-- No "cash outs" will be permitted. This means the new loan balance can only total the previous balance, plus settlement costs, insurance, property taxes and association fees.
-- Loans that already had mortgage insurance will likely continue to have coverage under the existing amounts and terms, thereby limiting Fannie and Freddie's exposure to loss. But loans where borrowers originally made down payments of 20 percent or higher will not require new insurance for the refi, despite current LTVs over the 80 percent limit.
-- The cutoff date for the entire program is June 10, 2010.
Lockhart said that although Fannie and Freddie would be refinancing portions of their portfolios into lower interest-rate, higher LTV loans, he expects their exposure to financial loss should actually decline.
"In fact," he said, "credit risk would be reduced because, after the refinance, the borrower would have a lower monthly mortgage payment and/or a more stable mortgage payment." This, in turn, would lower the probability of loss-generating defaults and foreclosures by those borrowers.
Since Fannie and Freddie both operate under direct federal control -- technically known as "conservatorship" -- any additional losses to the companies would inevitably be borne by taxpayers.
How it all works out may well depend on whether the Obama administration's broader efforts to stabilize housing prices, reduce foreclosures and push the economy out of recession are successful.
If large numbers of beneficiaries of these special refinancings ultimately cannot afford to pay even their cut-rate replacement rates and go into foreclosure, red ink could flow in rivers from Fannie and Freddie.
But since that's an unknown and the refi program is an immediate, here-and-now money-saving reality, homeowners ought to make the most of it. If you know that Fannie or Freddie owns or guarantees your mortgage -- your loan servicer can tell you -- and you've got an on-time payment record and an interest rate above today's prevailing levels, start assembling your financial records and get ready to refi.