Government Refinance Assistance

If you have an FHA loan now and have an interest rate of 6% or higher, contact us in the form below. One of the primary benefits of government-backed FHA loans is the option to “streamline” one FHA loan to an improved one with virtually no hassles. In many cases FHA loan holders are able to reduce their monthly payments significantly while not needing to pay any money out of pocket. The primary requirement is that borrower cannot have gone more than 30 days late on their mortgage payment in the last 12 months.

Just fill in form on the sidebar and we will contact you about a streamline.

There was a blurb over in the Santa Cruz Sentinel recently on the progress of increasing the loan limits on FHA loans:

SACRAMENTO — The California Association of Mortgage Brokers is lobbying to raise the Fannie Mae and Freddie Mac loan limits in California from $417,000 to $625,000 as a way out of the mortgage mess.

Such a change would allow tens of thousands of California homeowners to refinance out of their risky subprime loans, reducing their interest rates and payments, and obtaining affordable loans, said group president Pete Ogilvie, a Santa Cruz mortgage broker.

The House of Representatives passed HR 1427, the “Federal Housing Finance Reform Act of 2007,” May 22, allowing government-backed loan limits to be raised. The Senate version of this bill passed the Senate Banking Committee but the full Senate has yet to act.

The House also passed HR 1852, which could increase FHA loan amounts, on Sept. 18 but the Senate has not taken action. A 2005 study by the California Association of Mortgage Brokers projected that raising conforming loan limits would cut interest rates for more than 150,000 borrowers, allowing them to buy a median-priced home. The state median is $588,970.

Les Christie over at CNNMoney.com recently wrote an interesting article on the line government officials are trying to walk where they help people with bad loans but don’t reward reckless borrowing practices. Christie writes:

Treasury Secretary Hank Paulson is walking a fine line, pushing the need to help troubled mortgage borrowers without rewarding past risky behavior.

“I have no interest in bailing out lenders or property speculators. Still, we must recognize the very real harms to families affected by the housing downturn,” Paulson said in prepared remarks for a speech given Tuesday at Georgetown University.

“We must take steps to minimize the neighborhood effects and the macroeconomic effects of this housing market correction,” he continued.

Paulson pointed out that President Bush charged him, along with HUD Secretary Alphonso Jackson, to work closely with market participants to “modify” at-risk mortgages.

Paulson noted that as many as 50 percent of failing borrowers never contact their lenders to address their problems. Paulson said the industry must increase its outreach efforts.

Last week, Paulson announced the creation of a new alliance of mortgage servicers, counselors and investors called “Hope Now” that was designed to get to more troubled borrowers and find solutions to their mortgage problems.

Tuesday, he called for more flexibility in loan modifications and refinancing.

“For many families, this is the only viable solution,” Paulson said. But he pointed out that many servicers are not well staffed to provide “mitigation” services even though preventing foreclosures is in the best interest of investors in mortgage-backed securities.

Loan servicers, who handle billing and payments after a loan has been made, must put more trained credit counselors in place to deal with the increases in volume of borrowers in need of help.

Paulson also called upon Freddie Mac and Fannie Mae to work closely with private lenders to make affordable mortgage products more available and to increase funds so those in risky adjustable mortgages can refinance.

Starting in April 2007, Freddie Mac began to dedicate billions to buying refinanced mortgages designed to help troubled borrowers stay in their homes. Paulson would expand on initiatives like this.

Offering affordable mortgage products, through such agencies as the Federal Housing Administration (FHA), is part of Paulson’s prescription. In August, President Bush announced a plan to make these loans available to more Americans.

FHA loans carry competitive interest rates, require little in the way of down payments and are popular with lenders because they are backed by the Federal Government. They are aimed at increasing home-buying opportunities for low- and moderate-income Americans.

Changes in laws and regulations on mortgage borrowing was also addressed by the Treasury head. He pointed out that the patchwork of rules governing state and federal institutions make regulation more difficult.

Looking forward, Paulson stressed the need for more transparency in mortgage lending. “We need simple, clear, and understandable mortgage disclosure,” he said.

He pointed out the complexity of paperwork at closing, many of which are designed to shield lenders from liability rather than provide borrowers with useful information.

