What Is the High LTV Refinance Option
The High LTV Refinance Option was designed for borrowers who are current on their Fannie Mae mortgage payments but have loan-to-value ratios too high for standard refinancing. This program allowed you to refinance even when you owed more than 80% of your home's value.
Say you bought a home in 2018 for $300,000 with a Fannie Mae loan. Home values in your area dropped, and now your home is worth $280,000 while you still owe $290,000. Your LTV ratio is about 104%. Under normal refinance rules, you would not qualify. The High LTV option was created for exactly this situation.
The program streamlined the approval process. Lenders did not need to verify your income, assets, or employment the way they would for a standard refinance. The focus was on payment history and providing you with a tangible benefit.
However, Fannie Mae paused this program. No new applications are being accepted, though loans already in the pipeline may still close.
Existing Loan Requirements
Your current mortgage must meet specific criteria to be eligible. The loan must be a first lien conventional mortgage that Fannie Mae owns or has securitized. This means FHA, VA, or USDA loans do not qualify.
The note date on your existing loan must be October 1, 2017, or later. If you closed before that date, you cannot use this program. The loan also needs seasoning of at least 15 months from the original note date to the new loan's note date.
For example, if your original loan closed on January 1, 2019, you could not apply for a High LTV refinance until April 1, 2020, at the earliest.
Certain loans are excluded from eligibility. DU Refi Plus loans cannot be refinanced through this program. Loans with outstanding repurchase demands or those requiring special credit enhancements at origination may also be ineligible unless the new loan carries similar protections.
New Loan Requirements and Benefits
The new loan must provide you with a clear benefit. This could be a lower principal and interest payment, a reduced interest rate, a shorter amortization term, or movement to a more stable product like switching from an adjustable-rate to a fixed-rate mortgage.
The loan term cannot exceed 30 years, and the loan amount must meet current conforming or high-balance limits. You cannot originate the loan under Texas Constitution Section 50(a)(6), and temporary interest rate buydowns are not allowed.
Cash-out is severely limited. You can finance closing costs, prepaid items, and points up to $5,000 total. You can receive up to $250 in cash back at closing. Any excess proceeds must be applied to reduce the loan balance.
Your lender may provide an incentive by paying down part of your existing loan balance, but this appears as a lender credit on your settlement statement. Be careful here - reducing your loan balance too much could lower your LTV below the minimum required for the program.
Borrower Eligibility Rules
Generally, the borrowers on the new loan must be identical to those on the existing loan. You cannot add new borrowers to the refinance. However, you can remove a borrower in two specific situations.
First, if the remaining borrower can show they have been making the mortgage payments from their own funds for the past 12 months and meet the payment history requirements. Second, if a borrower has died, you can remove them with proper documentation of death.
If you cannot meet these criteria for removing a borrower, the loan must be underwritten through the Alternative Qualification Path, which requires full income and asset verification per B5-7-03: High LTV Refinance Alternative Qualification Path.
Borrowers who have received loan modifications can still use this program, provided the benefit calculation uses the current modified payment and the payment history requirements are met.
Property and LTV Requirements
All Fannie Mae-eligible property types can be refinanced through this program. For condos, co-ops, or PUD projects, most project review requirements are waived. The lender only needs to confirm the project is not a condo hotel, motel, houseboat, timeshare, or segmented ownership project.
The LTV requirements set minimum thresholds, not maximums. For primary residences, you need at least 97.01% LTV for single-unit properties, 85.01% for duplexes, and 75.01% for 3-4 unit properties. Second homes require a minimum 90.01% LTV, while investment properties need 75.01% regardless of unit count.
There are no maximum LTV limits for fixed-rate loans. ARM loans have a 105% maximum LTV but no maximum combined LTV limits when subordinate financing is present.
Documentation Requirements
The documentation requirements are minimal compared to standard refinances. You need a new Uniform Residential Loan Application (Form 1003). The lender must verify your payment history on the existing loan but does not need to verify income, assets, or employment under the standard path.
Property insurance and flood insurance must be obtained according to standard Fannie Mae requirements. For leasehold properties, the lease term must run at least five years beyond the mortgage maturity date, but no additional lease review is required.
