Obama’s Subprime Refinance Program

The Obama administration has decided that more subprime loans are part of the solution to the mortgage crisis. Accordingly, borrowers with eligible mortgages that are up to 125% of the value of the underlying real estate will be eligible for a loan modification.

From HousingWire, here are the details:

The administration expanded its Home Affordable Refinance Program to include borrowers current on payments but whose mortgages are worth up to 125% of the house’s value.

In its original terms, the refi program applied to a borrower whose mortgage — owned or guaranteed by government-sponsored enterprise Fannie Mae or Freddie Mac — did not exceed 105% loan-to-value (LTV). The expansion to 125% should broaden the program’s reach to deeply underwater borrowers.

“This decision is part of our ongoing efforts to maximize the effectiveness of the Making Home Affordable program and adapt to an ever-changing housing market,” said Treasury Departmentsecretary Tim Geithner in a statement today.

“By expanding refinance eligibility,” he adds, “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.”

The question is are they doing homeowners a favor with this change? If you’re that far under water it seems to me you should be doing one of two things. Either working on a principal reduction with your lender of bundling up the keys to send them back to him.

This sounds like a great way to establish a class of homeowners that are trapped in their homes for the foreseeable future.

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About Tom Lindmark 401 Articles

I’m not sure that credentials mean much when it comes to writing about things but people seem to want to see them, so briefly here are mine. I have an undergraduate degree in economics from an undistinguished Midwestern university and masters in international business from an equally undistinguished Southwestern University. I spent a number of years working for large banks lending to lots of different industries. For the past few years, I’ve been engaged in real estate finance – primarily for commercial projects. Like a lot of other finance guys, I’m looking for a job at this point in time.

Given all of that, I suggest that you take what I write with the appropriate grain of salt. I try and figure out what’s behind the news but suspect that I’m often delusional. Nevertheless, I keep throwing things out there and occasionally it sticks. I do read the comments that readers leave and to the extent I can reply to them. I also reply to all emails so feel free to contact me if you want to discuss something at more length. Oh, I also have a very thick skin, so if you disagree feel free to say so.

Enjoy what I write and let me know when I’m off base – I probably won’t agree with you but don’t be shy.

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