GSEs Differ on Refinancing Rules

The government has said its Home Affordable Refinance Program will lower monthly mortgage payments for four to five million homeowners. The initiative targets those home loans that are held by Fannie Mae and Freddie Mac, and the administration has expanded the eligibility pool by allowing borrowers to refinance even if they owe 5 percent more than the home's current market value. Previously, a homeowner was denied refinancing if they owed more than 80 percent of their home's value.
But the refinance program's guidelines released in early April differ between the GSEs. ""Fannie Mae"":https://www.efanniemae.com/sf/mha/mharefi/ permits homeowners to choose from a list of more than 1,600 approved lenders to secure a refinanced mortgage. ""Freddie Mac"":http://www.freddiemac.com/sell/factsheets/relief_refi.html, on the other hand, will only allow a refinance to be executed by the mortgage servicer that is currently collecting payments on the original loan - a stipulation that mortgage brokers and smaller lenders are arguing excludes them from assisting with the program and may reduce the number of homeowners that are helped.
According to an _""Associated Press"":http://www.ap.org_ (_AP_) report, Marc Savitt, president of the National Association of Mortgage Brokers, said, ""The president's got a much better chance of reaching his goal by opening this up to everybody.""
Patricia McClung, a Freddie Mac VP, explained to _AP_ that by restricting the refinancing to the current loan servicer, who has control of the original loan files, Freddie is making the process more efficient and can better control the costs involved.
But Fannie Mae spokesperson Amy Bonitatibus told _AP_ that giving homeowners more options ""will allow borrowers to negotiate among multiple lenders and bring competition to the process to help them attain the best rate and terms available for their circumstances.""
Another area where the two companies' refinance policies don't align is fees. Unlike Fannie, Freddie has slashed its fees to make the refinance option more affordable for borrowers, and in some cases, will even forgo requirements for a new appraisal.
Since the Home Affordable Refinance Program was launched on April 4, _AP_ reported that Freddie Mac has refinanced fewer than 1,000 loans under the new guidelines. McClung said, though, that there are more than 100,000 more refinance applications in the pipeline.
On the other side of the Potomac River, Fannie Mae has received more than 22,000 requests for refinancing since the program began, but was not able to provide an exact figure of how many had been approved. On Thursday, though, Fannie Mae released its ""loan summary"":http://www.fanniemae.com/ir/pdf/monthly/2009/033109.pdf for the month of March - before the government's road map was in place - which showed that already the GSE's refinance volume had skyrocketed. Last month, Fannie refinanced $77 billion in mortgage loans, nearly twice the refinancing volume reported in February and the company's largest refinance month since 2003.
Similarly, Freddie Mac's refinance volume, pre-Home Affordable Refinance Program, reached its highest level since 2003 last month. ""In March"":http://www.freddiemac.com/investors/volsum/pdf/0309mvs.pdf, Freddie refinanced $52 billion in home loans. Both of the GSEs expect their refinance activity to remain elevated as a result of the administration's housing program, as well as recent declines in mortgage interest rates.