Tuesday, August 28, 2007

FHA and FNMA Expanded Approval Only Product Options for ARM Adjusters: Bank of America Study

More evidence to support the theory of an approaching train-wreck in residential housing: Calculated Risk reported today on a Bank of America internal study that estimated only 36% subprime borrowers with resetting ARMs will be able to find viable refinance options, and that the only products that can bring relief to the lucky 36% are limited to FNMA's Expanded Approval program and FHA programs.
...the report concludes that FHA and Fannie Mae's "Expanded Approval" program (EA, its existing program for "near prime") are the only realistic options, given pricing structures. BoA estimates that approximately 18% of outstanding subprime ARM borrowers could qualify for an FHA refi(on both credit guidelines and rate reduction), and approximately 36% could qualify for Fannie Mae's EA. (That's best understood as 36% qualifying for either FHA or EA, not a total of 54%.) The larger bucket of loans qualifying for EA is mostly a matter of the larger GSE maximum loan amount compared to the FHA maximum, as well as a slice of the highest-credit class for which EA, at least in theory, offers 100% financing in contrast to FHA's 97% maximum.

No comments: