Refinancing hope with Fannie Mae, Freddie Mac loans

By FELICIA DECHTER

When Cynthia D. was looking to refinance her condo, her Fannie Mae-held loan made her eligible for a program called Refi Plus.

Cynthia, a late-30s professional who works at a downtown hotel, had been laid off for "a bit" and was looking to change her interest-only loan to a standard one.

"The current economic situation has changed my overall income," said Cynthia, who asked that her last name not be used. "I wanted to refinance to maximize the most of my spending power."

The fact that Fannie Mae -- the government-sponsored enterprise responsible for maintaining a secondary market in home mortgages -- held Cynthia's loan was lucky for her. For people like Cynthia or those with loans held by either Fannie Mae or Freddie Mac, there is relief.

Fannie Mae's Refi Plus and another federally sponsored program, Freddie Mac's Open Access, are excellent refinancing solutions and they eliminate mortgage insurance, said Doug Katz, an Oak Park resident who is sales manager at the downtown-based Chicago Bancorp, a national mortgage banker.

Katz said the best way to find out who holds your loan is to call a lender like him to figure that out.

"People think they can't do something," Katz said. "But there's a chance they can do something."

To qualify for the programs, you still need good credit and a good income, Katz said. However, the programs eliminate the need for costly mortgage insurance, he said.

Other than that, "There's no catch," he said. "Fannie Mae and Freddie Mac own a lot of homes. They don't want to own more. This is a way to keep people in their homes."

Keep in mind, though, that this is still refinancing, and you will have all the costs you would in a regular refinance. But, "It's a way to alleviate stress in depressed values," Katz said.

Katz also mentioned a "phenomenal" FHA program for those struggling with FHA loans. He said a lot of people don't know that you can refinance without appraisals and without credit approval. All you need is a job, and a minimum credit score of 620, Katz said.

"The nice part about it is there's no appraisal," he said. "There's very minimal documentation, and they're very quick loans to close."

Cynthia said the process, which turns her interest-bearing loan into a standard one, has been "a great relief." She said she anticipates saving a couple of hundred dollars a month.

"The bottom line is, I can put my money where it should be," she said. "The money I'm saving I can funnel into a 401K."

Reprinted with permission of the author