About Government Refinance and Home Purchase Programs

We have been noting recently that overall mortgage interest rates have temporarily dropped significantly in reaction to the European debt crisis. There was a post recently over at the WSJ blog reporting that rates on 15 year mortgages hit the lowest level since Freddie Mac started tracking that information nearly 20 years ago.

In addition to the excellent rates on fixed loans, 5 year ARM’s are coming in below 4% in some cases right now. 5 year ARM’s can be a prudent loan choice for qualified families that intent to sell their home in the next 4-5 years.

Interest rates on government-backed and conventional mortgages will surely be heading up soon so anyone interested in a refinance should contact us in the sidebar right away.

Here are some bits for that blog post:

Home-mortgage rates were little changed last week, holding steady for the most part at or near recent lows, including a record for the 15-year fixed-rate loan, Freddie Mac said. …

Rates on 15-year fixed-rate mortgages averaged 4.2%, the lowest level since Freddie Mac began tracking the mortgage in 1991, down from 4.21% in the prior week.

One-year Treasury-indexed adjustable-rate mortgages averaged 3.95%, unchanged from the prior week and the lowest level since May 2004. The one-year ARM averaged 4.81% a year ago.

The five-year Treasury-indexed ARM averaged 3.94%, down from 3.97% in the prior week and 4.85% a year ago.

The state of Pennsylvania has been running a foreclosure prevention program in which it reportedly loans unemployed people significant amounts of money to pay their mortgages while they are out of work. A variation of the plan is now being introduced nationally as it is included in the Financial Reform Bill being worked on in the senate right now. Here is more info from a recent HousingWire article on the subject:

The Senate passed the Restoring American Financial Stability Act last week, approving a new program that would reduce mortgage payments for the unemployed.

The program would provide $3bn from the Troubled Asset Relief Program (TARP) to lend up to $50,000 to unemployed homeowners, who could reasonably resume making payments again within two years. The program was modeled after the Homeowners’ Emergency Mortgage Assistance Program (HEMAP) in Pennsylvania.

The Senate passed the bill last week but transplanted its own language into the one passed by the House of Representatives. The status of the reform is still “resolving differences.” But, lawmakers hope to have it in front of President Obama to sign by the July 4, 2010 recess.

Please fill in the contact form in the sidebar to see which programs you could qualify for.

As the euro continues to struggle more and more investors all over the world are buying US treasuries. That in turn is lowering the yield on 10-year treasury notes and that in turn is temporarily reducing mortgage interest rates. These low rates certainly won’t last forever so if you have been considering refinancing to a lower rate now is the time. Contact us in the sidebar to learn more.

The announced enhancement to the Obama loan Home Affordable Modification Program (HAMP) is set to roll out on July 1 of this year. Contact us in the sidebar to get advice on your situation. We get this from a recent CNNmoney article on the early results from the program:

Separately, the administration plans to roll out its new program for the unemployed on July 1. Eligible borrowers could enter a forbearance program, which either suspends their monthly payments entirely or reduces them to less than 31% of their pre-tax household income.

Later in the year, two more initiatives will begin. One will encourage servicers to lower loan balances for delinquent borrowers when that is more advantageous to mortgage investors than reducing interest rates.

Principal reduction would be available for eligible borrowers who owe more than 115% of their home’s current value. The balance would be forgiven as long as the homeowner makes timely payments for three years.

The other initiative will allow some borrowers who are current on their mortgages but have seen their property values drop to refinance into Federal Housing Administration loans worth no more than 97.75% of their home’s price. The program is set to start in the fall.

If the borrower has a second lien, the total mortgage debt could not exceed 115% of the property’s value. Homeowners, however, must meet FHA’s qualifications and have a credit score of at least 500. Their new monthly payments would be no more than 31% of their monthly income.