Paulson advocated for a single-page summary of the most critical facts that borrowers need to know, including actual interest rates and schedules of payments. To accomplish this, the Treasury Department is reviewing the Truth In Lending Act.

To improve integrity among mortgage originators, Paulson wants to establish nationwide licensing, education and monitoring systems for mortgage broker and loan officers.

That should also help combat predatory lending and Paulson wants regulators to assert more authority in defining and prohibiting unfair and deceptive practices. The rules would apply to the entire mortgage industry.

Paulson did not allow borrowers to escape without their share of blame. “Buying a home today is a complex process, but that in no way excuses home buyers from their obligation for due diligence.”

Although the speech seemed to mark a step up in activism on the part of the Treasury Department, Paulson was quick to point out the limitations of the government’s approach during the question and answer following the talk.

Referring to HopeNow, he said, “This is a 100 percent market-based solution. I believe in markets. The government is doing nothing here but facilitating people coming together.”

Paulson also downplayed the possibility that the housing crisis could plunge the nation into recession. “I’ve seen turbulence in the market a number of times and I can’t think of any situation where the backdrop of the global economy was as healthy as it is today,” he said.

Jeanne Sahadi over at CNNMoney.com recently wrote this interesting piece on the moves toward FHA loans in the US:

BOSTON (CNNMoney.com) — If your credit is weak or your savings anemic, here are two phrases you’re likely to hear from mortgage loan officers in the next few years: FHA and mortgage insurance.

They’re part of a back-to-basics theme that was emphasized Monday at the annual conference of the Mortgage Bankers Association in Boston.

For those who entered the business in the past five years, they’ve only known the good times and will need to be re-educated, said Paul Bibb, CEO of National City Mortgage, who was on a panel of leading mortgage industry executives.

“You probably have a lot of loan officers who can’t spell FHA,” said Bibb.

Bibb and David Lowman, CEO of Chase’s Global Mortgage, which is a top 10 originator and servicer, said that during the go-go days of the housing boom, loan officers would steer home buyers with weak credit to subprime loans. And they would advise them to finance part of their down payment with a home equity loan.

“We probably all wish we had trained our sales staff to sell mortgage insurance,” Lowman said. “The reason we’re in this crisis is that we got away from the basics.”

Now with the subprime market eviscerated, loan officers will be steering more borrowers with weak credit to loans insured by the Federal Housing Administration and advising those with little savings to get private mortgage insurance in cases where they can’t put down 20 percent.

The FHA program is intended for home buyers and homeowners with weak credit. Borrowers with FHA-insured loans – which they get from private lenders as they would any other mortgage – pay a small premium to the FHA every month.

The FHA, in turn, uses those premiums to cover the lender in the event of foreclosure and requires lenders to pursue viable ways to help borrowers avoid foreclosure if they become delinquent.

Bibb can remember a time when FHA loans made up 30 percent of National City Mortgage’s business. A few years ago, however, FHA loans had shrunk to about 3 percent of the business. Now, he said, they currently account for as much as 12 percent.

The call to go back to basics comes amid a sobering forecast for home price growth. Patricia Cook, executive vice president and chief business officer of Freddie Mac, who was also speaking on the MBA panel, expects price declines on a nationwide basis this year and next and then only a slow recovery thereafter.

Some markets are holding up and will continue to do so, Bibb said. But he’s less optimistic for markets such as Arizona and Nevada where home-price gains were driven by heavy speculation. “[In those markets] the correction could be quite severe and last into 2009, if not 2010,” Bibb said.

Lawmakers have been working on legislation to reform the FHA to modernize its standards so that they reflect changes to the housing market in the past 30 years. Among the changes on tap, lawmakers want to:

Raise loan limits. Today the FHA won’t insure loans above $362,790 for single-family homes, and even less in lower-cost areas. Lawmakers are considering raising that ceiling to at least 100 percent of the conforming loan limit for mortgages backed by Fannie Mae and Freddie Mac, currently $417,000.

Reduce down payment requirements. Homeowners would no longer be required to have 3 percent equity or the cash equivalent. They could get an FHA-insured loan with 0 percent down.

Reduce complexity. Lenders have been complaining about the time and expense it takes to make an FHA loan.

