2) Loans with MI are permitted provided the new loan amount is not approximately $4,000 or 4% more than current loan principal, whichever is lower.

They've thought pretty hard about this. The modification plans being put into effect are a pretty decent compromise as well. I would have gone for it to be weighted more towards some principal reduction, but I can see the argument against that. Their solution has to encompass the demands of being generally fair across the borrower spectrum, of getting to the immediate problem of nonpayment and yet, not totally bailing out those seeking relief.

It's not the wisdom of Solomon, but it's a workable plan.

"only 6% of agency loans have LTVs between 105% and 125%."

that data – where is it from? it cant possibly be accurate – unless it only takes into account loans that may have been at that level when originated.

"…homeowner would have to be both desperate and crazy to refinance on these terms"

what are "these terms"? how do you know the terms? why are the terms less desirable than the homeowners current terms?

"So buyers of this paper will sit on losses."

isnt that the point – the gov't sits on the losses until they are no longer losses – because they have the deepest pockets and the longest time horizon, right?

"The refi turns a non-recourse loan into a recourse loan, exposing the borrower and locking them in should housing prices not recover. "

is that in all states? also, many of theses loans must already be recourse loans thanks to the cash out refi (better known as "what should have been wage gains") , so what's the difference? isn't it that the gov't now holds the note until it goes away – whenever that may be?

"What about mortgage insurance? "

i talk to wells fargo in april/may and was told that loans with pmi don't qualify for the program. is that true?

at the time i thought to myself how convenient for the banks to have that clause – nobody is going to use this program. – the people that need it will have pmi on their loans. (which by the way is the heart of the beast and needs to be slayed) and those that don't, probably dont need it.

FINANCIAL INSURANCE- what a joke and a scam. the only insurance is uncle sam's teat. what a bunch of wimps in finance. cant handle risk – so they pawn it off on others and reap all the rewards.

the only thing insured is the whole deal crashing down.

From Freddie and Fannie perspective, they are modifying existing loans which would already subject them to loss, and slightly reducing the risk of future loss.

http://www.thenational.ae/article/20090617/BUSINESS/706179916/1137

Take a house that's worth 100k with a purchase mortgage of 125k.

option a) Borrower walks. They lose their down payment. No more payments. Bank liable for 25k loss. They go rent something they can afford.

option b) Borrower refis. Now borrower is liable for bank's 25k loss and continues to pay interest on the loss until paid off. Should the borrower default at this point (likely, as this is still not a property they can afford), the bank can take the rest of their property too.

(I don't see walking away a moral issue. The banks wrote the loans clearly understanding non-recourse and priced the money accordingly.
With the roles reversed, banks consistently follow legal and not moral obligations.)

At 125% LTV, by refi'ing, the borrower immediately transfers a huge loss position from the bank onto themselves, exposing themselves not only to loss of home, but now to loss of additonal property!

A 105% LTV could be considered a help. A 125% LTV refi, from a consumer-protection point of view, is a completely hazardous instrument. It's outrageous the government is suggesting this as an option.

California Congressman Gary Miller has introduced H.R. 3044, which would place an 18-month moratorium on the recently imposed Home Valuation Code of Conduct (HVCC). The HVCC was worked out through an agreement between Fannie Mae, Freddie Mac, and the New York Attorney General’s Office (NYAG) in response to an investigation by the NYAG into Fannie and Freddie.

The purpose of the HVCC was to try and insulate the appraisal process from undue influences. The HVCC attempted to do this by placing tight controls and restrictions on the ordering of the appraiser, as well as purposes for communicating with the appraiser during the process. However, the implementation of the HVCC, which came about by neither regulation nor Congressional statute, has resulted in appraisals that cost more, take longer to perform, and are inaccurate. C.A.R. has heard from members throughout the state of similar difficulties with the HVCC and its negative impact on the California real estate transaction. C.A.R. is supporting H.R. 3044, and is asking California’s Congressional Delegation to sign onto the bill as a cosponsor."

Haliburton has a strict cash only policy now.