Government Refinance Assistance

The shockingly low mortgage rates we have been seeing this summer have not disappeared yet. Contact us in the sidebar to learn about the refinance programs available and if you can qualify. Here are some excerpts from a recent Bloomberg article:

U.S. mortgage rates fell to a record, extending a two-month tumble in borrowing costs for homebuyers as property demand slumps.

The average rate for a 30-year fixed mortgage dropped to 4.36 percent in the week ended today from 4.42 percent, Freddie Mac said in a statement. That was the lowest since the McLean, Virginia-based mortgage finance company began compiling the data in 1971. The average 15-year rate was 3.86 percent.

Mortgage rates have set or met a record for 10 straight weeks as concern of a faltering economic recovery spurred demand for bonds including those backed by home loans. Low borrowing costs have yet to spur home sales, which are being depressed by unemployment and the end of a federal homebuyer tax credit.

We will likely never see mortgage interest rates this low again. If you have considered looking into a refinance contact us in the sidebar now. It never hurts to get an estimate. See this from a recent LA Times blog post:

The interest rate for a 30-year mortgage fell for the eighth time in nine weeks, according to a widely watched survey, with the record lows triggering the highest volume of home refinancing in 15 months.

Freddie Mac’s weekly report on lenders said solid borrowers with 20% down payments or home equity were being offered 30-year fixed-rate loans at an average of 4.42% this week, down from 4.44% a week earlier. The borrowers would have paid 0.6% of the loan amount in upfront lender fees.

The average 30-year interest rate recorded by the survey has not risen in nine weeks, although it remained flat at 4.57% for the weeks ending July 8 and July 15.

The rate this week on 15-year fixed loans also edged down to an average of 3.90% compared with 3.92% the previous week, with 0.6% in lender fees.

For the last few years borrowers who had enough equity in their home to refinance their first mortgage but who were underwater when they combined their first and second mortgage had the option of refinancing the first mortgage only into an FHA loan as long as the second mortgage agreed to stay in second lien position. These so-called “subordination deals” were fairly complicated and never became very popular but they were at least an option. But recently the FHA announced it will no longer allow such subordination deals.

We get this from the recent FHA mortgagee letter on the topic:

This Mortgagee Letter eliminates the unlimited Combined Loan-to-Value (CLTV) ratio that was first introduced in Mortgagee Letter 2007-11.

The old policy is being replaced with the questionable new FHA short refinance program.

If you have considered a refinance for your home now is the time to contact us in the sidebar. The government-backed mortgage programs remain some of the best options available for most people. We get this from a recent AP report:

Mortgage rates dropped to the lowest level in decades for the sixth time in seven weeks, offering the most attractive opportunity for those who qualify to refinance or purchase a home.

Government-controlled mortgage buyer Freddie Mac said Thursday that the average rate for 30-year fixed loans this week was 4.49 percent, down from 4.54 percent last week. That’s the lowest since Freddie Mac began tracking rates in 1971.

The average rate on the 15-year fixed loan dropped to 3.95 percent, down from 4 percent last week and the lowest on record.

Rates have fallen since spring as investors seek the safety of U.S. Treasury bonds. That has lowered the yield on Treasurys. Mortgage rates tend to track those yields.

The last time home loan rates were lower was during the 1950s, when most mortgages lasted just 20 or 25 years.

There is another change coming to the FHA mortgage insurance guidelines on October 4, 2010. Starting on that date the upfront mortgage insurance premium (MIP) for FHA loans is scheduled to be reduced from 2.25% to 1.00%. That should reduce closing costs on FHA loans significantly going forward. However the monthly mortgage insurance fees will be increasing from 0.55% annually to at least 0.90% which will increase monthly payments for new FHA loans. Here is a bit from a recent HousingWire article on the subject:

“While premium increases are never ideal, this bill was necessary to help improve the strength and stability of FHA’s single family programs,” said MBA chairman Robert Story Jr. “We are encouraged that FHA Commissioner [David] Stevens has indicated he may not need to raise premiums to the maximum, and we believe that that a small increase in the annual premium, coupled with a decrease in FHA’s upfront premium [calculated in the chart below, from the FHA], will help stabilize FHA while lowering closing costs for many borrowers.”

The FHA recently announced the details of its new short refinance program. The idea of being able to obtain a short refinance has many borrowers excited about the prospects of having tens or even hundreds of thousands of dollars of debt wiped away. The problem is that lenders are normally not at all excited in losing tens or hundreds of thousands of dollars and the new program requires the full cooperation and approval of those lenders.

