The 105% loan-to-value ratio limit on Fannie Mae and Freddie Mac's program to refinance underwater borrowers could be raised to increase participation, according to the GSEs' regulator.

The Federal Housing Finance Agency is "looking at going significantly higher than 105%," FHFA director James Lockhart said. The 105% ceiling has kept too many borrowers on the sidelines, he told a National Association of Real Estate Editors conference.

The GSEs have refinanced 80,000 homeowners under the special program that the Obama administration has promoted to help borrowers who can't qualify for a standard refinancing. The administration unveiled the refinancing program in February and estimated it will refinance at least 4 million homeowners who have loans that are owned or guaranteed by the government sponsored enterprises.

The 105% LTV limit theoretically allows Fannie and Freddie to securitize the newly refinanced loans and sell them to the Federal Reserve and other investors. However, raising the LTV might force the GSEs to hold the loans on their books.

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