Fannie, Freddie to increase loan-to-value ratio

As the Obama administration looks to strengthen its anti-foreclosure programs, Fannie Mae and Freddie Mac will refinance mortgages with loan-to-value ratios of as much as 125 percent, jumping 20 percent from its former ratio of 105 percent. So far, 80,000 underwater loans have been refinanced through the Home Affordable program, but Paul Miller, an agent at FBR Capital Markets, said the plan will not work once affordability decreases, because the plan does not focus enough on principal writedowns. James Lockhart, director of the Federal Housing Finance Agency, agreed. He said the Home Affordable program has seen a slowdown in activity since mortgage rates have gone up.