Lenders question: What’s in it for us?

Mortgage lenders/banks are for-profit institutions so they will always ask “what’s in it for us?” when a borrower seeks a loan modification or short refinance. In the case of the new FHA short refinance program we fail to see the benefit to lenders for participating. Normally the only time a lender would seriously consider participating in a principal write-down is if the only choices left to them were to foreclose on a property or to grant a short refinance. That is because foreclosing usually is more expensive for the lender than the principal write-down would be. But based on the requirements of the new FHA program lenders will never be faced with those two options. That is because once a borrower falls behind on mortgage payments that borrower is no longer qualified for the FHA short refinance program to begin with. In other words, there is virtually nothing to gain for a current lender to agree to write down principal on mortgage because the people asking for them to employ the new FHA short refi program are not considered foreclosure risks to begin with.

The one thing that the new program does do is clear away some of the regulatory snags regarding getting an FHA loan. But based on what we can see so far, the fundamental idea behind the plan is deeply flawed and thus we don’t expect to see very many lenders granting these kinds of principal write downs at all.

Don’t give up

While we are skeptical of this new program there are several other programs in place that have a proven track record. Please contact us in the sidebar today to learn more about the available programs that could assist your family.

Here are some of the details from the recent published FHA mortgagee letter on the new FHA short refinance program. Contact us in the sidebar to learn more about the programs that best apply to you:

On March 26, 2010, the Department of Housing and Urban Development (HUD) and the Department of the Treasury (Treasury) announced enhancements to the existing Making Home Affordable Program (MHA) and Federal Housing Administration (FHA) refinance program that will give a greater number of responsible borrowers an opportunity to remain in their homes. These enhancements are designed to maintain homeownership by providing borrowers, who owe more on their mortgage than the value of their home, opportunities to refinance into an affordable FHA loan. This opportunity allows borrowers who are current on their mortgage to qualify for an FHA refinance loan provided that the lender or investor writes off the unpaid principal balance of the original first lien mortgage by at least 10 percent. …

Eligibility
Participation is voluntary and requires the consent of lien holders. In order for a loan to be eligible, the following conditions must be met:

1. The homeowner must be in a negative equity position;
2. The homeowner must be current on the existing mortgage to be refinanced;
3. The homeowner must occupy the subject property (1-4 units) as their primary residence;
4. The homeowner must qualify for the new loan under standard FHA underwriting requirements and possess a “FICO based” decision credit score greater than or equal to 500;
5. The existing loan to be refinanced must not be a FHA-insured loan;
6. The existing first lien holder must write off at least 10 percent of the unpaid principalbalance;
7. The refinanced FHA-insured first mortgage must have a loan-to-value ratio of no more than 97.75 percent;
8. Non-extinguished existing subordinate mortgages must be re-subordinated and the new loan may not have a combined loan-to-value ratio greater than 115 percent;
9. For loans that receive a “refer” risk classification from TOTAL Mortgage Scorecard (TOTAL) and/or are manually underwritten, the homeowner’s total monthly mortgage payment, including the first and any subordinate mortgage(s), cannot be greater than 31 percent of gross monthly income and total debt, including all recurring debts, cannot be greater than 50 percent of gross monthly income;
10. FHA mortgagees are not permitted to use premium pricing to pay off existing debt obligations to qualify the borrower for the new loan;
11. FHA mortgagees are not permitted to make mortgage payments on behalf of the borrowers or otherwise bring the existing loan current to make it eligible for FHA insurance; and
12. The existing loan to be refinanced may not have been brought current by the existing first lien holder, except through an acceptable permanent loan modification as described below.

Principal Write off
The mortgagee must ensure that the existing first lien holder writes off at least 10 percent of the unpaid principal balance on the first lien. The short payoff serves as payment in full for any debt extinguished.

…

Combined Loan-to-Value Ratio
Notwithstanding 24 CFR 203.32(c)(3), the combined amount of the new FHA-insured first mortgage and any subordinate non FHA-insured lien may not exceed 115 percent.

