125% Mortgages?
by Tom on July 2, 2009
in Market Musings, banks
HUD made the announcement that Fannie and Freddie are going to start doing refinance transactions up to 125% of the value of the homes. There are particular rules and regulations that I’ll get into more when I write my Mortgage Market Week in Review. I’m going to write that tomorrow (Friday) so if you aren’t already on the list, sign up for your copy now in the column on the left.
A couple of quick reactions:
- These are only rate and term refinance loans, so all they can pay off is an existing mortgage that is currently with either Fannie or Freddie.
- This is a risk reduction strategy for Fannie and Freddie. The thinking is that they can hopefully avoid some foreclosures by lowering payments.
- Due to rising interest rates and recently (at least as far as I know, recently) instituted credit score and loan to value pricing adjustments and ongoing employment challenges, I think the number of loans that will happen through this program are a lot less than the government is predicting.
More on it later……
Tom Vanderwell
HUD Allows 125% LTV in Home Affordable Refis : HousingWire || financial news for the mortgage market
The administration expanded its Home Affordable Refinance Program to include borrowers current on payments but whose mortgages are worth up to 125% of the house’s value.US Department of Housing and Urban Development (HUD) secretary Shaun Donovan announced the LTV limit expansion today while touring a Las Vegas neighborhood–a befitting venue for the reveal, considering 67% of homeowners there are underwater on their mortgages.
So maybe we didn’t say 125% after all…..
by Tom on June 22, 2009
in Market Musings, house prices
An interesting article over at Housing Wire. Let me summarize it:
- Apparently the government is looking at higher loan to value options but the report that they are going to do them up to 125% loan to value just isn’t accurate.
- So apparently they are just floating “trial balloons” that might or might not provide additional relief
- According to an analyst from JP Morgan Chase, the affect would be minimal because it would only help out 10% of the population. Well, if it would truly keep 10% of the population out of foreclosure, that would be a good thing.
Anecdotal evidence (just from my experience) is that the vast majority (upwards of 95%) of the people who I’ve refinanced benefited greatly but I’d say less than 5% of them were in a situation where it is truly the thing that is going to save them from foreclosure.
So, the news of the 125% LTV isn’t all it’s cracked up to be. With the way the government leaked details about the tax credit loans that weren’t loans, don’t get your hopes set on any particular plan until we have the actual final plans.
Stay tuned,
Tom Vanderwell
FHFA, Fannie and Freddie’s conservator, has said applying Lockhart’s comment to the effect of 125% LTVs are eligible for sale into Real Estate Mortgage Investment Conduits toward plans for a new refi LTV limit are a misrepresentation of Lockhart’s comments.Media reports that the LTV limit could top as much as 125% might be speculation, but the idea is catching on, with JP Morgan commentary on the mortgage-backed securities market late last week echoing the figure.
“We expect the proposal to raise the Obama refi LTV limit to 125[%] will have a minimal impact on speeds since only under 10% of the universe could benefit theoretically,” the analysts said.
