Analysts at Barclays Capital expect the additional housing-rescue measures announced today will have little-to-no impact on agency prepayments.
The Obama administration said it will pony up another $3 billion in funds to bail out struggling homeowners. The existing Housing Finance Agency (HFA) Innovation Fund for the Hardest Hit Housing Markets stands to get $2 billion, while the other $1 billion will go to start a new Emergency Homeowners Loan Program under the U.S. Department of Housing and Urban Development (HUD).
“Both programs are designed to provide temporary assistance to help unemployed homeowners with their mortgage payments as they seek re-employment,” Barclays analysts said, adding that initial details indicate that prepayment will be indifferent to this new lifeline.
“Loans are automatically being bought out by the GSEs at 120-days plus delinquency,” analysts added. “As a result, borrowers who become seriously delinquent should most likely be repurchased before they can enroll in the program.”