Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: SATURDAY, November 20, 1993                   TAG: 9311200054
SECTION: BUSINESS                    PAGE: A-6   EDITION: METRO 
SOURCE: Associated Press
DATELINE: WASHINGTON                                LENGTH: Medium

REFINANCING STANDARD LOWERED

The Federal National Mortgage Association said Friday it will permit refinancing on homes if owners have as little as 5 percent equity. Previously, refinancing required at least 10 percent equity.

"We are extending the benefits of refinancing to a greater number of people," said James A. Johnson, chairman of the association also known as Fannie Mae. "We believe this will be an enormous benefit to consumers, especially those living in areas where home prices have declined."

Millions of homeowners have refinanced in recent years as mortgage rates fell from double-digit figures. Rates had dropped to a 25-year low of 6.74 percent in October, although they averaged 7.08 percent this week.

Refinancing at a lower rate permits homeowners to reduce their monthly payments. For instance, homeowners who took out a 30-year mortgage on a $100,000 home when rates were 9.5 percent four years ago now pay $840 a month in principal and interest. By refinancing at a 7 percent rate, their monthly payments would drop to $665.

Johnson said Fannie Mae refinanced more than $143 billion in mortgages for about 1.5 million households so far in 1993. Association economists estimate $10 billion of savings will be pumped into the economy through mortgage refinancing and the downward adjustment of adjustable rate mortgages this year.

But many owners are unable to refinance because the value of their homes has fallen.

Fannie Mae's new policy applies only to mortgages in which Fannie Mae has invested or bought. Eligible new mortgages must be fixed-rate loans on principal residences that require scheduled repayment. The sole purpose of refinancing must be to reduce the mortgage rate on the existing loan.