There is a HUGE change to FHA refinances coming this September 1st
HUD released a statement on August 1st, 2019 detailing a huge change to FHA refinances effective with case numbers issued on or after September 1,2019.
Up until now, FHA refinances have allowed homeowners to cash out up to 85% of their home’s value. With the new changes coming, the maximum loan to value will be 80% for FHA cash out refinance.
Why the change? In short, risk reduction. Here is a quote from a HUD official.
“We are taking another important step to support sustainable homeownership that builds wealth for families,” said Federal Housing Commissioner Brian Montgomery. “This is a prudent measure to make certain that we protect and preserve the home equity borrowers are building for their futures and guard against taxpayer losses from the FHA program.”
“Today’s announcement underscores Ginnie Mae’s commitment to ensuring the agency’s policies enable homeowners to borrow prudently, utilizing the government-guaranteed mortgage market” said Ginnie Mae Acting President, Maren Kasper, “Additionally, this policy provides global investors with increased certainty in the performance of the Ginnie Mae security, which ultimately lowers mortgage rates for all borrowers served by our program.”
According to the latest FHA annual report to Congress, over 64% of all FHA insured refinances are cash out transaction. Those refinances are over 15% of the overall endorsements including purchases. And according to HUD, cash out FHA refinances are a growing segment which means that HUD’s exposure would continue to grow if no changes are made.
It is worth noting that FannieMae and FreddieMac already have an 80% LTV limit on cash out refinances and GinneMae is simply joining the party.
So does that mean that you have missed the chance to use an FHA refinance to access the equity in your home? NO!
The deadline is based on when your case number is assigned, not when the loan closes or is insured. So if you are interested in doing and FHA cash out refinance, contact me or your local lender an apply now before it’s too late.