About Government Refinance and Home Purchase Programs

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 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…

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.

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.

When the subprime mortgage market imploded in 2007 there was a mad rush by mortgage lenders and borrowers to FHA loans. FHA went from about 3% of the market to something like 30% of the mortgage market in short order. That is because FHA was the last refuge for buying a home with little or no money down. The problem was that about the time FHA began insuring more mortgages, housing prices were tumbling across the country. As housing prices tumbled more people began defaulting on their FHA loans. Every time a borrower defaults on an FHA insured loan the FHA is on the hook to cover the losses. As a result there have been growing concerns that the FHA may become insolvent for the first time in its 70+ year history.

The FHA has been slowly tightening standards to shore up its stability. Upfront mortgage insurance premiums have been increased, FHA to FHA refinances (called streamlines) have become vastly less appealing than they once were with new restrictions and fees, and loopholes allowing borrowers to put no money down on purchases have been closed. Still the FHA is in a bit of trouble so congress is now looking at significantly increasing the monthly FHA mortgage insurance rates. Stay tuned. We’ll keep you posted on the news on that front.

In the meantime contact us in the sidebar to learn what programs you could qualify for now (before costs increase).

There was a story over at HousingWire recently detailing the handful of foreclosure prevention bills being considered in California. Here are some highlights from that piece:

A number of foreclosure mediation bills introduced in California in recent months await consideration and votes by the State legislature. …

Assembly Bill (AB) 1588, introduced in September 2009, would add to foreclosure legislation already passed in the State by establishing the Monitored Mortgage Workout (MMW) Program. The Program would be administered by the California Housing Finance Agency, and would give borrowers an opportunity to explore foreclosure alternatives. The bill would prohibit further foreclosure action until the borrower completes participation in the Program.

It’s similar to AB 1639, last amended in March 2010, that establishes the Mediated Mortgage Workout (MMW) Program to help borrowers and lenders develop a modification plan. A Governor-appointed and State Senate-confirmed administrator would lead the program, which would require participating borrowers to deposit half the current mortgage payment each month to the Program administrator. The bill would also prohibit lenders and servicers from reporting a negative credit event if the borrower completes the MMW Program and accepts a mortgage modification.

Additionally, SB 931, introduced on February 2, prohibits a deficiency judgment on a note secured by a first lien when the borrower sells the house for less than the remaining mortgage due, as long as the first lien holder gives prior written consent. The lien holder can then accept all proceeds from the sale as full payment of the debt, and discharge the remaining debt.

AB 2024, introduced Feb. 17, would require lenders to notify borrowers of specific reasons a loan modification request is rejected.

SB 1221, introduced Feb. 18, would amend existing timelines for a lender to file a notice of sale. The bill would require lenders to send the notice of sale no less than 85 — instead of the current three months — days after filing the notice of default.

SB 1427, introduced Feb. 19, would require a notice of default to identify the contact information and name of any person or entity designated to maintain the property in foreclosure.

AB 2325, introduced the same day, expands the scope of parties considered as “foreclosure consultants.” The bill would qualify as a foreclosure consultant anyone arranging or attempting to arrange an audit of an obligation secured by a lien on a residence in foreclosure. Therefore, anyone arranging or attempting to arrange such an audit would first be required to register with the Department of Justice and become certified to do business as a foreclosure consultant.

No matter what state you live in contact us in the sidebar to discuss the best available options for your situation.

In addition to the HAMP and HARP and HAFA foreclosure prevention programs offered by the federal government, Fannie Mae announced its own program recently for the millions of loans they back. We get this from a recent HousingWire article on the topic:

Fannie Mae announced its version of the Making Home Affordable Foreclosure Alternatives (HAFA) program Tuesday, implementing the program for all conventional mortgages that are held in Fannie’s portfolio, that are part of an mortgage-backed security (MBS) pool with a special servicing option, or that are part of a shared-risk MBS pool for which Fannie Mae markets the acquired property.

The Fannie Mae program takes effect August 1, 2010 and is designed to mitigate the impact of foreclosures on borrowers who are eligible for a loan modification under the Home Affordable Modification Program (HAMP) but were unsuccessful in obtaining one, Fannie said. Like the Treasury Department’s HAFA program, servicers cannot consider a borrower for HAFA until the borrower is evaluated and eliminated from eligibility for a Making Home Affordable Modification Program (HAMP) workout plan.

Also like the Treasury program, Fannie Mae will offer servicers cash incentives for completed HAFA transactions, $2,200 for short sales and $1,200 for deed-in-lieu of foreclosure agreements. Borrowers are also eligible for $3,000 in incentives.

That’s more than in the Treasury’s HAFA program, where servicers are eligible for $1,000 and the borrower gets $1,500. In the Treasury HAFA, the investor is also eligible for a $1,000 incentive. …

After announcing the program in October 2009, Treasury’s HAFA program began in April. The Fannie Mae HAFA program is the latest in a string of programs designed to help borrowers avoid foreclosure. In addition to HAFA and HAMP workouts, Fannie Mae is letting some distressed borrowers stay in their homes as renters, under the deed for lease (D4L) program.

Under D4L, the homeowner-turned-renter is required to pay fair market rent to stay in their home for up to 12 months. The renter must have enough income to sustain a 31% income-to-rent ratio and rental payments are not subsidized by Fannie Mae, but could include renters eligible for Section 8 payments.

Also, in March 2010, Fannie Mae instructed its servicers to consider an “alternative modifications” for all mortgages that did not qualify for a permanent conversion under HAMP. That “Alt Mod” program, which sunsets on August 31, 2010, is similar to HAFA.

Contact us in the sidebar for information on this and other available 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.