Wednesday, July 1, 2009

Refinance LTV limits go from 105% to 125%

I'm surprised Fannie/Freddie are raising the limit for refinancing's to 125% hasn't made more news today. See this Bloomburg article or the HUD press release.

In reality, this won't do much to stem foreclosures as the most at risk people are well over 125% and many won't have the income to qualify anyway at their current loan balance. As we have argued in other posts, only principal reduction will keep these high risk borrowers out of foreclosure.

That isn't to say that this won't help some families. I personally know one or two that want to refinance but their appraisals have been coming in the 105-125% range. These are the kind of families that are experiencing some financial stress, but were riding out the cycle and very unlikely to default unless they lose their job.

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