Separately, the Department of Housing and Urban Development, which oversees FHA, may move to introduce risk-based pricing. Riskier borrowers would have to pay higher premiums than less risky borrowers.

Al Yoon recently recently wrote this interesting article on the FHA program for Reuters:

BOSTON, Oct 15 (Reuters) – The Federal Housing Administration will likely boost its share of the mortgage market to as high as 12 percent in coming months as it picks up borrowers locked out of subprime and other private lending programs, two leading industry executives said on Monday.

“I think FHA will play a huge role in the recovery of the market,” David Lowman, chief executive of JPMorgan Chase & Co.’s (JPM.N: Quote, Profile, Research) global mortgage group, said at the Mortgage Bankers Association annual meeting in Boston. Compared with a market share of about 2 percent in recent years, “I envision they will be in the double-digits, at 10 percent to 12 percent.”

President George W. Bush in late August announced a program that would widen the reach of the FHA program that guarantees loans purchased by mortgage investors. The initiative, known as FHASelect, makes it easier for borrowers facing default to refinance into the FHA program.

National City Corp (NCC.N: Quote, Profile, Research), based in Cleveland and the ninth largest U.S. bank, has already boosted its production of FHA loans to 11 percent to 12 percent from as low as 2 percent six months ago, said Paul Bibb, chief executive officer of National City Mortgage.

But Lowman and Bibb said FHA, whose lenders’ loans become collateral for Ginnie Mae mortgage-backed securities, must still overcome some hurdles that led the agency to lose market share in the first place. The loans are more cumbersome and expensive for lenders to originate because they require more back-office work, Bibb said.

Wall Street investment banks expanded their share of the subprime market during the housing boom by offering lenders a lower-cost way to securitize loans. Those programs are largely frozen today as soaring delinquencies led an investors revolt against many kinds of mortgage-related debt.

“FHA over a period of 10 to 12 years simply let that business get away from them,” Bibb said. “There’s a lot wrong with FHA” that increased costs and risks to lenders compared with conventional loans sold through Fannie Mae and Freddie Mac mortgage bond programs, he said.

But Brian Montgomery, the FHA’s housing commissioner, told mortgage bankers during a later panel that his agency has remained an “island of stability.” Concerns among mortgage investors that the FHA Select loans are vulnerable to default and may taint mortgage bond programs will soon be addressed by Ginnie Mae, the government-owned company that pools FHA loans into mortgage-backed securities.

“FHA has been a model of stability throughout the recent subprime boom and credit crunch but only recently have people come to recognize that fact,” Montgomery said.

Lowman, meanwhile, noted that FHA still hasn’t paid some outstanding claims from losses tied to Hurricane Katrina, suggesting that some may question the integrity of the guarantee. But that issue will get “worked out” through legislation or other avenues because “they know if they don’t pay claims there’s no program,” he said.

Steve Nadon, president and chief operating officer of H&R Block Inc.’s Option One Mortgage conceded that the FHA program will be an integral part of the subprime market where his company once played a dominant role.

“Over the next 24 months, or even 36 months, the subprime market is FHA,” said Nadon, who sat on the panel with the FHA’s Montgomery. “There’s no subprime” financing available anywhere else, he said.

The subprime market will eventually come back, he said, though not in the form that fueled lending to riskier borrowers that was done during the housing boom. Reminding bankers at the conference that patience is a virtue, he told them to anticipate recovery for subprime in 2009.

Larry Cragun over at the Seattle PI recently gave this useful overview of the differences between conventional and FHA loans:

Are you shopping for a home? When it comes to home shopping getting the right program may mean the difference between looking and buying.

Do you have concerns you might not be able to qualify? Do you have a loan you want out of, yet aren’t sure your situation is good enough? If so, you might want to talk to an FHA lender.

Sadly, FHA is not readily available to the mortgage community. The red tape, extra costs, and difficulties keep many good lenders from having it or wanting it. Another sad fact is that this lack of availability put some folks in sub prime loans when the could have closed FHA. In like manner some people don’t know they could buy now, and are not buying.

Hello, I promised on a recent article by Greg Perry (Bush says no to raising FHA loan limits past $417,000) that I would point out reasons FHA should be made more readily available to the market. The new proposed FHA changes seem to have moved a little in that direction but in my opinion fall way short. I will leave that for another article except to say, far too few mortgage brokers offer the product.

