Realty Check

Published: Thursday, 2 Jul 2009 | 2:30 PM ET

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I got quite a slew of emails yesterday after blogging about the change in the Administration's refi-to-the-rescue plan. One in particular, from a self-described "mortgage professional" named Jason, was, I thought, worth sharing.

This plan is great in theory...the practical application from the big banks doesn't exist. I can tell you that the 105% plan isn't a 105% plan according to the investors which offer this product in the marketplace. I would ask you to dig a little deeper into the "guidelines" for the "DU Refi plus" [DU stands for Desk Underwriter, "an automated underwriting system that helps lenders make informed credit decisions on conventional conforming, non-conforming and government loans" —www.efanniemae.com] plan which the big banks have in place. I can promise you that once you actually see what is offered in the marketplace you will see large discrepancies between what Washington has promised and what is available for "Main Street".

Another thing which will be an issue is the pace at which Fannie and Freddie program their automated underwriting engines to accept this 125% plan. My guess...based upon the timing of the 105% plan will be 60 to 90 days and another 30 to 45 days for the investors to "tweak" their guidelines to actually allow this to happen. At the company where I work, we turn more people down because they can't qualify for this plan versus accept because of the investor restrictions which have been put in place.

Government officials with whom I've spoken, from the HUD Secretary to the Treasury's point-man on the housing bailout, claim that the refi plan has been extremely successful, far moreso, they admit, than the modification program. But clearly it wasn't doing enough, or they wouldn't have widened the parameters of elligibility.

An interesting stat, by the way, came to me from the folks at Zillow.com. They claim that since the change from 105 percent DTI to 125 percent DTI, now a full 36 percent of all borrowers could qualify for a refi. That's a full 10 percent more than before. Or if you like to think of it as actual people, the plan could now, theoretically, help 20.1 million borrowers, as opposed to the previous 14.6 million.

Questions?  Comments? 

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