Fannie Mae's Seasoning Change
I just saw the article from CNBC so I wanted to make sure that I wrote something on it as clarification. The article said that there wasn’t an announcement emailed out but there in fact was since it has been sitting on my desk for over a week since receiving the announcement.
Fannie Mae requires someone who bought a home with cash to have to wait 6 months in order to refinance the property based off of the purchase price or appraised value, whichever is lessor. After 12 months it would go off of the appraised value.
Their Selling guide was updated and the full announcement is below. However, I haven’t seen any investors implement the change in their guidelines so we will see if there are any overlays (additional restrictions).
Currently, Fannie Mae requires a minimum of six months to elapse between the time a borrower purchases a home and subsequently applies for a cash-out refinance. The Selling Guide has been updated to allow a cash-out refinance within six months of a purchase transaction when no financing was obtained for the purchase transaction under the following parameters:
The new loan amount is not more than the actual documented amount of the borrower’s initial investment in purchasing the property, plus the financing of closing costs, prepaid fees, and points (subject to the maximum LTV, CLTV, and HCLTV ratios for the transaction).
The purchase transaction was an arms-length transaction.
The purchase transaction is documented by the HUD-1, which confirms that no mortgage financing was used to obtain the subject property. The preliminary title search or report must also confirm no liens on the subject property.
The source of funds for the purchase transaction can be documented (bank statements, personal loan documents, HELOC on another property). Any loans used as the source for the purchase transaction will be required to be repaid on the new HUD-1.
All other cash-out refinance eligibility requirements are met and cash-out pricing is applied.
In addition, the multiple financed property policy is being updated to allow cash-out refinances that meet the delayed financing exception.