Divorce / Owner Buyout Refinance
Paying another owner for their equity does not always force the new mortgage into cash-out classification.
Fannie owner-buyout exception
A refinance used for one owner to buy out another can be treated as a limited cash-out refinance when the secured property was jointly owned for at least 12 months before disbursement and the required written agreement documents the transfer and disposition of proceeds.
The remaining borrower cannot pocket the buyout proceeds
The borrower acquiring sole ownership may not receive proceeds intended for the departing owner's interest and must qualify for the new mortgage.
Inheritance exception
Fannie provides an exception to the 12-month joint-ownership documentation requirement for recent inheritance.
Official agency baseline
Fannie Mae Selling Guide · Freddie Mac Seller/Servicer Guide
These are agency-level rules. AUS findings, mortgage insurance, product restrictions and lender/investor overlays can still affect a real loan.