The loan refinancing scheme of the Obama administration’s government foreclosure program was assessed by James Lockhart, oversight board chairman and CEO of the Federal Housing Finance Agency, in his speech at the annual conference of the National Association of Real Estate Editors in Washington, D.C. recently.

Lockhart admitted that the 105-percent loan-to-value limit of the government foreclosure prevention program’s loan refinancing scheme may not work in states where home prices have fallen to the lowest levels, putting many mortgages underwater.

Lockhart said federal housing officials are considering increasing the loan-to-value limit to help underwater borrowers. But he also reiterated that much of the progress of the government foreclosure prevention program depends on the determination of troubled homeowners to save their homes.

The FHFA official said many homeowners have not been replying to their mails and others are refusing to take advantage of the lower mortgage rate, such as the 2 percent rate.

In an effort to explain the slow pace of the loan modification scheme of the government foreclosure prevention program, Lockhart said that mortgage servicers have been overwhelmed by large numbers of applications. He explained that the systems of lenders were not originally designed to service sudden large numbers of loan modification applicants.

Nevertheless, Lockhart said, the current government foreclosure prevention program has shown indications of becoming more successful than previous programs because of the incentives given to both lenders and borrowers to modify loans.

He also added that the Obama program should result in fewer repeat defaults than previous programs.

At the conference, Lockhart also discussed the future roles of Freddie Mac and Fannie Mae, which were taken over by the federal government in September 2008. Lockhart and former Treasury Secretary Henry Paulson crafted the move of the two enterprises into conservatorship to help maintain housing market stability.

Lockhart said that Fannie Mae and Freddie Mac have been recapitalized with more than $900 billion and that the federal government is committed to provide more if needed under the Housing and Economic Recovery Act signed by former President George Bush in 2008.

Among all the proposals submitted by various sectors for the future roles of Freddie Mac and Fannie Mae, Lockhart contends that the best is the house insurance role of the enterprises.

Lastly, Lockhart mentioned that the excessively high homeownership goals of the two enterprises pressured them to take too much risk. He hopes that the two enterprises can later focus on insurance after helping the government foreclosure prevention program achieve its goals.