B2-1.2-04: Prohibited Refinancing Practices (11/13/2012)

Overview

Fannie Mae restricts refinancing practices that might inappropriately affect the prepayment pattern for Fannie Mae mortgages, whether delivered for whole loan or MBS.

Lenders may not deliver a mortgage that is in the process of being refinanced.

Fannie Mae analyzes MBS pools that have high levels of prepayments. If such analysis raises concerns about a lender’s practices, Fannie Mae may review the lender’s origination and refinancing activities to ensure compliance with Fannie Mae requirements. With respect to any mortgage loan that pays off within 120 days from the whole loan purchase date or the MBS issue date, Fannie Mae in its sole discretion may require reimbursement by the lender for any premium paid or buyup proceeds paid in connection with the purchase of the mortgage loan. (For mortgage loans repurchased by a lender, Fannie Mae may require reimbursement in its sole discretion, without regard to the 120–day limitation.) See C1-1-01, Execution Options and C3-3-02, Accessing Buyup and Buydown Ratios and Calculating Payments or Charges for specific requirements.

Lender Solicitation for Refinancing

With the exception of certain Refi Plus and DU Refi Plus mortgage loans, lenders may not specifically target Fannie Mae borrowers for offers to refinance. Lenders may advertise refinancing opportunities generally, or to a specific type of mortgage (for example, ARMs or FHA mortgages).

Lenders may not treat mortgages they hold in their own portfolios and those sold to another investor or Fannie Mae as separate classes of mortgages for purposes of promoting refinancing.

Lenders may not, as a means of making a mortgage loan eligible for repurchase from an MBS pool, encourage a borrower to refrain from making payments on his or her mortgage loan.

Note: See B5-5.2-01, DU Refi Plus and Refi Plus Eligibility for additional information regarding permissible solicitation practices for Refi Plus and DU Refi Plus mortgage loans.

Prearranged Refinancing Agreements

A lender may not deliver a mortgage to Fannie Mae if the lender (or any affiliate or third-party originator) and the borrower have entered into an arrangement for special terms (such as reduced fees) for a future refinance of the mortgage. If the lender believes that there might be such a refinance agreement, the lender should contact its lead Fannie Mae regional office (see E-1-03, List of Contacts) to determine whether the mortgage is eligible for delivery.

Agreements to Advance Borrower Payments

Refinancing arrangements that call for the lender to advance a number of payments on the borrower’s behalf and then to refinance the mortgage once the agreed-upon payments have been advanced are not permitted.

Related Announcements

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

Additional Information: https://www.fanniemae.com/content/guide/selling/b2/1.2/04.html