More home loans could qualify for refinancing

06.22.09
By Sarah Beldo

Homeowners with higher loan-to-value ratios could soon be eligible for refinancing under the Obama administration's plan to stem foreclosures.

According to a Bloomberg report, the government is thinking about how to expand the current anti-foreclosure initiatives to help homeowners who are more deeply underwater on their mortgages than the current program allows.

Right now, homeowners with mortgages guaranteed by Freddie Mac or Fannie Mae - and who meet various other criteria - can qualify for the government’s Making Home Affordable plan as long as their loan is equal to 105 percent or less of their property's value.

The program has already helped tens of thousands of borrowers refinance onto new mortgages with lower monthly payments. And now, even more people could qualify.

"We're actively considering how to structure a program that makes sense over 105 percent," James Lockhart, directory of the Federal Housing Finance Agency, told Bloomberg.

Recently, rising mortgage rates have become a potential roadblock to the program's success, he added.

The most recent figures from the Mortgage Bankers Association show that refinancing activity fell by nearly one-quarter (23 percent) in the week ended June 12.

The proportion of mortgage applications to refinance home loans declined to 54.1 percent from 59.4 percent one week earlier.

Despite the fact that average rate for a 30-year, fixed rate mortgage decreased slightly to 5.5 percent, it could not match the record-low rates seen in April.

"Higher mortgage rates will keep re-fi activity under pressure," economist Tom Porcelli of RBC Capital Markets told Bloomberg.

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Government is thinking about how to expand the current anti-foreclosure initiatives.