I have a 7/1 ARM which doesn't reset until 2013. Unfortunately I live in S. FL and bought in 2006 so I am more than 25% underwater. Still, given the low rates, and having little chance to sell my home before the ARM resets due to how much things have crashed, I was willing to pay down to 125% LTV at closing to refi now while I still can. The loan is backed by Fannie. I went through the whole process, had an appraisal, submitted and signed all docs...and at the last minute the lady at Citi calls and tells me "the underwriter at Fannie says we cannot refi this loan at 125% LTV, only 105% LTV". This made no sense to me, and of course it made no sense to the person I spoke to at Fannie. So, I am unsure what to do. It seems that for whatever reason, maybe CITI is the one who doesn't want to do this refi, but you know how it is nobody will ever give you a truthful answer on anything. Does anyone have any thoughts or suggestions? The only thing I can think of is to try and refi at 125% with another lender at this point. Thanks in advance for any help/suggestions/similar stories!