The Obama plan would temporarily approve Fannie Mae and Freddie Mac to provide mortgage refinancing that they own or guarantee with loan-to-value ratios (LTV’s) of as much as 105% without appraising the property or requiring additional mortgage insurance.   That means that first and second mortgage loan balances can be 5% greater than the property’s appraised value.  This is good news for thousands of homeowners who recently found themselves upside-down with mortgage balances that exceeded that home values. Because of the lack of home equity, these homeowners were previously unable to qualify for traditional or FHA refinance loan.

Borrowers who don’t have mortgage insurance on their current home mortgages will not need it under the plan, Lockhart said.   Without new appraisals, the loan-to-value ratios could be far higher than 105%, masking the companies’ true risk, said Paul Miller, an analyst at FBR Capital Markets in Arlington, Virginia.   “They’re a public policy arm of the federal government right now,” Miller said of Fannie and Freddie. “They aren’t being run for profitability.”