On August 1, 2019, the U.S. Department of Housing and Urban Development (“HUD”) announced a reduction in the maximum loan-to-value (“LTV”) and combined maximum LTV ratios on cash-out refinance mortgages from 85% to 80%.
The last change to maximum LTVs occurred in 2009 in response to a weakening housing market. As explained in its publication, HUD is making the current adjustments as a prudent measure to strengthen the equity position of cash-out refinances and reduce severity of loss in the event of a potential shift in the housing market.
This change is effective September 1, 2019.