In the latest attempt to help prevent foreclosures, House Democrats recently introduced a bill that would give borrowers on the verge of foreclosure the right to rent their home from the bank even after the home is foreclosed. We get this from the recent Housing Wire story on the subject:

A bill filed in the US House of Representatives would allow mortgage borrowers to remain in their homes, as renters, for up to five years after receiving a foreclosure notice.

The “right to rent” bill, House Resolution (HR) 5028, would allow borrowers to petition a judge to stay in their homes as renters under a lease for up to five years. The judge would be empowered to appoint an independent appraiser to set fair market value, which would be allowed to rise with inflation, Representatives Raúl Grijalva (D-OH) and Marcy Kaptur (D-OH) said in a joint release. The bill is an updated version of a similar bill Grijalva introduced in 2008. …

The right to rent program would be limited to homes purchased at or below the median price for its metropolitan statistical area, and must have been the borrower’s principal residence for no less than 2 years. Only mortgages originated before July 1, 2007 will be eligible.

Of course the bill has a long way to go before becoming law but it is an interesting idea.

There was a really interesting article in the NY Times recently on the growing number of struggling homeowners who have stopped paying their mortgages and are living in their homes for free until the bank evicts them. In some cases the process of foreclosing on such a home can take well over a year. Here are some quotes:

A growing number of the people whose homes are in foreclosure are refusing to slink away in shame. They are fashioning a sort of homemade mortgage modification, one that brings their payments all the way down to zero. They use the money they save to get back on their feet or just get by.

This type of modification does not beg for a lender’s permission but is delivered as an ultimatum: Force me out if you can. Any moral qualms are overshadowed by a conviction that the banks created the crisis by snookering homeowners with loans that got them in over their heads. …

The average borrower in foreclosure has been delinquent for 438 days before actually being evicted, up from 251 days in January 2008, according to LPS Applied Analytics. …

In some states, including California and Texas, lenders can pursue foreclosures outside of the courts. With the lender in control, the pace can be brisk. But in Florida, New York and 19 other states, judicial foreclosure is the rule, which slows the process substantially. …

Both generations of Pembertons have hired a local lawyer, Mark P. Stopa. He sends out letters — 1,700 in a recent week — to Floridians who have had a foreclosure suit filed against them by a lender.

Even if you have “no defenses,” the form letter says, “you may be able to keep living in your home for weeks, months or even years without paying your mortgage.”

About 10 new clients a week sign up, according to Mr. Stopa, who says he now has 350 clients in foreclosure, each of whom pays $1,500 a year for a maximum of six hours of attorney time. “I just do as much as needs to be done to force the bank to prove its case,” Mr. Stopa said.

There was an interesting piece over at the WSJ blog recently. The part that really caught my attention was the claim that some borrowers are remaining in their homes for up to two years after they stop making mortgage payments. I had heard of people staying in homes for 6-12 months but never anything like that. Clearly these sorts of things vary by region but it is another indicator of the deep hole the US housing market is trying to dig out of. Here are some excerpts from the piece:

Some borrowers remain in their homes for a year or two after they stop making payments, waiting to be ejected through a clogged foreclosure system. Around 2.6 million households are more than 90 days overdue but still not yet in the foreclosure process, which can take more than a year.

Distressed borrowers are staying put for long periods partly because the federal government has leaned on banks to try to avert as many foreclosures as possible by offering lower payments, a time-consuming process. New state laws also require banks to take more steps to determine which borrowers might be rescued. Further slowing the process, many banks and other loan servicers still don’t have enough capacity to handle all the requests from borrowers for help.
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There were fears that when the Fed stopped buying mortgage-backed securities at the end of March 2010 mortgage interest rates wold shoot way up. There was some validity to those fears. When the MBS purchasing program concluded the rates on mortgages bounced up more than a quarter of a percent in the following weeks.

Since then other global factors have kicked in and mortgage rates are back down again. The main driver of the dip in rates is the troubles the European Union are facing lately. With the troubles across the pond more global investors are buying the relatively safe US treasury bills and that is in turn compressing mortgage interest rates.

