U.S. may expand mortgage refinance program - WSJ

Tue Dec 25, 2012 11:46pm EST

Dec 26 (Reuters) - The U.S. government is considering expanding its mortgage refinancing program to include borrowers whose mortgages are not backed by Fannie Mae and Freddie Mac, the Wall Street Journal reported, citing people familiar with the discussions. ()

The refinancing program now being considered also seeks to include "underwater" borrowers who owe more than their homes are worth, the Journal said.

The proposal would also transfer potentially riskier loans held by private investors to the government-sponsored mortgage entities Fannie Mae and Freddie Mac, the paper said.

Such a move would require congressional authorization to temporarily change the charters of Fannie Mae and Freddie Mac, according to the Journal.

About 22 percent of all homes with a mortgage, or around 10.8 million homes, down from 12.1 million last year, were worth less than the outstanding balance at the end of June, the Journal said, citing data from CoreLogic.

Under the proposal, Fannie and Freddie would be allowed to charge higher rates to borrowers in order to compensate for the risk of guaranteeing refinanced loans that are underwater and more likely to result in default.

Officials at the U.S. Treasury could not be reached for comment by Reuters outside of regular U.S. business hours.

Combined with Fannie Mae and Freddie Mac, which buy loans and repackage them as securities for investors, Washington's footprint in the market has grown to account for nearly nine of every 10 mortgages.

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California state worker Albert Jagow (L) goes over his retirement options with Calpers Retirement Program Specialist JeanAnn Kirkpatrick at the Calpers regional office in Sacramento, California October 21, 2009. Calpers, the largest U.S. public pension fund, manages retirement benefits for more than 1.6 million people, with assets comparable in value to the entire GDP of Israel. The Calpers investment portfolio had a historic drop in value, going from a peak of $250 billion in the fall of 2007 to $167 billion in March 2009, a loss of about a third during that period. It is now around $200 billion. REUTERS/Max Whittaker   (UNITED STATES) - RTXPWOZ

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