Obama Refinance Plan – Inside the Numbers
Posted on | July 7, 2009 | No Comments
Please use Subprime Blogger to get your mortgage rates forecast each week. There are also several articles that will help you to get the low mortgage rates you see advertised.
Last week I posted a few articles on the Obama Refinance Plan stepping up the loan-to-value ratio to 125%. If we crunch some numbers, we will be able to make a more educated guess as to why this plan was extended and if it will work. Many officials at HUD “claim” that the original plan to offer 105% loan-to-value has greatly helped with refinancing in the current economy. They claim that it has been much more successful than the mortgage modification programs put in place. With that being said, it cannot be “extermely” successful if they had to move the LTV up to 125%.
Zillow makes the point that the change from 105% to 125% increases the percentage of home owners who now have the chance to refinance to 36%; this is 10% more than the original Obama Refinance Plan. To put that into perspective, that is 20.1 million borrowers versus 14.6 million. Obviously this greatly increases the amount of home owners who can refinance their mortgages but will it help the housing market at all?
As many lenders are saying, it will makes at least 90 days or more for this plan to be implemented due to the Desk Underwriter automated system. It is quite possible that average mortgage rates could be quite higher in three months so will it really help home owners save that much money? If the plan went into effect immediately I would say that the plan would definitely help a great number of borrowers get a low rate mortgage. Unfortunately, I have a bullish outlook for mortgage rates as I think the 10 year treasury rate will move higher which will pull daily mortgage rates up with it.
Overall, offering underwater home owners a chance to refinance at lower rates is a great thing. In the grand scheme of things, I really do not feel it is going to help the overall economy. If the plan were set up to work immediately we could see people refinance and have the ability to stay in their homes. Sadly, borrowers are going to have to wait and when the rules have been put in place, average mortgage rates may be over 6%.
Tags: 125% mortgage > 125% refinance > making home affordable > obama refinance
Comments
Leave a Reply