Last week we had a flurry of chatter about some potential, vague government-backed refinance plan, and I received a number of valuable comments. "The elephant in the room that's being ignored is mortgage insurance.  With today's PMI structure, the rate for an FHA refi loan needs to be an average of at least 1.25% below the old loan's rate in order to meet the benefit to the borrower standard.  Existing underwater conventional loans that have MI on them can only be refi'd by the servicing lender.  Borrowers I've talked with in this situation are telling me that their existing lenders are in no hurry to do the refinances.  That pulls a huge number of loans off the market. Government and elected officials can talk all they want, but until the MI issue is dealt with, the vast majority of quality borrowers who bought at the wrong time are not going to receive significant, meaningful help."

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