What This Program Does
Fannie Mae's disaster-related limited cash-out refinance program helps homeowners who faced property damage from natural disasters. The program works in two ways: it lets you roll disaster-related subordinate financing into your new first mortgage, and it allows you to get cash back for repair expenses you already paid out of pocket.
Say Hurricane Ian damaged your roof and you took out a $25,000 home equity loan to pay for repairs. Under normal limited cash-out rules, you couldn't refinance that HELOC into your first mortgage because it wasn't used to buy the house. This program changes that rule for disaster victims.
The program also lets you get cash back for repairs you paid for yourself. If you spent $12,000 of your own money fixing storm damage, you can get that money back through the refinance, up to the program limits.
Where and When You Can Use This Program
Your property must be located in a county, city, or parish that FEMA designated as eligible for Individual Assistance due to a natural disaster. FEMA makes these designations after major disasters like hurricanes, wildfires, floods, and tornadoes.
The program only works for your primary residence. You cannot use it for second homes or investment properties.
You have a two-year window to complete the refinance. The loan must be delivered to Fannie Mae no later than two years from the date FEMA declared the disaster.
How Much Cash You Can Get
For reimbursement of out-of-pocket repair expenses, you can receive the lesser of 10% of your new loan balance or $15,000. This money must represent documented expenses for completed repairs to disaster-related property damage.
If you're refinancing subordinate financing used for disaster repairs, there's no specific dollar limit beyond what the standard limited cash-out refinance rules allow. You can pay off the entire HELOC through the refinance as long as some portion was used for disaster-related repairs.
Here's an example: You have a $300,000 mortgage and take out a new $320,000 loan. Ten percent of that new loan is $32,000, but the program caps reimbursement at $15,000. So $15,000 is your maximum cash-back amount for documented repair expenses.
Required Documentation
You must provide proof that your subordinate financing or cash-out request represents funds used for completed disaster-related property repairs. The lender needs copies of receipts, work orders, canceled checks, and other documentation showing the cost of materials and labor.
All documentation must post-date the disaster declaration and relate to completed repairs of damage caused by the disaster. You cannot get reimbursed for your own labor (called "sweat equity") on the repairs.
For subordinate financing, you need to show that the loan or HELOC draws happened after the disaster and were used for property repairs. If you're paying off an entire HELOC, you only need to prove that part of it went toward disaster repairs.
Desktop Underwriter Considerations
When you run your loan through Desktop Underwriter (DU), you might see error messages that would normally disqualify a limited cash-out refinance. The program allows lenders to ignore specific DU messages related to cash-out limits and subordinate financing restrictions.
For example, DU might flag that you're taking out more than the normal $2,000 cash limit for limited cash-out refinances. Under this program, your lender can disregard that message if your loan meets the disaster-related requirements.
Fannie Mae provides limited waiver of representations and warranties for these loans, including those that receive an "Approve/Ineligible" recommendation from DU, as long as they meet the program requirements and those in [[A2-2-04]].
Appraisal Requirements
The appraisal follows standard Fannie Mae requirements from Chapter B4-1. The appraiser can value the property "as is" if there are no conditions affecting safety, soundness, or structural integrity.
If safety or structural issues remain, the property must be appraised "as repaired" with completion of specific repairs required. The appraiser must provide a completion report before Fannie Mae will purchase the loan.
This means all disaster-related repairs affecting the property's habitability must be finished before you can close on the refinance.
Why These Rules Exist
Fannie Mae created these flexibilities because natural disasters create unique financial hardships that don't fit normal lending categories. Standard limited cash-out refinance rules assume borrowers are accessing equity for general purposes, not recovering from catastrophic property damage.
The requirement that repairs be completed protects both you and the lender. It ensures the property is restored to a safe, habitable condition and that the loan amount reflects the property's actual post-repair value.
The two-year delivery deadline prevents the program from being used for routine maintenance years after a disaster. It keeps the focus on genuine disaster recovery.
Common Complications
The biggest challenge is documentation timing. All repair receipts and subordinate financing must post-date the disaster declaration. If you started repairs before FEMA made its official declaration, those expenses won't qualify.
Mixed-use subordinate financing can create problems. If you took out a HELOC for disaster repairs but also used some of it for a vacation or other non-disaster expenses, you'll need to clearly separate and document the disaster-related portion.
Property condition issues can delay closing. If the appraiser finds that repairs affecting safety or structural integrity aren't complete, you'll need to finish that work and get a completion report before the loan can close.
The program requires Special Feature Code 416 in the delivery data. If your lender forgets this code, it can cause delivery problems with Fannie Mae.
