No You Cannot / Yes I Can... And Will

The argument is simple, should we do high loan to value refinances? The question poses many interesting views and my own proclivity's lead me to believe I'm a supporter. The difference between the 'Loan Product Problem' that was caused by furious greed and the high 125% loan to value refinance is simple. The old loans were originated under NINA terms (No Income No Assets) the new FHA guidelines are strict in a time while we are in a credit crunch. The FHA 125% isn't the worse idea in the world. Someone that purchased in the peek of the market and only owes 125% of the value is a good borrower that probably put some money down at one point. Or in the words of our new President "These are People that Tried to do the Right Thing." FHA guidelines are tough. You need to qualify for the loan, you have to provide evidence on Income, Credit and cash. It's a strong 30 year fix that won't adjust and I support it if the borrower qualifies for it!
Home Affordable Refinance eligibility expanded to 125 percent LTV
Fannie Mae last week announced the Home Affordable Refinance Program (HARP) will be expanded to permit refinancing of existing Fannie Mae and Freddie Mac loans with current loan-to-value ratios (LTVs) up to 125 percent, an increase from the current LTV limit of 105 percent. Fannie Mae characterised the expansion as a move to help lenders serve more borrowers with a demonstrated track record of paying their mortgages, but who have been unable to refinance due to significant property value declines. Loans with LTVs above 105 percent will be eligible for a same-servicer refinance under the Refi Plus manual underwriting option, and the new loan must be a fully amortizing fixed-rate mortgage with a term greater than 15 years, up to 30 years. Fannie Mae is evaluating potential updates to Desktop Underwriter to allow LTV ratios above 105 percent.

In conjunction with the LTV expansion, Fannie Mae also announced it is offering a 0.50 percentage point reduction in the loan-level price adjustment (LLPA) charged for manually underwritten Refi Plus loans with LTVs above 105 percent and loan terms greater than 15 years, up to 25 years. Refi Plus mortgage loans with LTV ratios that exceed 105 percent are eligible for whole loan purchase or delivery into MBS on or after September 1, 2009. Please refer to Announcement 09-23 for information about a new MBS prefix and other operational and delivery details for loans with LTVs above 105 percent.

Freddie Mac announced a similar 125 percent LTV expansion July 1; details are available on the webinar below.

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Free Think FHA webinars July 14, July
Don’t miss your chance to learn all about FHA with free Think FHA webinars on July 14 and July 28 from 1 p.m. to 2 p.m. The webinars will cover various topics including the benefits of FHA loans and Energy Efficient Mortgages to Hope for Homeowners. Space is limited, so register early and reserve your spot. For more information, visit http://www.car.org/education/FHA/.

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-Christopher Rockey