Magazine article American Banker

SoFi, Fannie Mae Offer Cash-Out Refi for Student Loans

Magazine article American Banker

SoFi, Fannie Mae Offer Cash-Out Refi for Student Loans

Article excerpt

Byline: Brad Finkelstein

A new refinance mortgage offered by Social Finance, better known as SoFi, lets consumers tap into their home equity to pay down student loan debt at terms more favorable than a traditional cash-out refi.

The San Francisco-based online lender is partnering with Fannie Mae on the product. The loans will be underwritten to the secondary market investor's guidelines for credit score, debt-to-income ratio and other criteria, and the property must support an 80% loan-to-value ratio, inclusive of both the original mortgage and student loan debts.

The "Student Loan Payoff ReFi" can be used to either reduce or completely pay off the borrower's existing student loans and is available to both consumers with their own outstanding student loans and those who have co-signed loans. About 8.5 million of the more than 44 million U.S. consumers with student loan debt are homeowners with sufficient equity and creditworthiness to qualify for the loan, SoFi estimates.

SoFi and Fannie Mae and working exclusively on the offering. Depending on the results of the pilot program, Fannie Mae will evaluate whether to offer more widespread student loan payoff products in the future, said Jonathan Lawless, Fannie Mae vice president of product development and affordable housing.

SoFi's product is priced competitively with a rate-and-term refinance, which typically has an interest rate that's 25 basis points lower than a traditional cash-out refi. …

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