Fannie Mae makes it easier to get a mortgage despite student debt

The San Francisco Chronicle reports:

Fannie Mae last week announced three small steps it is taking to make it easier for people with education loans to get or refinance a home mortgage.

The government mortgage giant, which guaranteed one-third of home loans in the first quarter, is responding to claims — coming mostly from the real estate and mortgage industries — that student debt is preventing Millennials from buying a house.

“We saw a big run-up in student loan originations around the time of the housing collapse. The reason for the run-up could have been that parents couldn’t refinance their home” to put their kids through college, said Rohit Chopra, a senior fellow with the Consumer Federation of America.

The new initiatives could prop up loan volumes when they could use a lift. Whether they make sense for borrowers “really depends” on their individual circumstances, Chopra said.

The main program Fannie announced last week will make it a tad cheaper to refinance a mortgage and pull cash out to pay off an education loan.

Fannie charges an additional risk fee that adds about 0.25 percent to the interest rate when people refinance a mortgage and borrow more than their outstanding balance. This is known as a cash-out refi. The fee does not apply when borrowers refinance their current balance just to get a different rate or term and don’t take cash out.

Fascist Mae: providing more leverage than your friendly local hedge fund. Just a reminder the next time Fascist Mae needs a bailout from federal taxpayers.