Those that claim FHA is no big benefit to consumers are wrong. Treat anyone who makes this statement as incompetent or unwilling to be straight with you. Understand, not all borrowers need to go FHA, nor do all properties qualify – but to many borrowers it is the only product. I repeat, the only product.

Also, on this blog a loan officer argued FHA pricing is much higher. That too is wrong. When he made that claim I quickly went to my rate sheets to double check. Using one of the markets leading mortgage banks the pricing was virtually the same for both programs.

I will spell out some benefits of FHA, understanding that there are probably even more on the horizon if the laws are going to be passed as proposed.

I first offer my thanks to Mary Pickard and Johanna Kimura, both experienced FHA professionals, for the gut check and feedback I needed for this article.

Borrowers, especially first time borrowers, read this.

With FHA there is no minimum FICO score requirement whereas with the My Community Program a 600 FICO is required. Your FICO may not truly represent what it accurate for now. Often old data is still on your report. Sometimes there is a good explanation.

With FHA even if automated underwriting denies your file, that doesn’t mean that you can’t get the loan funded. It just means that the underwriter would have to make a manual decision on the file. This is important as I have never seen an underwriter override a conventional automated underwriting decision. We have closed thousands of files, not just a few, the sample is big. It just doesn’t happen and is the door opener for a loan officer to move you to sub prime.

One of the best advantages with FHA is that you have the flexibility of underwriters discretion. FHA is really a make sense type of underwriting whereas with Fannie/Freddie its black and white it works or it doesn’t.

FHA allows up to 6% seller contributions and also allows temporary buydowns other programs do not allow. A temporary buydown is often justified and makes the loan make sense. A typical temporary buy down is 2% lower interest rate the first year and 1% the second. The difference in payments may make it work for you, also may make the proposed transaction work for the underwriter.

Non traditional credit is also allowed through FHA and unlike Fannie 1 of the trade lines do not have to be rent. So you could potentially have a borrower living rent free with other forms of non traditional credit and still make the loan work. Non traditional credit is credit you have been given that doesn’t show up on your credit report. The power company for example.

FHA also doesn’t have a maximum cap to the amount of income a borrower can make. The Up front MI can be paid by the seller using the 6% closing costs.

In the past the stigma with FHA was that the sellers ended up having to pay the bulk of the closing costs which is actually no longer the case the only non allowable closing costs is the tax service fee. People also thought that with FHA it was more of a hassle because HUD would require all repairs even minor repairs to be fixed. This is no longer the case.

Other things people don’t know about FHA is that if the borrowers run into trouble and cannot make their payment HUD will work with the borrower on a repayment plan so they won’t necessary go to foreclosure immediately they are really there to help the borrower.

If you have a hint that you qualify, now is the time to talk with an FHA lender.

Lynn Underwood over at the the Star Tribune in Minnesota recently gave this useful overview of various mortgage programs now available:

Just six months ago, home buyers with borderline credit, questionable income and no money down could easily snag a mortgage.

Today lenders are playing it safe in response to increasing problems with subprime sweetheart loans and recent state legislation that created stricter lending guidelines.

Although the lending landscape has changed, there are still plenty of consumer-friendly loan options for a wide range of home buyers.

Ronny Loew, senior mortgage banker at First Horizon Home Loans, Edina, said the industry is responding by taking a more conservative approach. “We’re taking a big step back to the old ways,” he said.

Some of those time-tested loan programs have been around for decades. Federal Housing Administration (FHA) loans, for example, weren’t highly promoted in recent years because they offered less profitability to brokers, came with strict guidelines and could be time-consuming to process.

“Now they’re one of the only games in town,” said Kris Wilson, a senior loan officer at Fairway Independent Mortgage, Bloomington.

The following are some examples of conforming conventional loans (for amounts less than $417,000). Variables related to income, credit, assets and property determine if a buyer can qualify for a mortgage.

COMMUNITY HOME BUYER LOANS

What: Offered by lenders under a variety of names such as Home Possible, My Community Mortgage and Neighborhood Advantage, for low- to moderate-income buyers.

Good for: Borrowers who need 100 percent financing, zero percent down and have a credit score of 620 or higher (some exceptions). However, a buyer’s income must not be higher than the HUD median income for the area they are buying in.

