The Home Affordable Refinance Program DU Refi Plus presents a unique opportunity for the mortgage branch to increase production. Coupled with the current high rate of underwater homeowners, and the large percentage of Fannie Mae owned mortgages, this program prompts LOs to open the doors to a wider range of potential borrowers. However, I know of many lenders that are capping eligibility with their own criteria, effectively handicapping their network of branches from generating business through this channel.
In its “Home Affordable Refinance (DU Refi Plus and Refi Plus) FAQs”1 document, under the “Lender Representation and Warranty Requirements” questions, Fannie Mae clearly states that
The lender is relieved of the standard underwriting representation and warranties (eligibility, credit history, liabilities, income and asset assessment) with respect to the new mortgage loan if the lender meets all of the following requirements...
Furthermore, the guidelines to verification of employment, income, reserves and assets is loosened to borrower’s whose payment increase is less than 20%2. Hence, I am puzzled over the imposition of discrimination criteria by lenders themselves. Do they recognize that they unnecessarily hamper business potential for their networks of mortgage distribution? I write unnecessarily because, if we follow the guidelines set forth by the program, there is no need for us to take further precautions. In other words, repurchase requests by Fannie Mae are not a risk if we adhere to the program guidelines.
We suggest the lenders embrace the program, or that branches look for mortgage branch opportunities from lenders who follow the program verbatim. As I mentioned at the beginning of this post, I believe that loan generators can greatly benefit from this program. Currently, there is a high supply of underwater homeowners. Fannie Mae owns many of this homeowners’ mortgages, which means they are likely candidates for the program. Lastly, the eligibility requirements of potential candidates have been laxed at all levels, from sources of income, to asset valuation.
In conclusion, we should not overreact with risk aversion to the aftermath of the prime lending crisis. Rather, we should embrace Fannie Mae’s initiative to normalize and help underwater borrowers position themselves to manage their debt. The program establishes the rules. As lenders, it is our role to facilitate competitive products; Fannie Mae has done this for us.
We are not putting any caps to underwater mortgage holders who are interested in applying for this program. We want our branch partners to take full advantage of the opportunities that this program represents. We will take applications for this program, from any borrower that meets the eligibility requirements. We don’t care about higher risk borrowers, and we are refinancing underwater mortgages that qualify according to Fannie Mae’s guidelines.
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