…

Second Lien Extinguishment and Servicer Incentive
To facilitate the refinancing of new FHA-insured loans under this program, Treasury will provide incentives to existing second lien holders who agree to full or partial extinguishment of liens effective on all case numbers assigned on or after September 7, 2010. To be eligible for incentives, the existing second lien mortgage servicer must: Execute a Servicer Participation Agreement with Treasury to participate in the Making Home Affordable Program; and, Agree to fully release the borrower from all obligations to repay the amount forgiven.

Existing second mortgage lien servicers will be entitled to a one time incentive of $500 for each successful closing. Existing second mortgage lien investors will be entitled to an incentive based on the combined loan to value of the existing lien and all senior liens associated with the mortgage.

The head of the FHA announced that the details of the new short refi program from the FHA should be available soon. Here are some bits from the HousingWire article on the subject:

US Department of Housing and Urban Development (HUD) secretary Shaun Donovan said details for a new “FHA Short Refinance” program would be announced this week, while speaking at the National Association of Real Estate Brokers (NAREB) conference in Fort Worth, Texas Tuesday.

According to a mortgagee letter sent out today, the new program would provide additional refinancing options to underwater homeowners starting Sept. 7. To be eligible for the new loan, the homeowner must be underwater but still current on the mortgage. A credit score of 500 or better is required, and the borrower’s existing first-lien holder must agree to write at least 10% of the unpaid principal balance.

It must bring the borrower’s combined loan-to-value ratio to no more than 115%. The existing refinanced loan cannot be an FHA-insured one. Once refinanced and insured by the FHA, it must have a loan-to-value ratio of no more than 97.75%.

Keep in mind that lenders must agree to the principal write down for this program to work and lenders have historically not been thrilled with that idea. The article continued:

Market players have come out saying a government-induced refinancing wave is unlikely. Barclays Capital, Credit Suisse and JPMorgan Chase have each said such a program would require too many logistical hurdles and would deviate away from recent monetary policy.

Contact us in the sidebar to learn more and see which programs apply to you.

We get this report from the folks over at HousingWire:

The 30-year fixed-mortgage rate (FRM) dropped week-to-week nationally averaging 4.28%, according to Zillow Mortgage Marketplace’s weekly update. This is down 0.1% and a new record low according to their data. Last week’s averages remained steady.

Regionally 30-year rates are varying, but the majority of states saw a drop. California’s current rate is 4.33%, down from 4.34% last week, as is Colorado’s at 4.26%, down from 4.28%. Rates substantially decreased in New York to 4.23% (from 4.46%), Massachusetts to 4.28% (from 4.61%), Florida to 4.18% (from 4.33%) and Washington to 4.36% (from 4.56%) from last week.. Texas is down to 4.27% from 4.36% and Illinois state average is down to 4.33% from 4.31%.

Zillow reported the rate for 15-year fixed home loans at a national average 3.85%, while the rate for a 5-1 adjustable-rate mortgage (ARM) is at 3.27%.

These record low interest rates are a temporary thing. Contact us in the sidebar today if you would like to look into a refinance yourself.

In some cases when a borrower can’t get a loan modification they can apply for a deed-for-lease program instead. In such programs, rather than face a traditional foreclosure the borrower turns home over to the bank and in return is allowed to remain in the home as a renter. Here are some details on the program from the Fannie Mae site:

What is Deed-for-Lease?

The Deed-For-Lease™ option is a program from Fannie Mae that allows you to lease your home after you have transferred the title to your property to the mortgage company (commonly called a Deed-in-Lieu of Foreclosure). The lease terms are up to 12 months (with the possibility to extend longer). And the monthly rent is based on the current rental rates for your area—not on your original mortgage payment.

Deed-for-Lease is an alternative to foreclosure and may be an option if:

* You are ineligible to refinance or modify your mortgage
* You are facing a long-term hardship
* You are several months behind on your mortgage payments
* You may owe more on your home than it’s worth
* You have not been able to sell your home
* You want to remain in your home and neighborhood

…

Important! If your loan is not owned by Fannie Mae, there may be a similar leasing option offered by your mortgage company. Always contact them to see what is available.

There was an interesting article over at Forbes recently titled “All-Time Low Mortgage Rates: Time To Refinance?”. Here are some highlights:

Your breakeven period is one of the most important considerations in a refinance. To determine your breakeven period, you need to look at the monthly savings you’ll create by refinancing and the total cost to refinance your loan. Let’s say that by refinancing, you’ll save $200 a month, and that the cost to refinance is $4,800. To determine your breakeven period, divide your refinance cost by your monthly savings. In this example, the breakeven period would be 24 months, or two years.

