Fannie Mae Allows Borrowers to Refi Up To 125% of Home Value?
HOME LOANS, INDUSTRY NEWS
July 17th, 2009
I shook my head during the boom years when lenders offered home owners the opportunity to borrow much more than their property was worth only to read last week that Fannie Mae has developed a loan program that does the same thing-bury a buyer in debt with even more debt!
The Home Affordable Refinance Program (HARP) has been expanded to permit refinancing of existing Fannie Mae and Freddie Mac loans to assist borrowers with a proven track record of paying their mortgages on time but have been unable to refinance due to sharp declines in property values. One would have to be very optomistic about future home value appreciation before signing on the dotted line for a loan that exceeds the value of their property by 25%!
One reason home owners with stellar credit are giving banks their house keys is the undesirable situation of making payments on a home that is worth much less than what is owed. Fannie and Freddie should be focused on writing down the principal balance of loans they hold for borrowers with a demonstrated ability to make monthly mortgage payments utilizing a loan modification program. Perhaps, a better idea would be for Fannie to split the equity loss with the banks that they purchased the loan from and complete a loan modification that lowers the principal balance of the loan to reflect current market value!
Why? I believe these government sponsored enterprises(GSE’s) are primarily responsible for this housing mess. They cooked the books to award top Fannie/Freddie CEO’s multi-million dollar bonuses, then started buying toxic mortgages despite warnings from internal staff that these loans were junk, then packaged and resold these loans to investors from around the world before it all unraveled. Red flags went up all over the place and these GSE’s turned a blind eye because the economy was humming along (toward a head-on train wreck).
Yes, Wall Street and banks had a major role in causing this economic catastrophe but neither would have been allowed to facilitate this fraud without the direct cooperation and blessing of these GSE’s. This new loan program should be canned before it creates a new list of victims. I hope no borrowers get duped into a loan that will burden them for decades to come. When will our government learn from past mistakes?
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS GMAC
CORNER OF COURT AND PLACER IN REDDING
QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
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