This past week, there was news that perhaps the government’s Fannie Mae and Freddie Mac refinancing program may begin refinancing mortgages with loan-to-value ratios above 105 percent as the Obama administration seeks to boost participation in its anti-foreclosure programs.
“We’re actively considering how to structure a program that makes sense over 105 percent,” Federal Housing Finance Agency Director James Lockhart said. He said a ratio of 125 percent “is a number” that’s on the table, though “not necessarily the number we’re going to end up with.”
This would be an expansion of President Barack Obama’s Home Affordable program announced Feb. 18, sought to help homeowners who may owe more on their mortgages than their homes are worth. No word was given at to when the loan-to-value ratio could be raised.
Home Affordable has been “seeing a slowdown” as mortgage rates increase, Lockhart said. The average rate on a typical 30- year fixed loan was 5.38 percent last week, according to Freddie Mac. The rate is up from a record low of 4.78 percent at the end of April.
The program applies to mortgages that meet Fannie Mae and McLean and Freddie Mac’s conforming loan limits. That cap is $417,000 for some areas and as high as $729,750 for the 250 most expensive real estate markets.
Under the program, borrowers with loans owned or guaranteed by Fannie Mae or Freddie Mac who have loan-to-value ratios of 80 percent to 105 percent and aren’t delinquent can refinance without buying mortgage insurance, or paying for more insurance than they already have.
Expanding the program to a 125 percent loan-to-value level may benefit additional borrowers that have loans backed by Fannie Mae or Freddie Mac. Fannie Mae and Freddie Mac own or guarantee more than half of the single-family mortgages in the U.S.
Lockhart also said yesterday that his agency, the companies’ regulator, is looking at ways for Fannie Mae and Freddie Mac to help the so-called warehouse lending market, which provides financing to smaller, independent mortgage companies, amid a credit crunch.
While Fannie Mae and Freddie Mac are prohibited by law from lending directly to other firms, Lockhart said they may be able to provide the market some liquidity by committing to purchase multifamily and other loans.
As more information is released on this initiative and others we will continue to provide updated information.
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