Refinance programs already exist, like the Home Affordable Refinance Program, which allows borrowers with loans from Fannie Mae and Freddie Mac with loan to value ratios of up to 125 percent to refi. There's also the FHA "Short Refi," which requires the lender to write down principal on the loan. The HARP program has refinanced less than a million loans, and the FHA program never really got off the ground because the FHFA, overseer of Fannie and Freddie, won't let them participate.
So back to the drawing board, except the drawing board is increasingly cloudy. The trouble is that the Administration will not want to do anything that would require enacting any legislation, given how cozy they all are with Congress these days.
"That means any type of bold program will be more about politically attacking Republicans than about helping housing," says Jaret Seiberg of MF Global. "By contrast, a more limited announcement is something that regulators could implement. That would have a higher probability of enactment even if the impact is less."
That would mean some kind of expansion of the existing programs, like dropping the LTV on the HARP program and letting delinquent borrowers into the mix as well. You'd also have to eliminate all the lender fees.
Citi analyst Josh Levin is skeptical any of these proposals would spur a massive refi wave. "Of the 752,000 homeowners who have done a refi through HARP, 93 percent had LTVs in the 80 percent -105 percent range and only 7 percent had LTVs in the 105 percent to 125 percent range, suggesting that homeowners with negative equity simply aren't interested in refinancing."