Selling Guide

Published June 02, 2021

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What transactions are not eligible as a cash-out refinance?

Ineligible Transactions

The following transaction types are not eligible as cash-out refinances:

  • The mortgage loan is subject to a temporary interest rate buydown.
  • The subject property was purchased by at least one borrower within the six months preceding the disbursement date of the new mortgage loan except if delayed financing guidelines are met. See Delayed Financing Exception guidelines.
  • For certain transactions on properties that have a Property Assessed Clean Energy (PACE) loan, borrowers who refinance the first mortgage loan and have sufficient equity to pay off the PACE loan but choose not to do so will be ineligible for a cash-out refinance. See B5-3.4-01, Property Assessed Clean Energy Loans for additional information.
  • Transactions classified as HomeStyle Energy loans. However, energy-related improvements are permitted.
  • Transactions in which a portion of the proceeds of the refinance is used to pay off the outstanding balance on an installment land contract, regardless of the date the installment land contract was executed.
  • The new loan amount includes the financing of real estate taxes that are more than 60 days delinquent and an escrow account is not established, unless requiring an escrow account is not permitted by applicable law or regulation. For example, if a particular state law does not allow a lender to require an escrow account under certain circumstances, the loan would be eligible for sale to Fannie Mae without an escrow account.

The transaction is not eligible for delivery to Fannie Mae if the subject property is listed for sale at the time of disbursement of the new mortgage loan. See also B2-1.3-04, Prohibited Refinancing Practices.

For complete details, see B2-1.3-03, Cash-Out Refinance Transactions.

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