U.S. raises home refi plan's loan-to-value ceiling to 125%

The Obama administration today eased eligibility rules for its Home Affordable Refinance Program, lifting the maximum loan-to-value ratio to 125% from 105%.

The shift, which regulators had hinted was coming, is aimed at making refinancing available to more homeowners whose homes are worth less than their mortgages.

HARP is open to homeowners whose loans are owned or guaranteed by Fannie Mae or Freddie Mac, the mortgage finance giants now under government control. It covers first mortgages only.

The refi program, launched this year, has gotten off to a slow start, in part because the maximum 105% loan-to-value ratio was too low to include many people whose homes have fallen sharply in value.

The new loan-to-value maximum of 125% means an eligible homeowner with a $375,000 mortgage could refi if his or her house is worth at least $300,000. But the borrower still would have to be able to afford the new loan, and income requirements are an increasing problem as unemployment soars and many workers are forced to take pay cuts.

Treasury Secretary Timothy F. Geithner said the move to raise the loan-to-value limit was "a crucial step in our broader efforts to get America's housing market and economy on the path to recovery."

But refi activity in general remains vexed by the jump in mortgage rates from their generational lows in April. Refi applications to lenders have tumbled since mid-May as rates have surged, according to Mortgage Bankers Assn. data. Despite a down tick in rates in the last two weeks, refi activity hasn’t rebounded.

-- Tom Petruno

Comments

[Lou]

Once again the Obama administration is proving it is just as incompetent and out of touch as the previous one. This will not work just like his previous attempt to fix this so-called "crisis" won't work. The reason: this isn't a crisis, it's a correction. Why can't any of these idiot politicians figure this out? Foreclosures are the answer to our problem. Let prices hit bottom and let the market stabilize. But Obama is a tool of the banks and special interest.

And seriously, who wants to stay in a home they owe 125% to the value of their homes. And no matter what propagandha the corporate media spews out, prices have way more to drop. Pretty soon Obama will let people refi who owe 200% to the value of their home.

Obama is a hypocrite. He ran on helping the middle and working class but he is doing everything in his power to keep the number one cost for these people (housing) high and not let it correct to reasonable levels. Great change we got.

[Mike]

Instead of being able to refinance at 125%. They should write the mortgage balance down 25% and create some incentive for homeowner to actually stay in the home without walking away. This will only prolong the problem.

[Jumbo & Underwater]

Still no help or hope for most of us in SoCal with a jumbo. The $729,500 threshold is way too low for all of us.

I don't mind no chance at equity as long as my payment is near rental units of comparable size. I will watch the bank's house, keep it clean, maybe add a few things...and then give it back in 40 years.

Isn't that better than giving it back now, with all the other homes in foreclosure?? At least if I give it back later it may be worth something.

[Maggie Knowles]

The lenders I speak to say it's too late, should have been done in 2007, especially now that folks are losing their jobs. No job, no refi...