If you plan to stay in your house for longer than the breakeven period, refinancing might make sense. Now, if you’re only planning to stay there for 26 months, will that $400 you save be worth the time and hassle of going through the refinancing process? Maybe not. But if you’re planning to stay in the house for another 10 years, the refinance would save you $2,400 a year for eight years, or $19,200 (less the cost of the refinance).

Contact us in the sidebar in order to find out if you can qualify for a refinance. If you can qualify for a refinance we can help you get the estimates/information you need to figure out your breakeven point.

There was an insightful article published recently at Patch.com on the question of whether you should look into a refinance. Here are some highlights:

If you’ve ever asked yourself if refinancing your home is a good idea the answer is, you should look into it. Not only could it give you more to live on month to month, but it could also save you thousands on your mortgage in the long run.

A recent survey produced some disturbing results on the state of mortgages in the United States. The report showed that more then half of homeowners are either paying too much for their mortgages or are locked into mortgages that are clearly unsuitable for their needs, income level or financial goals. Research also indicates that the average percentage of some ones income that goes to mortgage payments has risen 12.6 percent from nine years ago, which is not leaving today’s homeowners much left to live on for themselves and families.

If you don’t relate to these circumstances, there are plenty of other reasons why refinancing could still be in your best interest. Things have probably changed in your life since you signed your original home loan. What were your priorities then might not be what’s most important to you now. Refinancing allows you to change the terms of your mortgage, to suit your lifestyle now.

Refinancing your mortgage can benefit you in many ways like saving money, increasing cash flow, reducing the time of your mortgage and being able to lock in the low interests of today (4.375 percent, at some banks). But there are certain facts you need to know before deciding on refinancing.

Contact us in the sidebar to look into refinancing with a government-back loan.

There have been some speculations that interest rates on government-backed mortgages could creep even lower this coming week. A writer over at BankRate.com said the following:

For the fourth week in a row, we are going to set a record for the lowest rate in the nearly 25-year history of Bankrate’s weekly mortgage survey.

Last week the 30-year fixed averaged 4.75 percent in Bankrate’s survey. When the survey is conducted today, I expect it to fall to around 4.66 percent.

Contact us in the sidebar right away if you would like to refinance to a lower interest rate while such rates are still available.

The new financial reform law includes a provision that is specifically designed to provide relief to homeowners who have lost their jobs. We get this from a recent MarketWatch piece on the subject:

More help is on the way for unemployed homeowners struggling to make their mortgage payments, thanks to funding tucked into the financial reform legislation signed by President Obama on Wednesday.

Although the U.S. Department of Housing and Urban Development hasn’t released the details of exactly how the $1 billion emergency homeowners’ relief fund will be distributed, legislation dictates that the program start by Oct. 1.

HUD is reviewing the language to determine the best method of implementation, said Lemar C. Wooley, a HUD spokesman.

The bill also includes $1 billion for redevelopment of abandoned and foreclosed homes.

The relief-fund program is similar to a Pennsylvania program that provides financial assistance to out-of-work homeowners so they can keep up with their housing costs, said John Dodds, director of the Philadelphia Unemployment Project. The money has been available to residents since the 1983 recession, he said. …

Currently, unemployed homeowners are granted at least three months’ forbearance on their mortgage loans through the Home Affordable Unemployment Program. Some states hardest hit by the foreclosure crisis received extra federal funds for foreclosure prevention, and some states offer assistance for unemployed homeowners.

But the new funding in the bank-reform bill extends help for unemployed homeowners to all parts of the country.

“In this economy, getting that next job hasn’t been a very quick thing,” said Julia Gordon, senior policy counsel for the Center for Responsible Lending. For many, a three-month forbearance period isn’t enough, she said.

“For the most part, these are people whose loans are sound, 30-year fixed-rate loans. The person is in a bad situation because they’re underwater in terms of equity and they can’t make payments. They can’t borrow against their house and in many cases can’t sell their house,” Gordon said of the new group of homeowners who could be helped. “We don’t know how many people are paid for with a billion dollars, but it is a great start.”

There was a news release recently outlining some of the details of the new help for unemployed borrowers program. Here are some of the highlights:

By August 1, all mortgage servicers participating in the Making Home Affordable Program will offer extra help for homeowners struggling to make their monthly mortgage payments because of unemployment. The Unemployment Program will offer homeowners a forbearance period to temporarily reduce or suspend their monthly mortgage payments while they seek re-employment.

