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Freddie Mac Raises Bar for Refinancing With Home-Equity Debt

Freddie Mac, the government-supported mortgage company, made it harder for some borrowers with second-lien home equity debt to refinance as it released guidelines for its version of the federal Home Affordable Refinance Program.

For a borrower with loan-to-value ratio of less than 80 percent, the McLean, Virginia-based firm will require total housing debt, including second loans, of less than 105 percent of a property’s current values, according to a notice to lenders posted on its website. Previously, there was no cap.

“The rationale is to manage risk better,” Brad German, a spokesman, said in a telephone interview.

President Barack Obama has said he directed Freddie Mac and rival Fannie Mae to expand their HARP programs to help ease the U.S. housing slump and aid consumers. The companies, which were seized by the U.S. in 2008, are detailing the changes today, after they were announced Oct. 24.

Freddie Mac is also eliminating the upfront fees it charges when borrowers take out fixed-rate loans with terms shorter than 20 years under HARP, and reducing them to 75 basis points, or 0.75 percentage point, for most other debt. The fees will be maintained at 200 basis points for investment property loans.

Fannie Mae matched the fee changes except for those on investment properties, according to a posting today on the Washington-based company’s website. Fannie Mae said “there continue to be no limits on” so-called combined loan-to-value ratios under its version of HARP.

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