Govt. Refinance Loans to 125% LTV

By
Real Estate Broker/Owner with brokerforyou.com CA Lic#00706331

Fannie Mae

If bad loans got us into this mess, can we expect more bad loans to get us out? The answer is YES if you are running the Fannie Mae or Freddie Mac government refinance programs. In a recent press release it was announced that the two government owned agencies will now refinance loans up to 125% of the current home's value!

Did we not learn anything from the current, and continuing), housing bust? All facts from the mortgage industry and government point to the fact that mortgage default rates take a huge spike upwards with high loan to value loans.

I would venture to say that many of the mortgage debtors (in trust deed states) may not realize that by refinancing through this program, they will be going from a non-recourse loan to recourse refinancing, in many cases.

My bet is that actions like this will give a false sense of recovery for awhile, only to have us fall further in the future, much like the stimulus money is currently doing.

In his statement FHFA Director Lockhart said, “The higher LTV refinancing will allow more homeowners to strengthen their finances.” Do you really believe this? If the government really wanted people to stay in their houses, they would allow them to go into foreclosure and help them find alternative housing. Moving them into a 125% LTV recourse loan is setting them up for disaster and setting taxpayers up to take on the resulting new losses.

Perhaps the government is not being 100% honest in their touting this 125% refinancing program as a way to help people stay in their houses. In reality, it may actually be a way to help banks keep from writing down assets while they earn enough money to increase their capital base.

Living in California, I'm a little disappointed in the fact that our state tax and spend government did not come up with a comparable plan before the Feds. The fact that California has no budget, is issuing IOU's and has upwards of a 26 billion deficit is no excuse. Just a few months ago California passed a new law giving new home buyers a credit of 5% of the purchase price up to $10,000. California set aside 100 million for this program. Now that the $100 million is almost exhausted, two new bills are pending in Sacramento to to double or triple the original $100 million.

San Diego homes for sales

close

This entry hasn't been re-blogged:

Re-Blogged By Re-Blogged At
Topic:
Mortgage / Finance
Groups:
Realtors®
Dedicated Bloggers
Tags:
refiance loans

Post a Comment
Spam prevention
Spam prevention
Show All Comments
Rainer
4,911
Buzz Stanko
Real Estate One Blue Water - Port Huron, MI

This is a bad bad plan...........

Jul 21, 2009 05:10 AM #1
Rainer
12,359
Aaron Catt
Silvercreek Realty - Boise, ID
Boise Real Estate

I think we should be careful in trying to compare a bad loan of yesterday (Alt A, subprime, stated income/assets, ect.) with 125% Financing.

I would concur that giving 125% loans out to people who weren't credit worthy is a bad idea, but there are in fact people who ARE creditworth who are trying to keep their homes.  Couldn't this be a reasonable solution for them.

Jul 21, 2009 06:06 AM #2
Rainmaker
73,001
San Diego real estate blog San Diego real estate agent
brokerforyou.com CA Lic#00706331 - San Diego, CA

Hi Buzz, Aaron,

Thanks for the comments.

Aaron, I agree with you...somewhat. True, in certain cases these loans are very useful. But, how quickly the loan industry can abuse the original intent is the problem.

I think the Govt. will do whatever is required to patch things up so voters in 2010 re-elect democrats.

I think you should read my return of the No-Document home loan post of 7-10-09.

Jul 21, 2009 06:34 AM #3
Rainer
12,359
Aaron Catt
Silvercreek Realty - Boise, ID
Boise Real Estate

Interesting to say the least.

I think that we will see a separating of the wheat from the chaff not so much with regard to the loans, but with regard to those that originate them.  To that I say good riddance.

Jul 21, 2009 07:34 AM #4
Rainer
41,131
Patrick Randles
Nova Home Loans - Tucson, AZ

I think this is a good plan. You are taking folks who have been paying and allowing them the benefits of the lower interest rates, thus lowering their monthly outgo. The loan stays with the original servicer so I don't see where the negative exposure comes from.

Jul 27, 2009 06:17 AM #5
Rainmaker
73,001
San Diego real estate blog San Diego real estate agent
brokerforyou.com CA Lic#00706331 - San Diego, CA

Hi Patrick,

 

Thanks for the comment.

Jul 27, 2009 10:59 AM #6
Rainer
567
Greg Robbins
Chase, Phoenix, AZ - Phoenix, AZ

Well, the 125% hasn't been released yet. At Chase we have been told to expect it mid August. A couple things to keep in mind.

1. To be eligible, clients can not have any late payments in the past 12 months--these are good payers/loans

2. This is a great way for people to lower their interest rate/payment, or convert a ARM or Interest Only product go to a fixed rate loan. This should add stability in the months to come.

105% or 125% of values in the Phoenix market are in many cases 50% lower than values two years ago. Did values go too high too fast, yes. Will they stay this low long term, doesn't seem likely given the slowing of construction.

I attended a frist time home buyer seminar yesterday and heard a state official complain that it was hard for first time home buyers to take advantage of the Neighborhood Stabilization Homeownership Assistance program funds because they were being outbid by investors paying cash.

Aug 05, 2009 10:40 AM #7
Anonymous
Airwolf

This new program is Full Doc and less than half of people will qualify, it will only helo a few people at best.  Besides, with the coming AMERO currency the dollar has to be repudiated, therefore you think you have a housing slump now, wait till the new currency goes into effect.

Aug 19, 2009 10:59 AM #8
Anonymous
Lake Placid Homes

 

This is the Awesome post !!! And I think this is a good idea and nice plan..

I agree with you, in certain case this loan are useful..

 

May 24, 2011 08:05 PM #9
Post a Comment
Spam prevention
Show All Comments

What's the reason you're reporting this blog entry?

Are you sure you want to report this blog entry as spam?

Rainmaker
73,001

San Diego real estate blog San Diego real estate agent

Ask me a question
*
*
*
*
Spam prevention