About Government Refinance and Home Purchase Programs

There was an interesting story recently over at HousingWire reporting that two lenders — GMAC and Ocwen — have ramped up the number of principal write downs in this months. Here is a bit from that article:

Mortgage servicers began aggressively writing down the principal on delinquent nonagency mortgages and even second liens in January, analysts at JPMorgan Chase said in a report Wednesday, yet the amount of foreclosed properties continues to rise.

GMAC, the servicing arm of Ally Financial, stood out to analysts, who surveyed 433 deals in the nonagency space. In one security, GMAC liquidated 45 mortgages for a $3.2 million loss. At the same time, however, it modified nearly 1,200 of the loans that included $5.5 million in principal forgiveness.

“This is the first time we have seen large-scale principal forgiveness from GMAC,” JPMorgan analysts said. Outside of GMAC, however, principal forgiveness has been contained only in the subprime sector, but even those have occurred on a smaller scale to GMAC’s January numbers.

Ocwen Financial Corp. showed a push to charge-off second liens and low-balance first liens when it took over servicing for HomEq and Saxon Mortgage Services.

“I haven’t seen the report so I cannot comment specifically on it, but I can say that whenever we charge off second liens, it’s in accordance the governing PSAs (pooling and servicing agreements) and consistent with accepted industry practice,” Ocwen Executive Vice President Paul Koches told HousingWire.

…

While GMAC and Ocwen have shown that they’re ramping up writedown efforts, JPMorgan analysts said the effort is not seen industry wide.

“Bank servicers have not yet shown strong evidence of forgiveness,” analysts said.

Most lenders are loath to forgive principal for struggling homeowners. Lenders prefer to lower interest rates if they must do anything at all. That way the bank at least still has the right to collect the full amount lent. However, foreclosing on a property costs lenders more money than principal write-downs cost so in some cases the lenders go for that option. It is still rare but it appears it is becoming slightly less rare as of late.

Contact us in the sidebar for more information of this or other refinance programs.

After a rough couple of months at the end of 2010 where mortgage interest rates rose pretty consistently every week from early November until the end of the year, borrowers are starting to get a little relief in 2011. Over the first couple of week of 2011 interest rates have changed course and have been inching downward again. If you have been considering refinancing into a better mortgage now is still a good time while the government continues to do what it can to compress rates. Contact us in the sidebar to learn which programs apply to your situation.

There is a new program launching today in California designed to help unemployed homeowners avoid foreclosure. Here are some details from a recent article over at SFGate:

On Monday, more than two months behind schedule, the California Housing Finance Agency will begin taking applications for a federally funded program that will give some unemployed homeowners up to $18,000 each over six months to pay their mortgage.

To qualify, homeowners must meet income and other restrictions and their loan servicer must participate in the program. As of Friday, only three servicers had signed up, but CalHFA expects to have up to 10 by the end of this week.

The program is the first of four in California that will be financed by the Hardest Hit Fund, a $7.6 billion pot of money the Treasury Department is providing to 18 states with high unemployment rates or big drops in housing prices.

The Obama administration announced the fund in February but kept adding states and money to it throughout last year. California was one of the first states to qualify and stands to receive almost $2 billion, but has not yet launched a program.

Contact us in the sidebar to learn more about the programs that would best apply to your situation.

If you have a mortgage backed by Fannie Mae and are facing hardships, the folks at Fannie Mae have launched a new web site that is designed to educate borrowers on methods to avoid foreclosure. The instructional video is called WaysHome and the website is at www.knowyouroptions.com.

The folks over at HousingWire had this to say about the launch:

Fannie Mae’s new WaysHome interactive multimedia tool walks homeowners through options if they are struggling to pay the mortgage — even allowing them to select a character and be a part of an interactive video.

The WaysHome video is set in a neighborhood that has been hurt by the foreclosure crisis. Real actors play three residents of the neighborhood — each in financial distress. Homeowners select to play one of the residents and, as their stories unfold, make financial decisions for them and see how the consequences of these decisions play out. Fannie Mae provides tips, tools and links during the process and users have the ability to go back and revise their decisions. Most choices lead to an immediate consequence followed by a related teaching point.

WaysHome asks the homeowner input some basic information about his or her situation. For example, the homeowner is asked about whether they have short-term or long-term income issues, and whether they want to stay in the home or leave. It then provides some options that the homeowner should consider.

You can contact us in the sidebar for other questions or if your current loan is not backed by Fannie Mae.

As you might have heard already, mortgage interest rates have been slowly rising for a couple of months now. This is true for both government-backed mortgages and conventional mortgages. The good news is that rates were so low a couple of months ago that even after two months of increases, the average rates on 30 year fixed mortgages in the US were still in the 4’s as of last week. That is still a surprisingly low number.

People who have adjustable rate mortgages (ARMs) have also benefited from the low rates recently without even refinancing. Most people with ARMs have seen their payments drop over the last year. However, the problem with ARMs is that the higher overall rates get the higher their payments get. So while someone with an ARM might be enjoying paying something like 4% on their loan now, they could find themselves paying 6-10% on the same loan in the years to come if rates continue to rise.

If you have an adjustable rate mortgage now might be a good time to contact us to look into programs that will allow you to lock in a fixed rate below 5%. If current trends continue the opportunity to get a fixed rate that low could be passing quickly.

Contact us in the form in the sidebar to learn more.

The Obama administration’s Home Affordable Modification Program (HAMP) started pretty strongly out of the gate, but recent evidence indicates the program has been losing steam. We get this from a recent HousingWire article:

The Treasury Department’s Home Affordable Modification Program is dwindling.

According to data released last week from the Office of the Comptroller Currency, lenders started 43,739 new, three-month HAMP trials in the third quarter, down 84% from the peak of 272,709 a year ago.

New trials have been on the decline ever since lenders reported, on average, 57,000 fewer trials than the quarter before. The biggest drop came in first quarter of 2010, when lenders offered 118,000 fewer trials than the previous quarter.

“I think the program is turning out to have a lot less impact on the market than we thought it would have,” said Sen. Ted Kaufman (D-Del.), chairman of Congressional Oversight Panel after it released a scathing report on HAMP last month.

The Treasury launched HAMP in March 2009 to provide an incentive to servicers for the modification of loans on the verge of foreclosure. At the time, the Obama administration said the program would help 3 million to 4 million homeowners avoid losing their home. Under such political pressure, servicers began putting homeowners into three-month trials without checking for documentation.

When a backlog began forming, administrators put renewed emphasis on converting more into permanent modifications, while the Treasury changed the rules prohibiting a new trial until all the documentation was in from the homeowner.

The upshot of it all is that loan modifications just aren’t easy to come by — even with the federal government encouraging them. In addition, there are lots of stats out there indicating that people who do get loan modifications tend to re-default at an alarmingly high rate.

What have lenders been doing instead of modifying loans? Well first lenders will try to get borrowers to just take their lumps and keep paying. In many cases where borrowers fall behind on payments lenders are forging ahead with foreclosures again. However the average foreclosure has been taking something like 18 months to complete from the first late payment. Last, lenders have been accepting short sale offers at a more often and more quickly. Banks accepting a short sale on underwater homes where payments are delinquent has proven to be a good compromise that allows the borrower to get out of the underwater home and allows the lender to save time and money by avoiding the expenses of foreclosing.

Should you still seek a loan modification if you can’t qualify for a refinance? Absolutely. But it appears that loan modifications are getting harder to get lately. Contact us in the sidebar to learn which programs will best fit your situation.