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Will Obama's New Modification Plan Make Refi-Plus Obsolete?

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Mortgage and Lending with Mortgage Alliance Group - San Diego, CA - NMLS#305667

Fannie Mae's Refi-Plus and the more limited Relief Refinance from Freddie Mac debuted nearly a year ago.  These programs were designed to allow responsible homeowners, who had first mortgages owned by these agencies, to refinance into today's low rates even though they had lost value (equity) in their homes and ordinarily would have had a difficult time refinancing or would of had to pay costly mortgage insurance.  The programs were originally designed to refinance up 125% of the home's current market value.

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These programs saw limited use and popularity primarily because the agencies imposed some fairly stiff pricing adjustments for anything over 95% LTV that would usually negate any benefit to the borrower in the program.  The programs of course also had all of the agencie's other pricing "hits" for credit scores, property and occupancy types, etc.  I personally originated 12 of these loans in the past year but had to pass on numerous others simply because the LTVs were too high or the borrowers had existing mortgage insurance on their current loans.

Whether lenders will go ahead and modify loans that are eligible for Refi Plus and Relief Refinance remains to be seen.  If lenders do modify these loans it will mean the death nil for these two programs.  These programs involve refinancing and the associated fees that go with it.  Why would homeowners pay to refinance when they can modify for free?

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