GSE Refis May Exceed an LTV of 105%

The loan-to-value limit on mortgages that Fannie Mae and Freddie Mac can refinance under the President's foreclosure rescue plan could go higher than 105%, according to an industry veteran who has been advising the Obama Administration on the issue. Stressing that he was speaking for himself and not the White House, William Longbrake, a member of the board at First Financial Northwest, Renton, Wash., said it's "entirely possible" the ceiling could rise above 105% once the government-sponsored enterprises determine the procedures they will follow regarding refinancing underwater loans. Last week, James Lockhart, director of the Federal Housing Finance Agency, said the line was drawn at 105 so the new loans could still be securitized. According to the government, about 75% of the mortgages with LTVs above 80% of current value that the GSEs own or guarantee fit under that cap. Mr. Lockhart said his team did not want to push the lid any higher because of capacity issues. But mortgage professionals said the artificially low LTV limit won't help borrowers in California, Nevada and other markets where values have sagged the most. Mr. Longbrake, who has worked at the FDIC and most recently at WaMu, made his remarks at the National Association of Mortgage Brokers Legislative and Regulatory Conference in Washington.