Fannie, Freddie to Refinance Loans With Loan-To-Value Ratios Of As Much As 125%

By Dawn Kopecki

July 1 (Bloomberg) -- 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 anti-foreclosure programs.

Housing and Urban Development Secretary Shaun Donovan made the announcement in a statement today. Currently Fannie Mae or Freddie Mac, through President Barack 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 that 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 at a real estate conference on June 18.

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, Virginia, said mortgage brokers have told him that many aren’t sending borrowers through the program because it’s cumbersome and the loan applications “still have a lot of bells and whistles, which makes them difficult to do.”

Little Impact

“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 today’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 writedowns 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, New York, said Fannie Mae and Freddie Mac’s risk-based pricing makes it “much too difficult” for borrowers to qualify to refinance, even if the companies already back their loans.

“All of these government programs are having little or no effect on the ability to refinance,” Cirillo said in an interview. “Even potential borrowers with great credit and low LTV’s, but reduced income, have no chance of refinancing to a lower rate or payment because of strict” rules on debt-to- income ratios, he said.

Home Values

A drop in values has left about 20.4 million of the U.S.’s 93 million houses, condos and co-ops with mortgages higher than the properties are worth as of March 31, Seattle-based real estate data service Zillow.com said in a report May 6.

Home Affordable has also been “seeing a slowdown” as mortgage rates increase, Lockhart said. The average rate on a typical 30-year fixed loan was 5.42 percent in the week ended June 25, according to Freddie Mac. The rate is up from a record low of 4.78 percent at the end of April.

U.S. mortgage applications fell last week by the most since February, the Mortgage Bankers Association said today. The MBA’s index of applications to buy a home or refinance a loan dropped 19 percent to 444.8 in the week ended June 26 from 548.2 the prior week. The group’s refinancing gauge fell 30 percent to the lowest in seven months, while the index of purchases declined 4.5 percent.

Loan Limits

The Obama program applies to mortgages that meet Washington-based Fannie Mae and McLean, Virginia-based 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.

Fannie Mae and Freddie Mac own or guarantee more than half of the single-family mortgages in the U.S. The government- chartered companies were seized by regulators in September amid concern that their capital wasn’t sufficient to weather the worst housing slump since the Great Depression.

The companies each said in separate statements today that borrowers with loan-to-value ratios of between 105 percent and 125 percent must refinance through their existing mortgage company to qualify. Fannie Mae is additionally paying lenders an incentive equal to half a percentage point, to encourage refinancings to shorter terms of 20 or 25 years. Freddie Mac said it is also offering a “special price incentive” as well to borrowers that accept a shorter repayment schedule.

To contact the reporter on this story: Dawn Kopecki in Washington at dkopecki@bloomberg.net.

Last Updated: July 1, 2009 15:19 EDT

http://www.bloomberg.com/apps/news?pid=20601087&sid=aHVHVQAbwbvY

Sticking it to the bankers...Stay put until they produce the note!

Here's the essence of contract law.

Two parties come to an agreement and sign a piece of paper.

A loan is a contract.

If the owner of a loan wants to enforce it (including predatory conditions), it
has to do two simple things:

1. Produce the paperwork

2. Prove it owns the loan, Guess what?

In their brilliant financial machinations, the "Masters of the Universe" on Wall Street forgot these two simple laws.

Result: There are a lot of houses in foreclosure where:

1. The paperwork can't be found

2. No one is able to figure out who actually owns the loan because it's
been sold, resold, packaged and repackaged so often.

Oooops.

One Ohio Congresswoman has a word of advice for the thousands of people in her district now in foreclosure:

"Stay put" and when the sheriff comes, tell him to "Show me the paper."

You know, it sometimes takes a very, very long time, but there often is justice in
this world.

Stay Put

Produce the note

Follow the law

Wall Street and its co-conspirators on Main Street had a great plan.

Step 1: Ram predatory loans down the market with fraud and deceptive marketing.

Step 2: Some of the loans will blow up, but in the aggregate it will all work out and besides, the loans will be bundled and sold off to investors (spreading the toxic waste), so who cares?

Great plan, but it had a few problems.

Problem #1: It destroyed the world financial system (minor detail)

Problem #2 (And he's where it get VERY interesting...) For a loan to be valid, the lender needs to be able to produce the paperwork.

Guess what?

In their mad greed to screw the American people and line their own pockets, Wall Street forgot that little detail.

Many of these loans and been sliced and diced and sold and re-sold so many times that not only is the paperwork not easy to lay hands on, in some cases, it's not clear who actually owns the loan.

Here's where property law comes in.

If the bank can't produce the documents and the real owner of the loan can't be identified, the contract is null and void.

You've got to hand it to Congresswoman Marcy Kaptur (and Ohio which produces a lot of great Congresspeople.)

By telling a bank to "produce the note," a homeowner can delay foreclosure by forcing the lender to prove the suing institution is actually the same which owns the debt.

Now, the banks own sloth and disorganization (and inherent dishonesty) can be used against it.

Final word: The media (and Wall Street and its criminal partners in Congress and the former Bush White House) love to call these loans sup-prime.

Here's the old fashioned word: predatory.

Many of the loans that were made in the past five years that have created so many problems would have been illegal until Bush & Co not only gutted lending laws, but also literally sued states to stop them from enforcing their own lending laws.

Former governor Elliott Spitzer was the ring leader of the state movement to enforce local lending laws...and you saw what happened to him.

He's no saint (and truth be told, he's kind of a jerk) but if every politician who went to hookers was busted, Washington and all the state capitals would be ghost towns

Why Elliot Spitzer was assassinated

http://www.brasschecktv.com/page/550.html