Selling Guide

Published October 2, 2019

B5-7-05: High LTV Refinance Pricing, Mortgage Insurance, and Special Feature Codes (08/07/2018)

This topic contains information about the high LTV refinance option, including:

Loan-Level Price Adjustments

The LLPAs that are applicable to high LTV refinance loans are detailed in the Loan-Level Price Adjustment (LLPA) Matrix. Caps may apply based on the LTV ratio and amortization term, and excess LLPAs will be waived at delivery.

Mortgage Insurance

The following table provides mortgage insurance requirements for high LTV refinance loans.

If the loan being refinanced...

Then...

does not have mortgage insurance

mortgage insurance will not be required on the new loan.

has existing mortgage insurance

the existing mortgage insurance coverage must be continued on the new loan.

To accomplish this, the mortgage insurer will modify the existing MI certificate and transfer it to the new loan. Such transfer may or may not include assignment of a new MI certificate number. Lenders should check with the mortgage insurer for specific requirements.

Existing loans with financed mortgage insurance are eligible for high LTV refinance loans. There should be no difference in how coverage is continued on the refinance of such loans versus existing loans that do not have financed mortgage insurance. The existing coverage can be continued on the new loan regardless of whether the financed premium on the existing loan was paid as a single premium or a split premium.

Mortgage insurance coverage must extend for the life of the new loan, or until cancellation or termination of coverage as required by law or Fannie Mae guidelines. For example, even if a 15-year loan that is 3 years old is refinanced into a 30-year loan, the mortgage insurance coverage should be extended for the full life of the new loan.

A mortgage insurance company may charge a reasonable fee to transfer the certificate. Fannie Mae allows such cost to be rolled into the UPB of the new loan as a closing cost as long as the loan will still comply with both Fannie Mae and mortgage insurer guidelines. See B7-1-02, Mortgage Insurance Coverage Requirements for additional information.

Loan Delivery Requirements

For high LTV refinance loans, lenders must provide all applicable loan delivery data elements and special feature codes.

The following special feature codes (SFC) may apply:

  • SFC 839 may optionally be delivered for high LTV refinance loans underwritten using the standard requirements.

  • SFC 840 is required for high LTV refinance loans that are underwritten using the Alternative Qualification Path.

These codes are to be used in addition to any other special feature codes that may apply.

Income must be reported to Fannie Mae for all high LTV refinance loans at the time of loan delivery even for those transactions where there is no maximum DTI ratio. For high LTV refinance loans with payment changes less than or equal to 20%, the lender must report the stated income on the loan application (if any). If the borrower does not state any income and the lender uses the verification of reserves option as the income source, the lender must deliver the equivalent of the new monthly payment (PITIA) as the “Monthly Income” data element (Sort ID 291).

Note: Lenders must report gross monthly rent in the loan delivery data for all investment properties and two- to four- unit principal residence properties, regardless of whether the borrower is using rental income to qualify for the mortgage loan. See A3-4-02, Data Quality and Integrity for additional information.

Whole Loan Committing and Pooling of Loans with LTV Ratios Above 105%

Separate committing is required for high LTV refinance loans with LTV ratios above 105%. These loans may not be delivered against standard whole loan commitments. Specific “High LTV Refi” products are available in Fannie Mae’s whole loan committing application.

High LTV refinance loans with LTV ratios above 105% cannot be included in TBA-eligible MBS, but must be included in pools specifically created for loans with LTV ratios above 105%.

Furthermore, lenders may be able to deliver high LTV refinance loans with LTV ratios above 105% into the respective Fannie Majors pool specifically available for these loans. Due to the separate pool prefixes required for loans with LTV ratios above 105%, these loans may not be delivered into standard TBA-eligible Fannie Majors pools. However, MBS deliveries of loans refinanced under this new option are eligible for securitization utilizing existing Fannie Mae pool prefixes.

Related Announcements

The table below provides references to the Announcements that have been issued that are related to this topic.

Announcements Issue Date
Announcement SEL-2018-06 August 07, 2018