The minimum forbearance period is three months, although a mortgage servicer may extend it depending on the investor and regulator guidelines. If a homeowner becomes re-employed in that time, the forbearance period will end and the homeowner will be evaluated for a mortgage modification under the Making Home Affordable Program. Unemployment benefits will no longer qualify as income for the mortgage modification program.

During the forbearance period, a homeowner’s monthly mortgage payment must be reduced to no more than 31 percent (or less) of their gross monthly income. The servicer can decide to temporarily suspend payments in full. The payment amount and due dates will be decided by the servicer depending on investor and regulator guidelines.

To qualify, a homeowner must meet the following eligibility criteria:

* The mortgage must be a first lien mortgage, originated on or before January 1, 2009, and the unpaid principal balance must be equal to or less than $729,750 for a one-unit property.
* The property must be the homeowner’s principal residence.
* The mortgage has not been previously modified through a Home Affordable Modification.
* The homeowner was ineligible for a Home Affordable Modification.
* The homeowner is either behind on payments (but not by more than three consecutive months) or it is reasonably forseeable that the homeowner will fall behind.
* The total monthly mortgage payment is greater than 31 percent of the homeowner’s gross monthly income. If the payment is less, it is up to the servicer’s discretion if they will offer the program to the homeowner.
* The homeowner will be unemployed at the start of the forbearance period, and is able to document this because they will be receiving unemployment benefits in the month the forbearance period begins (even if the benefits expire before the forbearance period ends).

A mortgage servicer may require that, based on investor and regulator guidelines, homeowners have received at least three months of unemployment benefits before they begin a forbearance period.

There is no cost to apply to the Unemployment Program, although late charges may accrue while the homeowner is being evaluated for the program or in the program. A mortgage servicer may not collect late charges from the homeowner while they are still in the forbearance period.

Servicers may not initiate foreclosure proceedings or conduct a foreclosure sale while a homeowner is being evaluated for the Unemployment Program or in the forbearance period.

If you have considered a refinance now is the time to contact us in the sidebar. Interest rates on government-backed mortgages are the lowest they have been in 50 years right now. Here are some excerpt from a recent AP article on the topic:

Mortgage rates have sunk to the lowest level in more than five decades, but consumers aren’t rushing to refinance their loans or buy homes.

Mortgage company Freddie Mac said Thursday the average rate for 30-year fixed loans sank to 4.58 percent this week.

That’s down from the previous record of 4.69 percent set last week and the lowest since the mortgage company began keeping records in 1971. The last time they were cheaper was the 1950s, when most long-term home loans lasted just 20 or 25 years.

Rates have fallen over the past two months. Investors wary of the European debt crisis and the stock market have shifted money into the safety of Treasury bonds, driving down yields. Mortgage rates tend to track the yields on long-term Treasurys. …

Rates on 15-year fixed-rate mortgages fell to an average of 4.04 percent, the lowest on records dating to September 1991 and down from 4.13 percent a week earlier.

Rates on five-year adjustable-rate mortgages averaged 3.79 percent, down from 3.84 percent a week earlier. That was also the lowest on Freddie Mac’s records, which date back only to January 2005.

Average rates on one-year adjustable-rate mortgages rose to 3.8 percent from 3.77 percent.

The rates do not include add-on fees known as points. One point is equal to 1 percent of the total loan amount. The nationwide fee for all types of loans in Freddie Mac’s survey averaged 0.7 a point.

Refinancing is generally considered worthwhile for homeowners who can shave at least three-quarters of a percentage point off the rates they pay now and plan to stay in their homes for a long time.

Besides the fees for the mortgage broker or lender, there are fees for title insurance, a new appraisal, document processing and other charges. In “no fee” mortgages, costs are often added to the loan amount, or the interest rate is higher.

If you ever considered refinancing there may never be a better time than right now. The combination of the European debt crisis coupled with a low demand for mortgages overall has pushed interest rates on government-backed mortgages to stunning lows. Contact us in the sidebar today if you would like to look into reducing your mortgage interest rate and payments.

Despite signs recently that mortgage interest rates were moving up again, they ended up dipping recently to record lows. We get this from a recent Wall Street Journal piece:

Mortgage rates fell slightly the past week, with three of the four rates Freddie Mac tracks—including the 30-year fixed-rate—falling to record lows, according to Freddie’s weekly survey of mortgage rates.

