Equally important for some highly leveraged homeowners, the companies are setting no limits on the amounts of existing second mortgages or home equity line balances, as long as the secondary loan creditors agree to re-subordinate their liens behind the new Fannie- or Freddie-funded mortgage.
Both companies also are suspending their standard rules requiring purchase of private mortgage insurance coverage when borrowers' equity stakes are less than 20 percent. If loans carried mortgage insurance coverage when Fannie or Freddie first acquired them, that coverage will remain in force. But borrowers who never had insurance, and now have depressed equity stakes below 20 percent, will not be required to purchase new coverage.
Fannie and Freddie also plan to lessen the burden of other typical costs in connection with the mass refinancings -- including appraisals, lender fees and closing expenses. Fannie Mae will permit borrowers to finance those fees entirely by rolling them into the replacement loan amount. Freddie Mac will allow financing of escrow fees, prepaid items and closing charges up to a limit of $2,500.
Both companies emphasize that their refinancings will be limited strictly to customers who have paid their mortgages on time -- people who haven't been late by 30 days or during the most recent 12 months.
One major area of divergence between Fannie and Freddie involves where you obtain your new replacement loan. Freddie requires borrowers to apply to their existing lender or servicer for rate quotes and terms. Fannie Mae, by contrast, allows borrowers to contact any of its 30,000 approved servicing and lending partners nationwide for quotes.
Fannie spokesman Brian Faith said "being able to shop their refi business can help (borrowers) reduce rates and terms." Freddie Mac's German said his company is keeping refis with the current lender or servicer because that will cut down on time and costs -- "a simpler process with no re-underwriting for most borrowers." The current servicer has the detailed files on the existing mortgage, knows the customers, and is in the best position to offer a fast and less expensive refi.
How do you know if you're one of the millions of homeowners who might be eligible? First, you need to find out if your mortgage is owned or guaranteed by Fannie or Freddie. Your current servicer can tell you, or you can visit the companies' special Web sites: www.fanniemae.com/homeaffordable or www.freddiemac.com/avoidforeclosure.