Reports have been circulating everywhere regarding the pressure from Obama’s administration on Fannie Mae and Freddie Mac to force principal write-downs for underwater borrowers. Some people are all for this program while others are saying it may not even amount to anything substantial.
Strategists from Credit Suisse are saying the number of incremental mortgage borrowers is too small resulting in this program having limited power due to the small number of qualifying borrowers. They are estimating that only 5 to 15 percent of the $224 billion outstanding balance of more than 105 percent LTV loans from 2005 to 2008 might qualify. Strategists also think another burden to the program is the likeliness that borrowers will need to be in imminent default to qualify. Currently, borrowers who are in imminent default are already offered HAMP, a government sponsored mortgage modification program. It is because of this that strategists feel these borrowers will most likely just be switching from HAMP to FHA short refinancing.
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