An unfortunate case (275)

We had some good data today. Manufacturing showed muted declines. Pending housing sales improved slightly.

But the economy will, in the long term, turn on underwater mortages.

July 1 (Bloomberg) -- Fannie Mae and Freddie Mac will begin refinancing mortgages with loan-to-value ratios of as much as 125 percent as the Obama administration seeks to boost participation in its anti-foreclosure programs.

But...

Peter Cirillo, an independent mortgage broker in Long Island, New York, said Fannie Mae and Freddie Mac’s risk-based pricing makes it “much too difficult” for borrowers to qualify to refinance, even if the companies already back their loans.

“All of these government programs are having little or no effect on the ability to refinance,” Cirillo said in an interview. “Even potential borrowers with great credit and low LTV’s, but reduced income, have no chance of refinancing to a lower rate or payment because of strict” rules on debt-to- income ratios, he said.

The data are still abysmal.

A drop in values has left about 20.4 million of the U.S.’s 93 million houses, condos and co-ops with mortgages higher than the properties are worth as of March 31, Seattle-based real estate data service Zillow.com said in a report May 6.

http://www.bloomberg.com/apps/news?pid=20601103&sid=aHVHVQAbwbvY