References
For the official guidelines, see B5-4.2-02: Disaster-Related Limited Cash-Out Refinance Flexibilities in the Fannie Mae Selling Guide.
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Original Fannie Mae Guideline Text
B5-4.2-02, Disaster-Related Limited Cash-Out Refinance Flexibilities (10/08/2025)
Disaster-Related Limited Cash-Out Refinance Flexibilities Overview
Transaction Types
Documentation of Eligible Disaster-Related Expenses and Financing
Limited Cash-Out Refinance DU Requirements
Special Feature Codes
Uniform Appraisal Dataset (UAD) 3.6 Policy
Disaster-Related Limited Cash-Out Refinance Flexibilities Overview
Fannie Mae provides flexibilities to standard limited cash-out refinance policies for borrowers who have been impacted by a natural disaster. These guidelines:
permit the refinance of non-purchase money subordinate loans obtained to finance disaster-related property repairs, and
provide for a higher cash-out amount to reimburse borrowers for documented out-of-pocket expenses related to disaster-related property repairs.
This topic outlines the specific eligibility requirements for these additional flexibilities.
Location of Property
These flexibilities may be applied to loans on properties located in any counties, cities, or parishes that are designated by the Federal Emergency Management Agency (FEMA) as eligible for Individual Assistance as a result of a natural disaster (these areas are referred to as “FEMA Disaster Areas”).
Occupancy Status
These guidelines are applicable only to loans secured by the borrower’s principal residence, and may not be used in connection with second homes or investment properties.
A borrower may obtain:
a limited cash-out refinance to consolidate non-purchase money subordinate financing used for repair of disaster-related property damage to their principal residence. To be eligible, the subordinate financing, including any draws on an existing HELOC, must post-date the disaster. However, the borrower may pay off the entire HELOC through the limited cash-out refinance, provided that a portion of the amount was used for disaster-related expenses to repair property damage to the principal residence.
cash-out for reimbursement of documented out-of-pocket expenses for the completed repair of disaster-related property damage to their principal residence in an amount not to exceed the lesser of 10% of the balance of the new refinance loan or $15,000.
All existing guidelines and requirements for limited cash-out refinance transactions listed in this section continue to apply, including those for Texas Section 50(a)(6) loans (see B5-4.1-01, Texas Section 50(a)(6) Loans).
Documentation of Eligible Disaster-Related Expenses and Financing
The lender must document that the subordinate financing (or a portion of the HELOC) or the entire requested cash-out amount represents funds used for completed disaster-related property repairs.
Generally, documentation includes copies of receipts, work orders, canceled checks, etc., related to the cost of materials and labor.
The borrower may not receive any reimbursement for amounts representing their sweat equity in connection with the repairs.
Note: All documentation must post-date the disaster and be directly related to completed repairs of damage to the property resulting from the disaster.
Limited Cash-Out Refinance DU Requirements
Certain messages on the DU Underwriting Findings Report will not apply to loans originated under the disaster-related limited cash-out refinance requirements.
When the loan complies with the requirements of this section, lenders may disregard the following messages:
This case is ineligible because the amount of cash taken out of the subject property equity exceeds the limit of the greater of 1% of the loan amount or $2,000 for limited cash-out refinances.
If any subordinate lien that was not used to acquire the subject property is to be paid off with first mortgage proceeds, the loan is ineligible as a limited cash-out refinance. The loan must be resubmitted as a cash-out refinance.
If subordinate liens are being paid off with the first mortgage proceeds, obtain written documentation that the subordinate lien was used to acquire the subject property.
Fannie Mae will grant the lender the limited waiver of underwriting representations and warranties for these loans, including those mortgages that receive an Approve/Ineligible recommendation, provided the loan meets the requirements contained in this section as well as those contained in A2-2-04, Limited Waiver and Enforcement Relief of Representations and Warranties.
Appraisal Requirements
The appraisal for the property must follow standard requirements contained in Chapter B4–1, Appraisal Guidelines.
Those guidelines allow an appraisal to be based on the “as is” condition of the property provided there are no conditions that affect the safety, soundness, or structural integrity of the property. If those conditions do exist, the property must be appraised subject to completion of the specific alterations or repairs (“as repaired”) and a completion report must be obtained from the appraiser prior to delivery of the mortgage to Fannie Mae.
Delivery
Loans originated in accordance with this section must be delivered to Fannie Mae no later than two years from the date of the disaster declaration by FEMA.
Special Feature Codes
Loans delivered under these guidelines must include SFC 416 as part of the delivery data.
Uniform Appraisal Dataset (UAD) 3.6 Policy
Lenders using UAD 3.6 must follow the requirements in the UAD 3.6 Policy Supplement.
