On July 5, 2023, Fannie Mae issued an announcement (SEL-2023-06) updating their Selling Guide. Among the updates was a revision to eligibility requirements for limited cash-out refinances. Fannie Mae will now require that at least one borrower on the new loan was “a current owner of the subject property (on title)” at the time of the initial loan application. Fannie Mae noted two exceptions to this policy: 1) if the borrower acquired the property through inheritance or was legally awarded the property via a legal settlement or divorce decree or 2) if the property was previously held in an inter vivos revocable trust and the borrower is the primary beneficiary of the trust.
Lenders are encouraged to comply with this new requirement immediately. Compliance is required on loans with new loan applications on or after September 1, 2023.
Full Memorandum
