Underwater Refi’s May Be In Jeopardy

Housing agencies clash over mortgage relief program.  The FHA (Federal Housing Agency) says the programs will help avoid foreclosures.  The FHFA (Federal Housing Finance Agency) says that if extended to federally backed loans (Freddie Mac & Fannie Mae) it could create a logistical nightmare and cost too much in tax dollars.

Arguments on the pro side state that 1 in 4 homes are upside-down (or underwater, meaning their current market value is less than their mortgage balance).  Allowing refinancing to the current lower rates can help many of these owners from loosing their homes.  If the Fannie Mae & Freddie Mac programs are excluded, nearly 1/2 of today’s mortgages will be left out.  This would of course greatly reduce the effect of the measure.

The FHFA (which oversees the Fannie Mae & Freddie Mac programs) argues that it will cost too much, and they have already lost too much money.  So far they have resisted the programs.

Source: The Washington Post

How does that effect us?  Our take is that FHA loans comprise a larger share of the underwater home mortgages than combining the numbers above would indicate.  The estimation that 1/4 of home mortgages are upside-down includes high end homes.  These loans would not be covered by FHA loans, and are not common in our area.  The majority of loans in the Yuba-Sutter area are or can be FHA, so excluding them would nearly eliminate the benefit for our area.  Currently there are sources available for underwater loans in our area! 

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