Effective for Mortgages with Settlement Dates on and after March 7, 2023, Freddie Mac is NOT allowing CASH-OUT refinances that do NOT have 12 months of seasoning.
When proceeds of a cash-out refinance Mortgage are used to pay off a First Lien Mortgage, the First Lien Mortgage being refinanced must be seasoned for at least 12 months (i.e., at least 12 months must have passed between the Note Date of the Mortgage being refinanced and the Note Date of the cash-out refinance Mortgage), as documented in the Mortgage file (e.g., on the credit report or title commitment).
The seasoning requirement does not apply when:
- Paying off the partner or ex-spouse
- Paying off purchase money second
- There could be other cases that would allow cash-out as well
Fannie Mae at this time has NOT changed its guidelines but I would NOT be surprised if they follow the same guidelines. Many banks/lenders tend to follow Fannie/Freddie guidelines so we will see if others that do not sell loans to Fannie/Freddie will do the same. Some banks and lenders will use this as an advantage to generate more business and continue to allow cashout refinance. This is just one of many guidelines that will change for the WORSE in a changing real estate market with uncertainty about rates, values, recession, and the list goes on.
If you have any questions please reach out anytime!
