Interest-free Balloon Mortgage - Conforming Loan
Answer by Randy Carey, BOL Guru Guru Bios
Question: An interest-free balloon mortgage granted to a former spouse pursuant to a property settlement agreement is preventing the borrower from refinancing the subject residential property, even though the former spouse has agreed to subordinate the balloon mortgage to the new lender. The new lender advises that such a refinancing, notwithstanding the subordination of the balloon mortgage, would violate Fannie Mae requirements. Is this accurate, and if so, what modifications to the interest-free balloon mortgage would enable the lender to make a conforming loan?
Answer: You need to refer to the Fannie Mae 2007 Selling Guide for details:
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