UPDATE: Obama Administration To Expand Its Foreclosure Prevention Effort
July 01 2009 - 1:51PM
Dow Jones News
The Obama administration on Wednesday moved to allow more
underwater borrowers to take advantage of lower interest rates
under its program to combat the foreclosure crisis.
Strapped borrowers with mortgages worth up to 125% of their
home's value will now be eligible to refinance under the program,
as long as they are current on their loans. Currently, the program
caps eligibility at 105% loan-to-value.
Department of Housing and Urban Development Secretary Shaun
Donovan made the announcement while touring a foreclosure-ridden
neighborhood of Las Vegas, Nev., with Senate Majority Leader Harry
Reid, D-Nev., and Congresswoman Dina Titus, D-Nev.
"By expanding refinance eligibility, we can bring relief to more
struggling homeowners more quickly. It's a crucial step in our
broader efforts to get America's housing market and economy on the
path to recovery," Treasury Secretary Timothy Geithner said in a
statement.
The program, one prong of the administration's effort to help
strapped borrowers, is targeted at underwater borrowers with
mortgages backed by Fannie Mae (FNM) and Freddie Mac (FRE).
Normally, the mortgage finance giants require mortgage insurance
for loans greater than 80% of the home's value. But under the
program, borrowers with mortgages worth 80% to 125% of their home's
value can refinance without having to purchase mortgage
insurance.
In a recent speech, James B. Lockhart, the regulator for Fannie
Mae and Freddie Mac, said that 80,000 people had already refinanced
under the program.
However, rising rates could hamper the program's reach.
Refinancing volume has dropped off sharply since April, when the
average rate on a 30-year fixed-rate mortgage hit 4.78%, according
to Freddie Mac (FRE)'s weekly survey of its lenders. The average
rate on a 30-year mortgage was 5.42% last week.
-By Jessica Holzer, Dow Jones Newswires; 202-862-9228;
jessica.holzer@dowjones.com