Today's 125% loan-to-value ratio mortgage is not like the one that took the market by storm in 1998 only to blow out just as quickly, says Icon Residential Lenders' chief operating officer, Philip Giunta.

Icon, an Irvine, Calif., subsidiary of the $424 million-asset Grand Bank in Hamilton, N.J., will be originating Fannie Mae's 125% DU Refi Plus loans on both a wholesale and retail basis. Giunta said he believes the intention of the Fannie Mae program is to help quality borrowers refinance their mortgages. A large segment of these consumers have good credit scores, good jobs and assets, and have done the right things and made their mortgage payments, but falling home values hurt them.

This 125% product is strictly for rate-and-term refis; it is also strictly a first-lien mortgage. The late 1990s product was a second-lien loan that allowed consumers to take cash out to do whatever they wanted with the money including debt consolidation.

"It's tough to put this 125 in the previous year's 125, where they were betting on appreciation," Giunta said. Fannie Mae's intent, he said, is to reward borrowers who are doing the right thing and let them participate in a market with historically low interest rates and relieve some of their financial pressure.

Icon is drawn to the quality of the loan and quality borrowers.

"When we look at the parameters of the program and the restrictions that are on the product, we felt comfortable in the fact that these are not borrowers who were in over the heads. They are good borrowers, quality borrowers, who wanted to partake in lowering their monthly payment and couldn't because of value restrictions," Giunta said.

He pointed out that other lenders in this space have a 110% LTV maximum. Fannie's 125% product further expands this market.

Icon, established two and a half years ago, is now a Department of Veterans Affairs-approved lender. It is also an approved Federal Housing Administration lender.

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