Fannie Mae has finished developing Refi Plus, a portfolio retention tool that it plans to introduce by the end of 2008.

The program allows borrowers to lock in rates for refinancing existing Fannie Mae loans up to two years in advance of the prepayment period end date, in conjunction with supplemental financing.

The company feels the time is perfect for such a product, since acquisition activity has sharply declined over the last six months and more owners are opting to refinance rather than sell.

“If you have two years of yield maintenance remaining, but you like where rates are today and you’re ready to put a supplemental on, we now have a product for that,” said Heidi McKibben, Fannie Mae’s vice president of multifamily production. “This will give borrowers the flexibility to lock in today’s rates if they feel like we’re in a rising interest-rate environment, take out a supplemental, and basically lock up their new loan up to two years out.”

Borrowers using Refi Plus are able to get cash out immediately in the form of a supplemental loan; they don’t have to wait for the existing loan to mature. Additionally, there’s no prepayment premium on the existing loan, so there’s no need to fund a good-faith deposit.

Borrowers also eliminate uncertainty about future rates since they’re locking in the rate of the refinance loan on a forward basis, up to 24 months out. The interest rate of the supplemental mortgage loan and the refinance mortgage loan are rate-locked simultaneously.

Fannie Mae’s Delegated Underwriting and Servicing DUS) lenders are able to underwrite, commit, rate-lock, and deliver most Refi Plus loans without prior review by Fannie Mae, speeding up the deal cycle time. All multifamily loans of more than $750,000 are eligible, although loans of more than $25 million that want to use Refi Plus would need to be pre-reviewed by Fannie Mae before the deal closes.

Because Fannie Mae is already familiar with the property, borrower documentation is reduced. Borrowers can certify that there haven’t been any changes to its organizational structure, or to its financial strength and credit standing, in lieu of providing new documentation. However, new third-party reports, such as an appraisal report and physical needs assessment, are required.
Jerry Ascierto