The rates on all but one-year adjustable-rate mortgages hit the lowest point since Freddie began tracking them—1971 for the 30-year loans, 1991 for 15-year fixed and 2005 for 5-year adjustables. The one-year set yet another 6-year low in the latest week.

The declines come amid a continued rally in the Treasurys market, which pushes the debt’s yields down. Mortgage rates generally track yields.

If you would like to improve your mortgage contact us in the sidebar right away while rates are scraping bottom.

The full FAQ on the newly announced program can be found here. Some of the highlights are below:

Frequently Asked Questions

Q: When will homeowners begin to receive help under the new enhancements?
It will take time to get these new program enhancements up and running. Some pieces, such as
increased payments for alternatives to foreclosures, will be put in place in the coming weeks. We
anticipate the full set of programs to be available by the fall.

Q: I think I may be eligible for the temporary assistance for unemployed homeowners. When
will this program be available to eligible borrowers?
We will move to implement this as quickly as possible and expect it to be offered within the next
few months. Some major investors and servicers have similar programs in place today.

Q: If I qualify for the forbearance period, will I be eligible for a HAMP modification at the
end of the forbearance period if I become employed?
At the end of the temporary assistance period, homeowners who have a mortgage payment
greater than 31 percent of their monthly income must be considered for a permanent HAMP
modification. To receive the permanent HAMP modification, homeowners must verify
qualifying income with standard documentation and must be current on forbearance plan
payments, and the modified loan must pass the standard net present value (NPV) test. It is
important to note that unemployment insurance will not be counted as income when a
homeowner is evaluated for HAMP at the end of the forbearance plan. Not all unemployed
homeowners will receive a HAMP modification at the end of the temporary assistance period.

Q: I owe more on my house than it is worth. How do the HAMP changes help me and other
underwater homeowners?
Homeowners who are significantly underwater and who are eligible for the HAMP program will
benefit from changes that will motivate lenders to writedown more principal. This will help
homeowners regain some of the equity lost due to severe home price declines in many regions of
the country. The changes will require all servicers to consider an alternative modification
approach which includes writedown of some principal for loans that are over 115 percent of the
current value of the property (LTV). Servicers will earn increased incentives for offering
principal writedowns in conjunction with a HAMP modification. The alternative payment
reduction option will allow homeowners to regain lost equity in their homes just by remaining
current on their modified payments. Servicers will initially forbear some or all of the principal
balance over 115 percent LTV as needed to bring the borrower’s payment to 31 percent of
income. Then, servicers will forgive this forborne amount in three equal amounts over 3 years, as
long as homeowner remains current on payments.

Q: How do I know if I qualify for principal reduction in HAMP?
If your property is worth at least 15 percent less than the amount of your first mortgage you may
be eligible, but not every underwater borrower will benefit from principal reduction through the
HAMP program. Your servicer or investor will contact you if you are eligible.

Q: Will these changes require my servicer to write down my principal?
No, principal writedown will not be required. However, we are providing increased financial
incentives and expect that where principal write-down yields a greater economic benefit, based
on the net present value (NPV) test comparison, lenders will generally choose to pursue the
principal writedown option when they are legally permitted to do so.

Q: I have an existing HAMP modification. Will I be able to take advantage of the new
principal forgiveness program?
Possibly. The increased incentives will be available to servicers who elect to review loan that
have already been modified under HAMP to determine if principal forgiveness would help bring
those mortgages closer to a market value.

Q. I have both a first and a second lien, is there any payment assistance available for my
second lien?
Yes, many borrowers whose first mortgages are permanently modified under HAMP may now
be eligible for payment relief on their second lien if their servicer is participating in the Second
Lien Modification Program (2MP). We have increased incentives in this program to encourage
servicers and investors to either forgive all or a portion of qualifying second liens

Q: I have applied for a HAMP modification but continue to receive notices from my servicer
that I am in foreclosure. Are there new protections to prevent the servicer from selling my
home while I am being considered for the HAMP modification?
Yes. New and clarifying guidance provides protection for responsible borrowers against
initiation of costly and unnecessary foreclosures while the borrower is being considered for
HAMP. The guidance clarifies the solicitation requirements for borrower eligible for HAMP,
including mail and phone outreach. In addition, the guidance provides improvements in
communication about the foreclosure process to reduce confusion for borrowers who are
simultaneously in foreclosure and either being evaluated for HAMP or in a trial payment plan.
Also, the guidance requires written certification that a borrower is not HAMP eligible before an
attorney or trustee can conduct a foreclosure sale.

