The Mortgage Bankers Association said it wants the Obama administration's housing plan to be expanded so more underwater borrowers can refinance their loans.
John Courson, the MBA's president, sent a 10-page letter Monday to Treasury Secretary Timothy Geithner and Housing and Urban Development Secretary Shaun Donovan suggesting changes to the plan unveiled last week.
The MBA wants the Treasury to expand the plan's refi program to include mortgages not owned or guaranteed by Fannie Mae or Freddie Mac and loans that exceed the temporary conforming limit of $729,750 in high-cost areas, he wrote.
The trade group also wants to eliminate or raise a 105% cap on the loan-to-value ratios permitted under the refi program. Doing so would help a broader group of underwater borrowers in states like California, Florida, and Nevada, Mr. Courson wrote.
William Longbrake, a director at First Financial Northwest Inc. of Renton, Wash., who has been advising the Obama administration on the issue, said it is "entirely possible" the ceiling could rise above 105% once Fannie and Freddie determine the procedures they will follow for refinancing underwater loans.
Mr. Longbrake, who has worked at the Federal Deposit Insurance Corp. and Washington Mutual Inc., made his remarks at a National Association of Mortgage Brokers conference in Washington this week and stressed that he was speaking for himself and not the White House.
Last week James Lockhart, the director of the Federal Housing Finance Agency, the regulator and conservator for Fannie and Freddie, said the line was drawn at 105% so the new loans could be securitized.
Mr. Courson also wrote that the MBA wants the administration's plan to include a safe-harbor provision protecting servicers that modify loans from investor lawsuits. The MBA also recommended that the Treasury and the SEC "encourage" the Financial Accounting Standards Board to temporarily suspend certain accounting changes for securitizations that may affect bank capital.
Losses from loan modifications may require banks to hold additional capital, the MBA said, and bank regulators should "provide capital rule relief" if securitized assets have to be put back on bank balance sheets.