UPDATE: FHFA Lockhart:Rising Rates May Hurt Homeowner Program
June 18 2009 - 6:27PM
Dow Jones News
Federal Housing Finance Agency Director James B. Lockhart
acknowledged that he is concerned that rising mortgage rates could
deal a blow to the Obama administration's plan to help strapped
homeowners.
"Certainly it is an issue. We're certainly seeing a slowdown in
refinancings, you can see the numbers," Lockhart said in response
to a reporter's question Thursday.
A key part of the administration's plan aims to help underwater
homeowners refinance to take advantage of low mortgage rates. But
rates have shot up to well above 5% since the program was
announced. So far, 80,000 homeowners have received refinancings
under the program.
"There's a big pipeline so it probably won't hit for a couple
months," Lockhart said. "But at some point, if we don't see some
moderation of rates, it could have an impact."
Lockhart, the regulator for Fannie Mae (FNM) and Freddie Mac
(FRE), confirmed the administration is mulling tweaks to the
program so homeowners with mortgages worth more than 105% of their
home's value could qualify for refinancings.
He declined to say what the new loan-to-value limit would be,
but said that loans with a 125% loan-to-value ratio could be sold
into special pools known as Real Estate Mortgage Investment
Conduits, or REMICs.
Lockhart said Fannie and Freddie were barred by their charter
from engaging in "warehouse" lending, which nonbank mortgage
lenders rely on for capital to make fresh loans. Lenders have seen
their warehouse lines of credit cut due to the credit crunch.
Lockhart said Fannie and Freddie could help cash-strapped
lenders by agreeing upfront to purchase the loans before they are
originated.
- By Jessica Holzer, Dow Jones Newswires; 202-862-9228;
jessica.holzer@dowjones.com