HARP LTV Could Go Higher

l Housing Finance Agency Director James B. Lockhart hinted last week that loan-to-value (LTV) requirements of the refinancing arm of President Obama's Making Home Affordable plan may be increased. Currently, the plan allows refinances for mortgages with LTVs up to 105%. The regulator is ‘actively considering how to structure a program that makes sense over 105 percent,’ Lockhart said at a conference for real estate editors, according to a [link=http://www.bloomberg.com/apps/news?pid=newsarchive&sid=avAvJacs7UcU][u]Bloomberg News[/u][/link] report. The Home Affordable Refinance Program (HARP) may be expanded to include LTVs up to 125%, though that is "not necessarily the number we're going to end up with," he added. Over the last three months, Fannie Mae and Freddie Mac have done 1.8 million refinancings. The HARP refis, just starting, are 80,000, a quarter of which are over 80% LTV. Credit Suisse mortgage strategist Mahesh Swaminathan told Bloomberg that upping the allowable LTV ratio to 125% could help about 10% of borrowers who have Fannie- or Freddie-backed loans. Lockhart also commented that modifications, which have increased by nearly 14,000 from the fourth quarter of 2008, are reducing borrowers' monthly payments more than they have in years past. "Some 52 percent of modifications during the first quarter of this year reduced the borrowers' monthly payments by more than 20 percent, while a year ago, it was only two percent," he said. "With only 16 percent receiving any reduction last year, versus 83 percent last quarter, no wonder there was so high a redefault rate." The government-sponsored enterprises' recent adoption of certain Financial Accounting Standards Board rules will also relieve the short-term adverse accounting impact of loan modifications, Loackhart added. SOURCE: FHFA, Bl

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