Q: I was told that I did not qualify for HAMP because I have filed for bankruptcy protection.
How will the new enhancement impact me?
As a result of the new guidance, servicers are required to consider a borrower in bankruptcy for
HAMP if the borrower or the borrower’s bankruptcy counsel asks for help. The guidance also
includes new features to facilitate the process for them.

FHA Refinance Options

Q: I owe more on my home than it is worth. How can the FHA Refinance option help me as
an underwater borrower?
The Federal Housing Administration (FHA) is making some changes to its existing refinancing
program guidelines that will allow more lenders to perform mortgage principal write-down for
underwater homeowners in mortgages not currently insured by FHA. These adjustments will
provide more opportunities for qualifying mortgage loans to be responsibly restructured and
refinanced into FHA loans as long as the borrower is current on the mortgage and the lender or
investor writes down the unpaid principal balance of their mortgage by at least 10 percent of the
original first lien of the borrower. A second lien write-down program will be paired with these
changes to encourage further write-down of second liens such that total mortgage debt (first and
second liens) is no greater than 115 percent of the current value of the home.

Q: Am I eligible for a FHA Refinance loan?
This is a voluntary refinancing and lenders must agree to the writedown. However, the new
FHA refinance option is only available to responsible homeowners who are current on an
existing mortgage that is not insured by FHA. Eligible borrowers must occupy the home as the
primary residence and will also have to meet FHA standard documentation and other
underwriting requirements. In addition, to participate in the program, all homes will be appraised
to determine current market value. The LTV loan for the new FHA loan must be no greater than
97.75 percent of the appraised value of the home.

Q: When will the FHA Refinance loan be available to underwater borrowers?
FHA will move to implement this as quickly as possible and expect that lenders can begin
making decisions by the fall. Specific guidelines will be posted in a FHA Mortgagee Letter in
the near future.

Q: How do I apply for an FHA refinance loan?
Because this program is voluntary for lenders, not all underwater borrowers who meet the
eligibility standards will receive an FHA refinance loan. You will be notified by your lender if
you have been selected to participate in the program.

Q: I have an FHA-insured loan. Why am I not eligible for this principal forgiveness?
FHA-insured borrowers are currently eligible for extensive loss mitigation assistance to prevent
foreclosure and make mortgage payments more affordable. FHA is currently prohibited by
statute from offering explicit principal forgiveness to FHA-insured loans.

We recently noted that mortgage interest rates hit new 2010 lows last week. Well the trend is continuing and we get the following from a recent CNBC article:

Here’s some good news for the struggling US housing market: Thanks to the European debt crisis, mortgage rates are at historic lows.

The current average rate for a 30 year fixed loan is 4.87 percent, according to Bankrate.com. That’s the lowest rate for the 30 years since Bankrate started keeping track 25 years ago…

“There’s a tremendous window on re-financing,” says Greg McBride, chief economist at Bankrate.com. “That’s particularly true for people who can take advantage of the government’s Home Affordability Refinance Program (HARP)-which allows home owners to refinance into low mortgage interest rates even if they’re property value has gone down.”

HARP, which was due to end at the end of this June, now runs through June of 2011.

“Think of the benefits if you buy or refinance now,” says McBride. “Locking in now at the lower rates means more more bang for the buck and more breathing room for homeowners when it comes to payments.”

But the decline in rates probably won’t last long, analysts say. So homeowners need to move fast.

“I think they won’t last much longer than a month or two at the best,” says Lawrence Yun, chief economist at the National Association of Realtors. “I can see them going up to 5.5 percent by the end of June if not sooner.”

The reasons? Yun says the worries over Europe will be fading soon and investors will be looking at other assets besides US Treasurys. And there’s the US deficit, which will push up Treasury yields.

If you think you could be a candidate for a HARP loan or other government-backed refinance loan contact us in the sidebar immediately. These low rates may be disappearing soon.

Most foreclosures in the US are happening in a handful of hard hit states. To address this issue the Obama administration recently signed on on a $1.5 billion plan targeted at and administered by some of those hard hit states. Here are some excepts from a recent HousingWire article on the topic:

The aid, granted through the Hardest Hit Fund announced in February, supports local initiatives to aid underwater mortgage borrowers in states where average housing prices declined 20% or more from peak levels. The states include Arizona, California, Florida, Michigan and Nevada.