Features: The interest rate is .75 of one percentage point higher than a standard conventional loan. Thirty- or 40-year fixed-rate or adjustable rate mortgages (ARMs) are available. Mortgage insurance payments are discounted (and can be dropped when the mortgage reaches 20 percent equity).

FANNIE FLEX

What: A Community Home Buyer loan that has no income limits.

Good for: Borrowers with a higher income who need 100 percent financing/zero percent down. Requires a credit score of 620 or higher.

Features: The interest rate will be about .75 percentage-point higher than a standard conventional loan. Available as a 30-year fixed-rate or ARM. Mortgage insurance is not discounted.

EXPANDED APPROVAL LOANS

What: Fannie Mae and Freddie Mac expanded standard qualifying guidelines so more people can get a loan. Two examples are EA1 and A Minus loans.

Good for: Slightly higher-risk, credit-challenged borrowers with a credit score under 620.

Features: Interest rate will be 1.25 percentage points or more above that of a standard conventional loan. Requires 5 percent down. Mortgage insurance payments may be higher.

FEDERAL HOUSING ADMINISTRATION (FHA )

What: FHA insures mortgages for low- to moderate-income buyers and is the loan of choice for many first-time home buyers.

Good for: Credit-challenged borrowers. FHA will allow more flexibility on credit scores, but is strict on income documentation. “FHA also will work with you if you lose your job and can’t make payments,” said Tim Bendel, president of the Minnesota Mortgage Association.

Features: The maximum mortgage amount is $272,683. Requires a minimum 3 percent down payment. Interest is charged at the market rate. Available in a 30-year fixed or ARM. Mortgage insurance payment is in effect for almost the entire life of the loan.

FHA Secure Program: A new refinancing option for credit-worthy homeowners who made timely mortgage payments before their ARM reset to a sharply higher rate, causing them to default.

FHA reform: Congress is considering legislation that will result in improved FHA options for home buyers.

VETERANS ADMINISTRATION

What: This government agency provides federally guaranteed home loans for military personnel or surviving spouses.

Good for: Veterans who need 100 percent financing/zero percent down; credit score may be lower than 620.

Features: Loan amount is higher than FHA; 30-year fixed rate available. One-time funding fee instead of mortgage insurance

An article in Investor’s Business Daily recently pointed out the the FHA issue is likely to get a lot more national attention as the ’08 presidential campaigns ramp up:

The meltdown in subprime loans is a made-for-TV political extravaganza debuting just in time for election season — especially as more Americans keep losing their homes.

At least, that’s the way economist David Shulman sees it. He expects “show trials” before Democratic congressional committees to begin this winter, replete with testimony from distressed homeowners.

But so far the gloves have largely stayed on as regulators and lawmakers grapple with ways to help an estimated 2 million U.S. homeowners who have lost or are about to lose their homes — not to mention fix mortgage lending excesses that led to today’s debacle.

“A lot of it will be bipartisan, at least initially,” said Shulman, senior economist with the UCLA Anderson Forecast. “Both parties will try to show how sensitive they are to homeowners.”

The first stand-alone bill to address the mortgage crisis easily breezed through the House last month, expanding the ability of the Federal Housing Administration (FHA) to help struggling subprime borrowers.

The bill would give more power to the FHA, the federally insured loan program known for affordable fixed-rate mortgages. It would let the FHA give subprime borrowers lower rates and better terms. A Senate committee has passed a companion bill with a lower loan limit.

“The FHA reform bill has good bi-partisan support,” said Kurt Pfotenhauer, senior vice president of government affairs for the Mortgage Bankers Association. He says the FHA is the only real alternative at the moment for subprime borrowers now that the “private-label subprime market has disappeared.”

The Bush administration supports making it easier for the FHA to refinance adjustable rate mortgages — though not as easy as the Democrats would like.

Another bill giving borrowers relief passed unanimously in the House last week by voice vote and also got support from President Bush. It would waive taxes on mortgage debt forgiven as part of a mortgage workout.

This House bill also extends deductibility of mortgage insurance, making loans cheaper for those who have little equity in their homes or can’t put down 20%. Political observers expect the Senate to approve the bill.