The lender must confirm you meet the borrower benefit requirement and payment history standards outlined in B5-7-02: High LTV Refinance Underwriting, Documentation, and Collateral Requirements for the New Loan. Beyond these specific requirements, the streamlined nature of the program reduces the typical documentation burden.
Subordinate Financing Restrictions
New subordinate financing is only allowed if it replaces existing subordinate financing. You cannot take out a new second mortgage or home equity line of credit as part of this refinance unless you already have subordinate financing in place.
If you have existing subordinate financing, it cannot be paid off with proceeds from the new first mortgage. The existing second mortgage can remain in place if it is resubordinated to the new loan, or it can be simultaneously refinanced as long as the new subordinate loan amount does not exceed the current balance.
This restriction prevents you from using the program to access equity through subordinate financing, keeping the focus on rate and term benefits rather than cash extraction.
Common Issues and Complications
The biggest issue is that the program is currently paused. Fannie Mae stopped accepting new applications, so you cannot use this option right now. There is no announced timeline for when or if it might resume.
Payment history is critical but not always straightforward to document. If you have had any late payments in recent months, you may not qualify. The specific payment history requirements are detailed in the underwriting guidelines.
Lender incentives can backfire. If your lender pays down too much of your existing balance to make the deal more attractive, your LTV might drop below the minimum threshold, disqualifying you from the program.
Property occupancy changes can complicate matters. If you moved out of your primary residence and now rent it out, the property is treated as an investment property for LTV purposes, which has different minimum requirements.
Multiple financed properties do not create additional restrictions under this program, unlike standard Fannie Mae guidelines. However, if you need to use the Alternative Qualification Path, those standard restrictions would apply.
References
For the official guidelines, see B5-7-01: High LTV Refinance Loan and Borrower Eligibility in the Fannie Mae Selling Guide.
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Original Fannie Mae Guideline Text
B5-7-01, High LTV Refinance Loan and Borrower Eligibility (08/06/2025)
Overview
The high LTV refinance option is designed for Fannie Mae borrowers who are making their mortgage payments on time, but whose LTV ratios exceed the maximum allowed for standard limited cash-out refinance transactions. Lenders are not required to evaluate borrower creditworthiness except for the requirements specifically stated in the high LTV refinance topics.
The current servicer or a new servicer may refinance the existing loan. Lenders may not solicit Fannie Mae loans for refinancing except in accordance with standard requirements in Lender Solicitation for Refinancing found in B2-1.3-04, Prohibited Refinancing Practices.
Note: The acquisition of high LTV refinances is currently paused.
Existing Loan Requirements
The following table provides requirements for the existing loan that is to be refinanced under the high LTV refinance option.
✓
The existing loan must....
be a first lien, conventional mortgage loan owned or securitized by Fannie Mae.
have a note date on or after October 1, 2017.
have seasoning of at least 15 months - meaning at least 15 months have passed from the note date of the existing loan to the note date of the new loan.
For example, if the note date on the existing loan is January 1, 2018, the note date of the new loan must be no earlier than April 1, 2019.
Note: Loans that are part of a risk-sharing structure (for example, credit risk transfers) are eligible to be refinanced under the high LTV refinance option.
Conversely, the following loans are not eligible for refinance under the high LTV refinance option:
existing DU Refi PlusTM or Refi PlusTM loans;
loans that are subject to outstanding repurchase demands; or
loans that are subject to recourse, repurchase agreement, indemnification, or another negotiated credit enhancement required at origination for eligibility purposes are not eligible unless
the new loan is also subject to a credit enhancement that meets eligibility requirements, or
such credit enhancement is not required for eligibility purposes on the new loan.
New Loan Requirements
The following table provides requirements for the new loan resulting from the refinance under the high LTV refinance option.
✓
The new loan must...
have an application date on or after November 1, 2018.
be either:
have a term not to exceed 30 years.
meet current general or high-balance loan limits, as applicable, at the time of loan delivery.
have a newly executed Uniform Residential Loan Application (
provide a benefit to the borrower in the form of at least one of the following:
a lower P&I payment;
a lower interest rate;
a shorter amortization term; or
movement to a more stable product (for example, from an ARM or step-rate modification to a fixed-rate loan).
