Refinancing rules eased further at Fannie, Freddie
NEW YORK - Fannie Mae and Freddie Mac will begin refinancing mortgages with loan-to-value ratios of as much as 125 percent as the Obama administration seeks to boost participation in its antiforeclosure programs.
Shaun Donovan, secretary of Housing and Urban Development, made the announcement in a statement yesterday. Currently Fannie Mae or Freddie Mac, through President Obama’s Home Affordable program, can refinance mortgages they own or guarantee when the loan is worth as much as 105 percent of the home’s market value.
The continuing slide in home prices has pushed millions of Americans beyond that 105 percent loan-to-value ratio, limiting participation in Obama’s initiative. Fannie Mae and Freddie Mac have refinanced 80,000 loans under the program, which set out to help as many as 5 million people who may owe more than their homes are worth, Federal Housing Finance Agency director James Lockhart said last month.
The decision to change the allowable ratio is part of an effort to “adapt to an ever-changing housing market,’’ Treasury Secretary Timothy Geithner said in the HUD statement. “By expanding refinance eligibility, we can bring relief to more struggling homeowners more quickly.’’
Paul Miller, an analyst with FBR Capital Markets in Arlington, Va., said mortgage brokers have told him that many are not sending borrowers through the program because it is cumbersome and the loan applications “still have a lot of bells and whistles, which makes them difficult to do.’’
“I don’t think it’s going to have much of an impact because you still don’t have enough qualified borrowers,’’ Miller said, referring to yesterday’s announcement. “It will help on the margin, but the issues with Obama’s plans is that they all focus on affordability and not principal write-downs, and at some point they’re going to have to address’’ that, he said.
Just 20,000 of the 80,000 refinanced Fannie Mae and Freddie Mac mortgages exceed loan-to-value ratios of 80 percent, which are the loans administration officials specifically targeted in designing the program, Lockhart said.
Peter Cirillo, an independent mortgage broker in Long Island, N.Y., said Fannie Mae and Freddie Mac’s risk-based pricing makes it “much too difficult’’ for borrowers to qualify to refinance. A drop in values has left about 20.4 million of the United States’ 93 million houses, condos, and co-ops with mortgages higher than the properties are worth as of March 31, real estate data service Zillow.com said in May.