The problem is, how many lenders will rework subprime terms? Only 1% of reset subprime adjustable rate mortgages were modified by lenders and servicers earlier this year, according to a recent report from Moody’s.

Attorneys general and bank regulators in 10 states have joined forces to push mortgage loan officials to rework loans to stave off foreclosures.

Also, Treasury Secretary Henry Paulson on Wednesday announced that 11 of the largest mortgage servicers, plus mortgage counselors, investors and trade groups, have formed a coalition to improve outreach to struggling homeowners.

“Their partnership, called Hope Now, has put together an aggressive plan to reach more homeowners and help them find a way to stay in their homes,” Paulson said in prepared remarks.

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Aldo Svaldi over at the Denver Post recently had this to say about recent government mortgage assistance programs changes:

A new federal loan program designed to help borrowers cope with rising payments on adjustable-rate mortgages is kicking into gear.

An estimated 80,000 borrowers nationally are expected to take advantage of the FHASecure loan program, said Ben Johnson, director of the Denver Homeownership Center with the Federal Housing Administration.

Another 160,000 or so are expected to use other FHA loans to escape their unaffordable mortgages.

The first Colorado borrowers in the program should start receiving their new loans in early November.

Critics say the program doesn’t go far enough to help homeowners.

FHASecure loans, unveiled by President Bush in August, are designed to shift borrowers who can’t afford higher payments on their ARMs into more traditional FHA-backed loans.

But they aren’t a shoo-in. Borrowers facing a reset must have stayed current on their payments for at least six months, although those who have fallen behind because of a reset to a higher interest rate are eligible.

Loans are underwritten to FHA standards, which limits how much can be financed. In Denver-Aurora, the FHA cap is $308,370.

The FHA will insure a mortgage for up to 97 percent of a home’s appraised value. If the borrower can’t come up with the down payment or the loan is worth more than the home, the current mortgage provider must be willing to accept a second mortgage for the difference, including any prepayment penalties or other fees.

Borrowers must also demonstrate an employment history and that they can afford the payments on the new loan, based on an interest rate that will come in somewhere between the initial rate offered on the ARM and the higher adjusted rate.

Critics charge that FHASecure and other administration efforts represent a Band-Aid on an open wound. There were 223,538 foreclosure filings in the U.S. in September, according to RealtyTrac.

“Unfortunately, the bottom is falling out of our housing market much more quickly than the administration is willing to stem the tide of foreclosures,” Sen. Charles Schumer, D-N.Y., said Wednesday.

Schumer was responding to an announcement Wednesday by Treasury Secretary Henry Paulson Jr. of a new alliance with mortgage servicers, housing counselors and government agencies to help an estimated 2 million borrowers who face higher payments on their ARMs – not all of whom would qualify for FHASecure loans.

“A combination of stagnant or falling house prices, low- down-payment mortgages and resetting adjustable-rate mortgage rates are creating real challenges for many American homeowners,” Paulson said in a statement.

The Hope Now program will work to establish best practices in housing counseling and launch a mass-mail marketing campaign next month to reach struggling borrowers before they fall off a cliff.

As it reaches out to help borrowers, the FHA also has cracked down on seller-financed assistance programs.

The programs, which claimed to be charities, inflated home sales prices, allowing the minimal 2 percent to 3 percent down payments to be wrapped back into the FHA loans and increasing the risk to buyers and the government.

Barry Jacobs over at Affordable Housing Finance reports this progress as of today:

The House Financial Services Committee has approved legislation (H.R. 2985) to create a national affordable housing fund, bringing advocates one step closer to their goal of a dedicated funding source for housing aid.

The funding is still contingent on the passage of government-sponsored enterprise (GSE) reform and Federal Housing Administration (FHA) modernization legislation, which would channel money from Fannie Mae- Freddie Mac portfolio holdings and FHA premium revenue into the trust fund. Those sources are expected to provide $800 million to $1 billion annually for affordable housing.

“The growing shortage of affordable housing is one of the most serious social and economic problems facing our country,” said Financial Services Committee Chairman Barney Frank (D-Mass.) after the committee approved the bill, 45-23. “Given our severely constrained fiscal realities, we are today doing the best we can to address this—creating a lowincome housing trust fund that will be paid for in ways that do not draw from federal tax revenues.”

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