About Government Refinance and Home Purchase Programs

The Treasury and Obama Administration released the the first iteration of their plan to wind down government-sponsored mortgage behemoths Fannie Mae and Freddie Mac. The plan was not earth shattering by any means. The basic ideas in it are to slowly wind down the involvement of Fannie and Freddie in the mortgage market by about 10% per year over the next few years. It also recommends reducing the loan limits on government-backed loans this Fall. Here are some excerpts from the recent HousingWire article on the subject:

The administration’s plan, sent to Congress by the Treasury Department, calls for continuing to wind down of the GSEs investment portfolio at an annual rate of no less than 10% per year.

The Treasury also wants to see 10% down payments from potential borrowers. …

“This is a plan for fundamental reform – to wind down the GSEs, strengthen consumer protection, and preserve access to affordable housing for people who need it,” said Treasury Secretary Tim Geithner. “We are going to start the process of reform now, but we are going to do it responsibly and carefully so that we support the recovery and the process of repair of the housing market.” In a conference call Geithner predicted a 5 to 7 year timeline for implementation.

Despite the recent wave on news on rising mortgage interest rates, the interest rates on most government-backed mortgages are still startlingly low by historical standards. But all good things must come to an end and it is not unlikely that rates will bounce significantly higher soon. For folks who have an adjustable rate mortgage (ARM) now, rising rates overall will mean monthly mortgage payments could start shooting up soon.

If you have an adjustable rate mortgage — whether that is on a first or a second mortgage — and have been thinking about looking into a fixed rate mortgage it is definitely time to stop procrastinating. Contact us in the sidebar right away to learn which programs best suit your situation.

Recent reports show housing prices in the US continuing to drop. We get this from a recent HousingWire report:

December home prices fell 5.4% from a year ago, the fifth straight month of declines, according to data provider CoreLogic.

The decrease was steeper in December than the revised 4.39% drop in November. For all of 2010, though, home prices showed no change from the year before and some signs of stabilization. From 2008 to 2009, home prices fell 12.7%. CoreLogic Chief Economist Mark Fleming said 2010 was a year of volatility with the expiration of the homebuyer tax credit.

“It was a bumpy ride which ended with a net gain/loss of zero. Despite the continued monthly decline in home prices and year-over-year depreciation, we’re encouraged that on an annual basis we’re unchanged relative to a year ago,” Fleming said. “Excess supply continues to drive prices downward, but the silver lining is that the rate of decline is decelerating.”

If you still have any equity in your home it is much easier to refinance to a better mortgage rate than if you are significantly underwater. If you would like to improve your mortgage situation contact us in the sidebar to see which programs apply to your family right away before housing prices slide further.

With the economy showing signs of life lately mortgage interest rates have slowly been creeping higher. While it is still possible to get a 30 year fixed government-backed mortgage at below 5% that window of opportunity may be closing quickly.

While rising interest rates will be met with rejoicing among savers and investors, they are not desirable to folks looking to refinance their mortgages or people who have adjustable rate mortgages now. If you have considered getting an estimate on a refinance to a lower interest rate contact us in the sidebar right away. We may be looking at the recent record low rates through the rear view mirror as soon as this Spring.

One of the foreclosure prevention ideas that has been kicking around Washington DC in recent years is the so-called “right to rent” plan. Basically, the idea is that the government could give the right to homeowners to rent their homes back from the bank after a foreclosure and thus not be evicted. We get the following from a recent Huffington Post article:

At the moment, though, it’s unclear whether or not a “right-to-rent” plan has enough support in Washington.

“While we continue to review this concept, we have found several challenges that we believe would limit this type of assistance from making any significant impact in the market,” David Stevens, Federal Housing Administration Commissioner, wrote in an email. “Although we are not currently pursuing this option, the Obama Administration continues to work toward reforming the housing finance system and the mortgage servicing system in a way that puts consumers first and helps keep more Americans in their homes.”

But while the right to rent idea doesn’t have much traction, several other programs are up in running. Contact us in the sidebar to learn about which programs best apply to your situation.

Homeowners over the age of 62 are eligible to look at a government-backed loan product called a reverse mortgage. There was a good article recently over at CNNmoney.com on the subject. Here are a few excerpts:

A reverse mortgage can be a good way for people 62 and older to turn their home equity into extra spending cash that can supplement Social Security and withdrawals from savings, making retirement more enjoyable than it otherwise might be.

Typically, you can take the loan proceeds in a lump sum, monthly payments for life, as a credit line or a combination of these.

One of the big appeals of this type of arrangement — as opposed to, say, tapping your home equity by refinancing or opening a home equity line of credit — is that you don’t have to repay the loan until you die or move out of your house.

Another plus is that the payments you receive from a reverse mortgage don’t affect your Social Security benefits (although they could affect your eligibility for programs like Medicaid and Supplemental Security Income, or SSI, the program that provides income to people with low incomes and disabilities)

Keep in mind that you need to have a decent amount of equity in your home to be a candidate for a reverse mortgage. If you would like to learn more about reverse mortgages just fill in the contact form on the right and one of our counselors with follow up with you.

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.

After hitting shocking lows over the Fall of 2010 interest rates on government-backed loans have been slowly inching higher since then. Nevertheless rates on 30 year fixed loans are still currently in 4’s on average, in the high 3’s in some cases for 15 year mortgages, and even lower on some 5 year and 7 year ARMs. So if you have a mortgage with a rate in the 5’s or higher and plan to own your home for five of more years now is the time to look into locking in a lower interest rate. It is no secret that the rates are being artificially compressed by the Fed right now but sooner or later rates will go back up to more normal levels and the chance to lock in rates not seen in 50 years will pass for good.

December tends to be a really good month to get the ball rolling on a refinance because borrowers tend to procrastinate getting started due to the holidays. That leaves extra time for authorized lenders to help people who don’t procrastinate. So if you have a fixed interest rate at 5% or higher or an ARM that you would like to fix in, contact us in the sidebar right away to see about taking advantage of the government-backed mortgage refinance programs.