repurchase demand, or credit enhancement (unless the new loan is also subject to the credit enhancement or it is no longer required).
- Not be an existing high LTV refinance loan, DU Refi PlusTM loan, or Refi PlusTM loan.
- The new loan must be secured by a one-unit principal residence.
RefiNow Loan Transaction Requirements
- Be a fixed-rate loan.
- Have maximum LTV, CLTV, and HCLTV ratios as permitted in the Eligibility Matrix.
- Be a limited cash out refinance with cash out less than or equal to $250. Excess proceeds may be applied as a curtailment on the new loan.
- Have a loan limit that conforms to the general loan limits (high-balance loans are not permitted).
- Have identical borrowers on the new loan as the existing loan. New borrowers cannot be added or removed. One or more borrowers may only be removed:
- If the remaining borrower(s) meets the payment history requirements and provides evidence that they have made at least the last 12 months of payments from their own funds.
- Death of a borrower (Evidence of the deceased borrower’s death must be documented in the loan file).
- Note: Non-occupant borrowers are permitted.
Not be a Texas Section 50(a)(6) loan.
Not be subject to a temporary interest rate buydown.
Note: A RefiNow loan may not be combined with a HomeReady® refinance transaction.
FNMA RefiNow FAQs
Question: How will a lender or borrower know if the existing loan is a Fannie Mae loan?
Answer: A lender or borrower can determine whether a mortgage is owned by Fannie Mae by visiting www.knowyouroptions.com/loanlookup and using our Fannie Mae Mortgage Loan Lookup tool. Additionally, DU will issue specific messages when a loan casefile is eligible for RefiNow.
Question: Is a RefiNow refinance different than a HomeReady refinance?
Answer: At a high level, RefiNow would likely be a better refinance option for borrowers with higher DTIs and income up to 100% of the applicable area median income (AMI) limit who have limited funds to pay for upfront appraisal costs. A detailed comparison between HomeReady and RefiNow can be found here on the Fannie Mae website.
Question: Can I use the DU validation service to assess the borrower’s income, assets and/or employment for a RefiNow loan?
Answer: Yes, RefiNow casefiles are eligible for income, asset and/or employment validation through the DU validation service, provided all existing DU validation service requirements in Selling Guide B3-2-02, DU Validation Service are met.
Question: If there are multiple borrowers, is the 100% AMI requirement on a per borrower basis or based on the income across all borrowers on the loan?
Answer: For purposes of determining eligibility, the lender must include the income from all borrowers who will sign the note, to the extent that the income is considered in evaluating creditworthiness for the loan. For example, if there are two borrowers on the loan application, the lender will use the combined total qualifying income amount to determine
whether the 100% AMI limit has been met.
Question: Will the lender receive the full $500 credit even if the cost of the appraisal is less than $500? When will it be reimbursed?
Answer: Fannie Mae will provide a $500 credit to the lender for RefiNow loans when an appraisal was obtained, regardless of the exact cost of the appraisal. The $500 must be passed to the borrower in full. Whole loans will receive the $500 credit immediately upon sale to Fannie Mae, while loans delivered into an MBS pool will receive the credit as part of a monthly settlement of proceeds.
Question: Will DU automatically underwrite all loans under the RefiNow parameters? If so, how do I choose a different product?
Answer: All loans submitted to DU will first be assessed under the RefiNow eligibility guidelines, and DU will provide messaging when a loan has been underwritten as RefiNow. An additional message will be issued when the loan is potentially eligible for HomeReady based on the qualifying income being at or below 80% AMI for the property’s location. If the lender wants DU to underwrite the loan as a HomeReady refinance, the lender must resubmit the loan as a HomeReady loan. If the lender wants DU to underwrite the loan as a standard limited cash-out refinance, the lender must enter “Standard LCOR” in the Product Description field and resubmit the loan casefile to DU.
Question: Can RefiNow be combined with HomeReady?
Answer: No, RefiNow is a standalone offering and may not be combined with HomeReady. A summary comparison of HomeReady and RefiNow can be found here.
BEHIND THE SCENES – CFPB Sues Vanderbilt Mortgage for Setting Borrowers Up to Fail in Manufactured Home Loans
CFPB Claims Berkshire Hathaway-owned company pushes people into unaffordable loans to purchase Clayton Homes
WASHINGTON, D.C. – Today, the Consumer Financial Protection Bureau (CFPB) sued Vanderbilt Mortgage & Finance for setting families up to fail when they borrowed money to buy a manufactured home. The CFPB alleges that Vanderbilt’s business model ignored clear and obvious red flags that the borrowers could not afford the loans. As a result, many families found themselves struggling to make payments and meet basic life necessities. Vanderbilt charged many borrowers additional fees and penalties when their loans became delinquent, and some eventually lost their homes. The CFPB is seeking to stop Vanderbilt’s illegal practices and obtain relief for the harmed homeowners.
“Vanderbilt knowingly traps people in risky loans in order to close the deal on selling a manufactured home,” said CFPB Director Rohit Chopra. “The CFPB’s lawsuit seeks to not only protect homebuyers, but also honest lenders helping people to finance the purchase of an affordable home.”
Vanderbilt Mortgage & Finance, Inc. is a nonbank financing company based in Maryville, Tennessee that originates loans for manufactured homes across the country. Vanderbilt is a unit of Clayton Homes, Inc., which is the largest manufactured home builder in the U.S. and a wholly owned subsidiary of Berkshire Hathaway, Inc., the multinational conglomerate based in Omaha, Nebraska.
