Freddie sets new limit on home refinancings

November 16, 2011 11:58AM

Even as President Barack Obama urges federal lenders to help consumers refinance their home loans, Freddie Mac made it harder for some consumers to do just that in an effort to mitigate risk. Bloomberg News reported the company will increase the standards that certain homeowners must meet in order to refinance their loan.

Homeowners with a loan-to-value ratio of less than 80 percent — meaning they owe at least 80 percent of their home’s value in debt — cannot have a total housing debt, including second loans, that exceeds 105 percent of the property’s current value if they want to refinance. Previously there was no limit.

The new standard is part of the guideline Freddie Mac is releasing for its version of the Home Affordable Refinance Program that President Obama has directed the company, along with Fannie Mae, to expand. Fannie Mae has not set a similar limit.

On a positive note for consumers, both Fannie and Freddie will reduce fees for borrowers who take out fixed rate mortgages. [Bloomberg News]