The New 105% Refi Plan – What I know and What I don't…..
Okay, here’s the latest on what I know and what I don’t on the 105% refi plan. I’m going to attempt to summarize a 10 page document, so I’m only going to hit the “highlights” of it:
The things that I know about the plan:
- The loan to value is indeed max’d out at 105% but with a second mortgage, it can go higher than that (frankly unlimited) if the second mortgage holder will agree to it and if the second mortgage was already in place. You can’t put a new second mortgage in place right now.
- There are three “levels” of potential appraisals: What Freddie Mac calls the “Home Value Explorer.” or a new appraisal or the existing appraisal. There’s some verbiage in the Freddie Mac docs about certifications that the lender has to make about the existing appraisal, so I don’t know what that involves yet.
- The borrower’s mortgage payment history can have no 30 day late payments in the last 12 months.
- The only loan that can be paid off is the existing first mortgage plus up to $2500 toward closing costs and escrows.
- The new mortgage has to be done with the same servicer as the existing mortgage. So, unfortunately for borrowers, you can’t shop around on this type of loan.
- There are some “kind of” confusing guidelines about mortgage insurance and my initial read of it says that there might be some questions on mortgage insurance. If there was mortgage insurance, it sounds like there would need to be mortgage insurance again, but we don’t know that the mortgage insurance companies will “reissue” the insurance.
- Primary residence loans that were sold to Fannie Mae or Freddie Mac are eligible. There are other restrictions too.
The things that I don’t know (about the plan):
- The documents I read call for a “Market Condition Delivery Fee” but I don’t know how much that will be and what impact that will have on the interest rate.
- It appears that we don’t know exactly what underwriting criteria will be used besides for at least a 620 credit score and 12 month positive payment history on the mortgage (if the loan is less than 12 months old, then it had to have been 0 x 30 days the whole life of the loan.
If you have questions about it and your loan is with Fifth Third Bank, call me at (616) 292-7559. I’ll post more about the program as I know more.
P.S. This information is compiled from Freddie Mac Bulletin 2009-5