Fannie, Freddie Lift 125% LTV Cap to Help ‘Underwater’ Homeowners

The regulator of the two mortgage-financing giants, Fannie Mae and Freddie Mac, said today it has expanded its refinancing assistance to “underwater” homeowners by removing the current 125 percent loan-to-value (LTV) ceiling for fixed-rate mortgages.
With the much-anticipated adjustment, there is now no cap on how much a mortgage holder owes.
Enhancements to the two-year-old Home Affordable Refinance Program, known as HARP, targets homeowners whose mortgages – backed by Fannie and Freddie – exceed the value of their homes. It is the latest attempt by the Obama Administration to give a jolt to the ailing housing market and ease the ongoing foreclosure crisis.
But only homeowners current on their mortgage payments are eligible, a requirement which fails to assist those already in the foreclosure process.
Fannie and Freddie’s regulator, the Federal Housing Finance Agency, estimates that up to a million homeowners will take advantage of HARP, which has failed to meet previous expectations. Most U.S. home mortgages are funded by Fannie and Freddie, the government-sponsored enterprises under U.S. control since the financial crisis of 2008.
Another change to the program is the elimination of certain risk-based fees for borrowers to utilize HARP for refinancing into shorter-term mortgages. Borrowers will be able to reduce the balance owed much faster if they take advantage of historically low interest rates by shortening the term of their mortgage, the FHFA said.
“We have identified several changes that will make the program accessible to more borrowers with mortgages owned or guaranteed by the Enterprises,” said FHFA Acting Director Edward J. DeMarco. “Our goal in pursuing these changes is to create refinancing opportunities for these borrowers, while reducing risk for Fannie Mae and Freddie Mac and bringing a measure of stability to housing markets.”
Other enhancements to HARP include:

  • Waiving certain representations and warranties to which lenders commit in making loans owned or guaranteed by Fannie Mae and Freddie Mac;
  • Eliminating the need for a new property appraisal where there is a reliable AVM (automated valuation model) estimate provided by the Fannie and Freddie; and
  • Extending the end date for HARP until Dec. 31, 2013 for loans originally sold to the Fannie and Freddie on or before May 31, 2009.

See the FHFA’s Resource for Homebuyers and Homeowners.

2 thoughts on “Fannie, Freddie Lift 125% LTV Cap to Help ‘Underwater’ Homeowners

  • October 24, 2011 at 11:31 am

    As I see these programs.. I am happy for those people that this will actually help, but I can’t help but get more and more angry.
    My mortgage company probably laughs each time it cashes my checks for a mortgage on a house that is almost 70,000 underwater and is stuck in an adjustable arm loan that is currently raking in 8.75 percent interest.
    I have a family with 4 young children, a lot of bills but not enough to qualify for a modification (tried that and was denied– twice)!! Once for too much debt and the second time for too much income… really?? OK… which one is it..
    I am just so fed up with this but of course I am stuck writing the check each month and hoping that we can just hang in there. What I really want to do is mail the keys to my lender and walk away.
    Where is the help for people like me with the Conventional loans???? Can I refinance into a Fannie/Freddie loan??
    Someone help me understand why I can’t get any relief.

  • October 24, 2011 at 3:20 pm

    It’s all BS smoke and mirrors. I just got off the phone with my mortgage company (I have a GMAC Fannie Mae financed through USAA — military loan). They know nothing about it and were trying to tell me that the cap is not 125% but only 105%. I have called USAA 5 times in the last 18 months to try to refinance. The first time, I did not have 36K to put down, 2nd it was 43, 47, 67, and who knows what it is this 5th time? As the months go by my home is worth less and less. Pretty soon the loan cap amount will have to be 200% of the current market value in order for me to refinance. Is this any way to treat the military and their families?

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