Obama Expands Refinance Program From 105% To 125%

Today HUD Secretary Shaun Donovan announced that the Obama Refinance - also known as the Making Home Affordable Plan — was expanding the guidelines to allow people to refinance their homes up to 125% loan to value.

This means that people who were previously under water by more than 105% and couldn’t refinance under the Obama refinance plan can now refinance their homes as long as they do not owe more than 125% of what their home is worth.
This change in guidelines is just one more thing the Obama administration is doing to boost participation in its anti-foreclosure programs.

Prior until today’s announcement, anyone who had a mortgage that was owned by either Fannie Mae or Freddie Mac could refinance their home under the Obama refinance plan (or the Making Home Affordable Plan) as long as they didn’t owe more than 105% of what their home is worth. Todays announcement expanded that number to 125%.

Here in Virginia, and in many other parts of the country - there are many people who currently owe more than 105% on their home and prior to today, they are unable to refinance. Now as long as they don’t owe more than 125% of what their home is now worth, they can take advantage of lower rates.

According to CNN:
The move acknowledges that home prices in many areas have fallen so far that many people were shut out of the program. Some 67% of homeowners in Las Vegas — one of the hardest hit areas where Housing Secretary Shaun Donovan announced the expansion Wednesday — owe more than their homes are worth.
More than one in five borrowers are now underwater, with homes in parts of California and Florida losing more than 50% of their value, according to Zillow.com, a real estate Web site. Some 20 million people own homes worth less than their mortgages.
“The president’s Making Home Affordable plan is already helping far more than any previous foreclosure initiative and with today’s announcement we will extend its reach still further,” said Donovan.

According to Bloomberg:
The decision to change the allowable ratio is part of an effort to “adapt to an ever-changing housing market,” Treasury Secretary Timothy Geithner said in the HUD statement. “By expanding refinance eligibility, we can bring relief to more struggling homeowners more quickly.”
Paul Miller, an analyst with FBR Capital Markets in Arlington, Virginia, said mortgage brokers have told him that many aren’t sending borrowers through the program because it’s cumbersome and the loan applications “still have a lot of bells and whistles, which makes them difficult to do.”
“I don’t think it’s going to have much of an impact because you still don’t have enough qualified borrowers,” Miller said, referring to today’s announcement. “It will help on the margin, but the issues with Obama’s plans is that they all focus on affordability and not principal writedowns and at some point they’re going to have to address” that, he said.
A drop in values has left about 20.4 million of the U.S.’s 93 million houses, condos and co-ops with mortgages higher than the properties are worth as of March 31, Seattle-based real estate data service Zillow.com said in a report May 6.

My Thoughts:
I don’t know how much of an impact this expansion will have across the nation - but here in Virginiaand in other states — where many, many people owe more than 105% of their home’s value, I can see it having a significant impact.
Feel free to email or call me with questions — I am sure there will be plenty!

Rob Alley, Realtor of The Avery Group at Roy Wheeler
540-250-3275 (cell)
roballey@roywheeler.com
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