The new loan cannot be originated pursuant to Texas Constitution Section 50(a)(6). Temporary interest rate buydowns are not allowed.
The standard limited cash-out refinance requirements are modified for high LTV loan transactions. The new loan amount is limited to
the payoff of the UPB of the existing first mortgage loan being refinanced (including accrued interest);
the financing of closing costs, prepaid items, and points up to $5,000 total for the new loan; and
cash back to the borrower up to $250. Excess proceeds may be applied as a curtailment on the new loan.
Lenders may provide an incentive to the borrower(s) in the form of a payment to pay off a portion of the existing loan being refinanced provided the following:
no repayment is required,
the payment is reflected on the settlement statement as a lender credit, and
because any such reduction of the existing loan balance will impact the LTV ratio as it applies to the calculation of the new loan amount, lenders are advised to use caution as incentives have the potential to reduce the LTV ratio below the minimum allowed for this option.
See B3-4.1-02, Interested Party Contributions (IPCs), for additional requirements that apply to lender incentives.
Borrower Eligibility
Generally, the borrower(s) on the loan being refinanced (or the current borrower(s) if the existing loan was assumed) must be identical to the borrower(s) on the new loan. However, an existing borrower may be excluded from the new loan for either of the following:
the remaining borrower(s) meets the mortgage payment history requirements and provides evidence that they have been making the payments on the existing loan from their own funds for the most recent 12 months prior to the application of the new loan, or
due to the death of a borrower. Evidence of the deceased borrower’s death must be documented in the loan file.
If this criteria cannot be met, the new loan must be underwritten in accordance with the Alternative Qualification Path. See B5-7-03, High LTV Refinance Alternative Qualification Path for additional information.
New borrowers may not be added to the new loan refinanced via the high LTV refinance option. Additionally, if the loan being refinanced was assumed by the current borrower(s) prior to the refinance, the current borrowers must have been qualified for the existing loan in accordance with the requirements of the Servicing Guide.
Borrowers who have applied for or received a modification are eligible for refinancing provided the following:
the borrower benefit provision is met using the prevailing payment, and
the payment history requirement is met. See Credit Eligibility Requirements in B5-7-02, High LTV Refinance Underwriting, Documentation, and Collateral Requirements for the New Loan.
Property Eligibility
All Fannie Mae-eligible property types are permitted for refinance under the high LTV refinance option.
For properties in condo, co-op, or PUD projects, all project review requirements are waived with the exception that the lender must confirm the project is not a condo or co-op hotel or motel, houseboat project, timeshare, or segmented ownership project. For assistance in determining whether the project is a condo or co-op hotel or motel, see B4-2.1-03, Ineligible Projects.
The lender must obtain property and flood insurance in accordance with this Guide.
LTV Ratio Requirements
For the new loan to be eligible, the following table provides the minimum LTV ratio requirements for both fixed-rate and ARM loans.
1
97.01%
2
85.01%
3-4
75.01%
1
90.01%
1-4
75.01%
The loan being refinanced and the new loan do not have to represent the same occupancy. The occupancy of the subject property may have changed by the time of the high LTV refinance transaction.
There are no maximum LTV, CLTV, or HCLTV ratios for fixed-rate loans. There is a maximum LTV ratio of 105% for ARM loans, but no maximum CLTV or HCLTV ratio. For comprehensive requirements see the Eligibility Matrix.
Eligible Subordinate Financing
New subordinate financing is only permitted if it replaces existing subordinate financing. In addition, the existing subordinate financing
may not be satisfied with the proceeds of the new loan, but
may remain in place as long as it is resubordinated to the new loan, and
may be simultaneously refinanced as long as the new subordinate lien loan amount does not exceed the existing UPB.
Other subordinate financing requirements described in B2-1.2-04, Subordinate Financing are not applicable.
Leasehold Estates Eligibility
The term of the leasehold must run for at least five years beyond the maturity date of the mortgage, unless fee simple title will vest at an earlier date in the borrower. The lender is not required to perform any additional review of the leasehold terms.
Multiple Financed Properties
There are no limits on the number of financed properties the borrower may own. The additional eligibility requirements for borrowers with multiple financed properties in B2-2-03, Multiple Financed Properties for the Same Borrower do not apply.