The takeaway from all of this is that if you have been considering refinancing to a better mortgage interest rate contact us in the sidebar now. The current dip in interest rates is a temporary thing so rates will likely only move up from here.

Here are some more interesting excerpts from the recent press release on the progress of the HAMP program:

At the time we launched HAMP in March 2009, President Obama said that the program would “enable as many as three to four million homeowners to modify the terms of their mortgages.”

* The target of three to four million homeowners includes both agency loans (owned or guaranteed by the Government-Sponsored Enterprises, Fannie Mae and Freddie Mac) and non-agency loans.
* We have continued to report offers of trial modifications, because the offer is the servicer’s commitment to extend a trial modification subject to the borrower’s agreement. At this point, a homeowner is provided an opportunity to reduce his or her monthly mortgage payment.
* There will be fewer permanent modifications than trial modifications, as modifications are only offered permanent status once the homeowner has accepted a trial modification, has performed for at least three months in a trial modification, and has met the full documentation requirements for the permanent modification. By requiring borrowers to demonstrate their ability and willingness to meet their monthly obligations, the trial modification helps ensure that taxpayer dollars are not spent on unsustainable modifications.
* Loan modifications have a risk of re-default. Among the permanent modifications, some will re-default and that factor is incorporated into the program’s design.
* In fact, we designed our program specifically to protect the taxpayer in cases where re-default occurs payments to servicers, investors, and borrowers are conditional on actual performance over time.
* The projection of three to four million homeowners helped is based on our best estimate of the number of HAMP-eligible households that are likely to require assistance during the four-year program. The number of households that actually require assistance from HAMP during the remaining three years may diverge from our expectations if economic conditions or home prices evolve differently than projected.

More than 1.4 million borrowers have been extended a modification offer, with approximately 1.2 million of these approved offers resulting in modification trials. In a program scheduled to last nearly four years (March 2009 through December 2012), either figure places the program well on schedule to meet the goal announced by President Obama.

Contact us in the sidebar to discuss your situation.

There was a pretty useful press release at the MakingHomeAffordable web site recently. It has a lot of information but here are a few highlights:

Actions Helping Homeowners Purchase Homes, Refinance and Modify Mortgages to More Affordable Payments, Prevent Foreclosures and Stabilize Communities

The Administration has:

* Launched a modification initiative to help homeowners reduce mortgage payments to affordable levels and to prevent avoidable foreclosures. Homeowners in active modifications are saving around $500 per month on average;
* Supported temporarily expanding the limits for loans guaranteed by Fannie Mae, Freddie Mac, and FHA from previous limits up to $625,500 per loan to $729,750 to provide needed support to keep markets functioning during this crisis;
* Expanded refinancing flexibilities for the Fannie Mae and Freddie Mac loans, particularly for borrowers with negative equity. Combined with historically low mortgage rates, this has helped more than four million American homeowners to refinance, saving an estimated $150 per month on average and more than $7 billion cumulatively in the past year;
* Launched a $23.5 billion Housing Finance Agencies Initiative which is helping more than 90 state and local housing finance agencies (HFAs) across 49 states provide sustainable homeownership and rental resources for American families;
* Supported the First-Time Homebuyer Tax Credit, and the subsequent extension and expansion of the credit to also assist move-up buyers, which has helped hundreds of thousands of responsible Americans purchase homes.
* Through the Recovery Act, provided over $5 billion in support for affordable rental housing through low-income housing tax credit programs and $2 billion in additional support for the Neighborhood Stabilization Program (NSP), on top of the first round of $4 billion of NSP funds, to restore neighborhoods hardest-hit by concentrated foreclosures; and
* On February 19, 2010, announced the $1.5 billion HFA Hardest-Hit Fund for five state HFAs in the nation’s hardest-hit housing markets to design innovative, locally targeted foreclosure prevention programs. On March 29, 2010, we announced a $600 million expansion of that program for an additional five HFAs.

Contact us in the sidebar if you would like to discuss your situation.