Vanderbilt originates mortgages for the purchase of manufactured homes that are built and sold by Vanderbilt-affiliated companies. Manufactured homes, or mobile homes, are a vital source of affordable housing, particularly for millions of low-income Americans and for older Americans. For these homeowners, who predominately live in rural areas, manufactured homes can fill the gap left by the lack of affordable site-built homes. Although manufactured homes may be more affordable to purchase, CFPB research has shown that manufactured home loans often come coupled with higher interest rates and limited opportunity to refinance compared to traditional home mortgage loans.
In response to widespread problems in mortgage originations, including systemic failures to consider borrowers’ income when making loans, Congress in 2010 required that all residential mortgage lenders document and verify borrowers’ income before making a mortgage, and that mortgages only be made after the lender has made a good-faith and reasonable determination that the borrower can repay the loan. Those systemic failures contributed directly to the 2008 foreclosure crisis, which resulted in more than six million families losing their homes.
The CFPB alleges that Vanderbilt failed to make reasonable, good-faith determinations of borrowers’ ability to repay loans, as legally required. Specifically, the lawsuit alleges Vanderbilt:
- Manipulated lending standards when borrowers did not make sufficient income: In its underwriting process, Vanderbilt often disregarded evidence that borrowers did not have sufficient income or assets (other than the value of their home) to pay their mortgage and cover recurring obligations and basic living expenses, like food and health care. Sometimes, Vanderbilt originated loans for borrowers who were already struggling, making their financial situation worse. For example, Vanderbilt approved a loan for a family with 33 debts in collection and two young children. The borrowers fell behind only eight months after getting the mortgage.
- Fabricated unrealistic estimates of living expenses: Vanderbilt justified its determination that borrowers could pay the loans by using artificially low estimates of living expenses that made no adjustment for higher expenses in different geographic areas. Vanderbilt’s estimated living expenses were about half of the average of self-reported living expenses for other, similar, Vanderbilt loan applicants. These families were left with little or no buffer to cover unexpected expenses. For example, Vanderbilt left one family of five with only $57.78 in net income after Vanderbilt applied its estimate of living expenses. That family first missed a payment only a year after signing the mortgage.
- Made loans to borrowers it projected could not pay: In some cases, Vanderbilt violated its own policy and made loans to borrowers who, even under the company’s overly optimistic estimates, did not have enough income to cover the mortgage and basic living expenses. For example, Vanderbilt approved a mortgage for a single mother with two dependents after estimating she had insufficient income, and then sent her loan to collections when she missed a mortgage payment after only four months in the home.
The CFPB alleges that Vanderbilt violated the Truth in Lending Act and Regulation Z. When Vanderbilt originated loans to borrowers who lacked sufficient income (or assets beyond the home) to make the payments on the loan, Vanderbilt set those families up for failure.
Clayton Homes Response
For 50 years, Vanderbilt Mortgage has increased homeownership in the U.S. The CFPB’s lawsuit is unfounded and untrue, and is the latest example of politically motivated, regulatory overreach.
Vanderbilt Mortgage’s underwriting processes exceed the legal requirements for assessing a borrower’s ability to repay loans by considering both monthly debt-to-income ratio and residual income, while the law only requires the use of one or the other. Vanderbilt Mortgage goes further by taking the greater of the borrower’s actual reported expenses or an estimated living expense for the family size, similar to that used by the Federal VA loan program.
The CFPB examined tens of thousands of Vanderbilt Mortgage loans and identified less than 0.8 percent, over a six-year period, that allegedly should not have been made. Many of those loans have not been delinquent. Vanderbilt Mortgage follows the law, and the facts bear that out.
Despite regularly blessing Vanderbilt Mortgage’s underwriting practices in the past, the CFPB is now demanding compliance with an unknown and unknowable new “standard” not addressed in the law. Far from protecting American consumers, the CFPB’s lawsuit will deprive credit worthy borrowers of owning a home.
The lack of attainable housing is one of the greatest threats facing our country. Vanderbilt Mortgage remains committed to protecting the American public’s access to fair lending services while providing a path to homeownership for hardworking families.
Tip of the Week – The Goal of Helping Others, Making Changes in 2025
Goals without meaning or balance lack the substance necessary for motivation. A car with the best tires but no engine cannot move forward.
Ambition and motivation are intertwined. Ambition could describe the degree of drive behind motivation. Mildly motivated is an oxymoron. Be clear: You need motivation to define your goals, but you need ambition to fuel your motivation. Ensure goals are thought-out with foundational ties to your most important values. Goals unconnected to driving values lack motivational substance. Once headwinds develop, the necessary drive to reach the goal comes from deep-seated needs or values.
What changes must you make in 2025 to ensure you progress towards your goals? Are you operating in a vacuum, or are your goals aligned with the key stakeholders in your life? For example, if your spouse is unsupportive of your goals, you may need new goals. What about referral partners, management, or key support staff? Are these persons supportive of your goals? Here is another thought: Do you support your key stakeholder’s goals? Am I supportive of the goals of key stakeholders in my life, or is it a one-way street? In other words, the only way to advance to your goal may be at the expense of those around you. Sometimes, sacrifices are required.
Help your referral partners express what they want. How can you foster supportive goal-setting for the key stakeholders in your life?
As it is written, “He who loves his wife loves himself.”