The HUD announced new actions regarding the reduction of risks inside cash-out refinance lending. For starters, loan-to-value maximum requirements will be lowered by 5% starting on September 1st of the current year. Other actions and policies include new ways of reducing loan churning on VA mortgages.
“Rapid, serial refinancing has proven to deplete home equity and wealth for veterans with VA-insured mortgages and harmed investor confidence in mortgage-backed securities that Ginnie Mae guarantees,” the HUD stated on their official release.
These new policies are good news for homeowners, who will now have a chance to convert their home equity to cash through a government sponsored mortgage, while improving the risk profile on HUD’s housing finance programs.
According to the FHA’s annual report, cash- out refinances represent a 64% of all insured refinance transactions, thanks to the increase in home prices and the decline of refinancing activity.
All of this will have an impact on ethics requirements on the whole mortgage industry, enabling a prudent borrower climate from homeowners, providing global investors with increased certainty in the performance of government enabled economic security, leading to a drop in mortgage rates for all borrowers in the program.