New Restrictions Coming to 100% VA Cashout Refinance Loans
Ginnie Mae, which is the entity that provides the funds for VA backed mortgage loans made a huge announcement in their August 1 press release that was issued on their website.
For purposes of this new requirement, the term “High LTV VA Cash-Out Refinance Loan” means a Refinance Loan that is insured or guaranteed under the provisions of chapter 37 of title 38 of the United States Code with a loan-to-value ratio that exceeds 90 percent at the time of origination (i.e. 90.01 LTV and higher), and where the borrower converts any amount of home equity into cash.
Effective with mortgage-backed securities guaranteed on or after November 1, 2019, High LTV VA Cash-Out Refinance Loans are ineligible for Ginnie Mae I Single Issuer Pools and Ginnie Mae II Multiple Issuer Pools, except in cases when the loans are Permanent Financing Construction Loans, as defined in Chapter 24 of the MBS Guide.
High LTV VA Cash-Out Refinances may be pooled into Ginnie Mae II Custom Pools without restriction, provided they satisfy the seasoning and number of payment requirements detailed in Chapter 24, Part 2 § (A)(3)(d).
What This Means In Plain English
In plain English, it means that for cash out refinances, it's going to get a lot harder to borrow 100% of the property value. Many lenders are going to be capping out at 90% of the value. In fact several lenders started doing so already.
The lenders that are going to keep going to keep to offering 100% financing will be raising rates significantly due to having to use the custom investor pools at much higher interest rates.
This rule affects closings on or after November 1st, 2019. However, several lenders are starting a lot sooner. Put in your application now while you still can!