It could soon be easier to borrow against your home after U.S. regulators approved a Freddie Mac pilot program for purchasing second mortgages. The plan, announced Friday, is meant to help homeowners who secured low-interest mortgages and want to access their home’s equity for a loan.
The Federal Housing Finance Agency (FHFA) said it granted “conditional approval” to the program. Under the pilot, Freddie Mac will have $2.5 billion cap on purchases over 18 months, with maximum loan amounts of $78,277.
The plans come as cash-out refinancings have become increasingly unviable for borrowers who would be forced to swap their current rates for higher ones. Instead, borrowers can secure a second, smaller loan through Freddie Mac for things like home renovations.
After the pilot ends, FHFA said it will “analyze the data on Freddie Mac’s purchases of second mortgages to determine whether the objectives of the pilot were met.”
FHFA president Sandra L. Thompson said in a statement that the pilot comes as “many borrowers — particularly low-income borrowers and those in rural and underserved communities — have struggled to access equity in their homes through the private home equity market.”
Thompson also said the volume cap was put in place to “mitigate any concerns about potential inflationary impacts,” an issue raised by multiple senators and congresspeople in a May letter addressed to her.
The legislators worried that the program “will exacerbate inflation, disrupt the home equity lending and consumer credit markets, and increase risks to taxpayers, while providing no benefit to the many Americans who lack substantial home equity.”
