Did You Know... 7/23/18

  • July 13, 2018

Fannie Mae announced a student loan cash out option.

Fannie Mae introduced the student loan cash-out refinance feature, a cost-effective alternative to use existing home equity to pay off student loan debt. This feature provides the opportunity for borrowers to payoff one or more student loans through the refinance transaction, potentially reducing their monthly debt payments. The loan-level price adjustment that applies to cash-out refinance transactions will be waived when all requirements have been met. 

The student loan cash-out refinance feature contains elements of both a cash-out refinance and a limited cash-out refinance transaction as described in the table below.

Student Loan Cash-out Refinance Features

Student Loans Eligible for Payoff

· At least one student loan must be paid off. Loan proceeds must be paid directly to the student loan servicer at closing.

· Only student loans for which the borrower is personally obligated can be paid through the transaction.

· Student loan debt must be paid in full with the proceeds – partial payments of student loan debt are not permitted.

New policy

Eligibility

The standard cash-out refinance LTV, CLTV, and HCLTV ratios apply.

Aligns with cash-out refinance

Maximum Cash Back

Lesser of 2% or $2,000 (over and above the student loan payoff)

Aligns with limited cash-out refinance

Mortgage payoff

1st mortgage and purchase money seconds

Other Requirements

Property cannot be listed for sale at time of disbursement

· Payoff of taxes ineligible unless escrow account is established

· Payoff of delinquent taxes ineligible

 


 

 

 

 


 

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