ALERT – Fannie Mae Cash-Out Eligibility Update & Freddie Mac Reminder
Fannie Mae Cash-Out Refinance Eligibility
Arc Home will align with the guidance provided by Fannie Mae in Announcement SEL-2023-01 regarding the cash-out refinance eligibility update. Effective for all Fannie Mae loans with a Note Date on or after April 1, 2023, any existing first mortgage being paid off through the transaction must be at least 12 months old (measured from Note Date of existing mortgage to Note Date of new cash-out refinance mortgage). This is in addition to the existing requirement that at least one borrower must be on title to the subject property for at least six (6) months prior to the disbursement date of the new loan, unless subject to one of the ownership exceptions permitted in the Fannie Mae Selling Guide.
Important Notes
· This guideline change also applies to the Arc Elite QM, Conventional Investment, and FNMA/FHLMC Second Home & Investment Property programs scored on Desktop Underwriter (DU).
· If the existing first lien mortgage was modified and the modification resulted in a new Note Date, the required seasoning starts from the new Note Date.
Freddie Mac
As a reminder, Arc Home communicated the Freddie Mac Cash-Out Refinance seasoning rule on December 23, 2022 to align with the guidance provided by Freddie Mac in Bulletin 2022-25. The details of the change and effective date are noted below.
Cash-Out Refinance Transactions
Freddie Mac revised the guidelines to specify new seasoning requirements when proceeds of a cash-out refinance are used to pay off a first lien mortgage. Effective for all Freddie Mac loans registered with Arc Home on or after December 27, 2022, the first lien mortgage must be seasoned for at least 12 months (measured from Note Date of mortgage being refinanced to Note Date of new cash-out refinance mortgage), as documented in the loan file. This guideline change also applies to the Conventional Investment and FNMA/FHLMC Second Home & Investment Property programs scored on Loan Product Advisor (LPA). The seasoning requirement does NOT apply when:
· The transaction is a special purpose cash-out refinance that meets the requirements in Freddie Mac Selling Guide Section 4301.6, or
· The first lien being refinanced is a Home Equity Line of Credit (HELOC)
Important Note: If the existing first lien mortgage was modified and the modification resulted in a new Note Date, the required seasoning starts from the new Note Date.