“While we’ve made important progress stabilizing the housing market and keeping responsible families in their homes, the Obama Administration will continue to do everything it can to help those who are struggling the most during this difficult time,” said Treasury assistant secretary for financial stability Herbert Allison, Jr., in a statement. “Today marks an important milestone for delivering relief to homeowners through the Hardest Hit Fund program.”

With the panic over the Greek debt crisis subsiding, the circumstances that sent mortgage interest rates to stunning lows recently are beginning to fade as well. As a result mortgage interest rates are beginning to inch higher again.

If you have been considering a refinance or would like to look at other available assistance programs contact us in the sidebar now while rates are still extremely low.

There was a recent news release over at MakingHomeAffordable.gov on the details of the new program designed to help unemployed homeowners. Fill in the contact form in the sidebar to learn more about the programs that might apply to you. Here is an excerpt from that release:

By August 1, all mortgage servicers participating in the Making Home Affordable Program will offer extra help for homeowners struggling to make their monthly mortgage payments because of unemployment. The Unemployment Program will offer homeowners a forbearance period to temporarily reduce or suspend their monthly mortgage payments while they seek re-employment.

The minimum forbearance period is three months, although a mortgage servicer may extend it depending on the investor and regulator guidelines. If a homeowner becomes re-employed in that time, the forbearance period will end and the homeowner will be evaluated for a mortgage modification under the Making Home Affordable Program. Unemployment benefits will no longer qualify as income for the mortgage modification program.

During the forbearance period, a homeowner’s monthly mortgage payment must be reduced to no more than 31 percent (or less) of their gross monthly income. The servicer can decide to temporarily suspend payments in full. The payment amount and due dates will be decided by the servicer depending on investor and regulator guidelines.

To qualify, a homeowner must meet the following eligibility criteria:

* The mortgage must be a first lien mortgage, originated on or before January 1, 2009, and the unpaid principal balance must be equal to or less than $729,750 for a one-unit property.
* The property must be the homeowner’s principal residence.
* The mortgage has not been previously modified through a Home Affordable Modification.
* The homeowner was ineligible for a Home Affordable Modification.
* The homeowner is either behind on payments (but not by more than three consecutive months) or it is reasonably forseeable that the homeowner will fall behind.
* The total monthly mortgage payment is greater than 31 percent of the homeowner’s gross monthly income. If the payment is less, it is up to the servicer’s discretion if they will offer the program to the homeowner.
* The homeowner will be unemployed at the start of the forbearance period, and is able to document this because they will be receiving unemployment benefits in the month the forbearance period begins (even if the benefits expire before the forbearance period ends).

A mortgage servicer may require that, based on investor and regulator guidelines, homeowners have received at least three months of unemployment benefits before they begin a forbearance period.

There is no cost to apply to the Unemployment Program, although late charges may accrue while the homeowner is being evaluated for the program or in the program. A mortgage servicer may not collect late charges from the homeowner while they are still in the forbearance period.

Below is a video interview from Yahoo Finance with analyst Gary Shilling. Shilling predicts that housing prices in the US will drop another 20% over the next three years. If his prediction is even close now is the time to refinance. Mortgage interest rates are currently near all time lows and with housing prices potentially falling further many US homeowners may not have enough equity to refinance to a lower rate in a few years. Contact us in the form in the sidebar to learn about which government-backed mortgage programs apply to you.

The numbers of permanent loan modifications through the Home Affordable Modification Program (HAMP) continue to increase. For instance Bank of America recently reported it granted 70,000 permanent loan modifications total through May of this year. We get the following from a HousingWire article on the topic:

Bank of America pushed its total number of permanent modifications under the Home Affordable Modification Program (HAMP) to roughly 70,000 in May, up from 56,400 in April.

BofA reported more than 630,000 modifications through all of its programs since January 2008. The Treasury Department launched HAMP in March 2009 to provide incentives to servicers for the modification of loans on the verge of foreclosure. Borrowers must make three monthly payments under a trial modification and provide all financial documents to the servicer before it becomes permanent.

In April, servicers reported more than 300,000 permanent modifications under HAMP. Earlier in June, BofA began reducing principal for some qualifying underwater borrowers as part of the modification process.

Fill in the contact form in the sidebar to learn more about which program you could take advantage of.