About Government Refinance and Home Purchase Programs

Widely anticipated changes to the Home Affordable Refinance Program (HARP) were announced this morning. The updates include several but not all of the changes most borrowers have been hoping for. Among the changes are the following:

1. There is no longer a 125% loan to value limit to the program. Going forward HARP loans can theoretically work for any loan backed by Fannie Mae or Freddie Mac regardless of how underwater the home is.

2. A full appraisal will not be required in all cases. Reports are that in some cases an automatic valuation system may be used.

3. Mortgage insurance providers have reportedly agreed to automatically transfer mortgage insurance coverage to the new loan. If this is true it will be a huge change because previously borrowers with mortgage insurance were not able to participate in the HARP program.

Unfortunately, the cut off dates for eligibility were not changed so any loans taken out after May of 2009 are still not eligible for the program.

The FHFA said the operational details for the program will be available by November 15th 2011. That probably means that the new program won’t be up and running with most authorized lenders until December. The question yet to be answered is how many authorized lenders will choose to participate in the new version of the program in the months to come. But assuming several authorized lenders do participate there is no denying that removing the 125% limit and the allowing borrowers with mortgage insurance to participate will open the program to vastly more borrowers.

Contact us in the sidebar to learn more about the HARP program and other government-backed refinance programs that are available.

In conjunction with the Obama administration announcing intentions to revamp and revitalize some of the government-backed refinance programs that are now in place, several US senators recently sent a letter to regulators urging improvements as well. We get this from a recent HousingWire report:

A group of 13 senators sent a letter to regulators Tuesday, pressing for a plan to boost mortgage refinancing for more homeowners as soon as possible. Such a plan is being widely-discussed admittedly, and now the lawmakers are ready to see some action.

“Time is of the essence and we urge you to act quickly and aggressively to ensure that responsible homeowners receive the full benefit of these lower rates,” the senators said in the letter to Treasury Secretary Timothy Geithner, Department of Housing and Urban Development Secretary Shaun Donovan, Federal Housing Finance Agency Acting Director Edward DeMarco, and National Economic Council Director Gene Sperling.

While a letter from senators might be more show than substance, it does help show there is wide support for upgrades and changes to the HARP programs and other government-backed refinance programs. With any luck regulators will announce the changes and upgrades soon. As soon as changes are announced we will report on them here.

In the meantime, contact us in the sidebar to learn more about the government back refinance programs that are already available while rates are still hovering near all time lows.

A few weeks ago President Obama hinted at a new mortgage refinancing plan his administration was cooking up. Most speculations since then have been that the new plan would be an expansion of the Home Affordable Refinance Program (HARP) to make it available to even more borrowers than the current version of the program. Treasury Secretary Tim Geithner recently said more that would indicate a new plan will be announced soon. We get these quotes from a recent Wall Street Journal blog post:

“My sense is, based on what I’ve seen…it’s going to be meaningful enough to make a difference,” Mr. Geithner said at a Senate Banking Committee hearing…

“They are looking at a range of things and you’ll see more details in a couple of weeks,” Mr. Geithner said.

Stay tuned. It sounds like the changes will be announced in the next few weeks.

In the meantime, rates continue to test new lows this month. Contact us in the sidebar to learn more about the refinance programs that could help you.

More than a week after President Obama announced in a speech before congress that he wanted to make it easier for American home owners to take advantage of the record low interest rates we are seeing on mortgages now there have yet to be any concrete policy changes. Rumors are that the changes will be to the Home Affordable Refinance Program (HARP) with the goal of making it easier for many more home owners to qualify for that program. We’ll keep you post on news as it breaks.

In the meantime, contact us in the sidebar to learn more about the government-backed refinance programs you might already qualify for.

As expected, part of President Obama’s recently revealed jobs plan was a plan to make it easier for more Americans to refinance their mortgages to the historically low interest rates we have been seeing in the last month or so. The president outlined his plan last night and it looks like main idea is to make it easier to qualify for the already existing Home Affordable Refinance Program (HARP). Here are some quotes from a Reuters article on the topic:

President Barack Obama said on Thursday he is seeking to broaden U.S. homeowners’ access to mortgage refinancing in a plan to help the ailing housing market and put money back in the pockets of borrowers needing help locking into record low rates.

“We’re going to work with Federal housing agencies to help more people refinance their mortgages at interest rates that are now near 4 percent,” …

The White House officials said the U.S. Treasury was having talks with both Fannie Mae and Freddie Mac and their regulator — the Federal Housing Finance Agency — on ways to broaden refinancings. The aim is to is to “remove the barriers that exist in the current refinancing program.” …

The refinancing initiative under consideration by the Obama administration would need final approval from the acting head of the Federal Housing Finance Agency, Edward DeMarco. Those close to DeMarco say he is acting as an independent regulator with the goal of conserving the assets at Fannie and Freddie, a position he has staunchly defended before lawmakers since the two firms were taken over by the government three years ago.

The encouraging news is that the Obama Administration does not appear to need the approval of the Republican-led congress to make access to the HARP program easier. Rather the administration mostly needs to persuade the independent head of the FHFA Edward Demarco that their plan is sound.

We’ll keep you posted on the progress of this new initiative. In the meantime, contact us in the sidebar to see which government-backed refinance programs you already qualify for.

The FHFA, the organization responsible for the Home Affordable Refinance Program (HARP) recently announced that the HARP program will be extended another year and is now set to expire June 30, 2012 rather than that same date this year.

The HARP program is designed to help people with conventional mortgages backed by Fannie Mae or Freddie Mac refinance to lower interest rates even if the value of their homes have dropped. With a HARP loan a conventional mortgage can be refinanced at up to 125% of the current value of the home. This is obviously useful to people who are underwater on their mortgages, but the program is also very useful to people who owe 80-100% of the current value of their home because with the HARP program borrowers can refinance to a lower Fannie/Freddie loan without having to add mortgage insurance.

Contact us in the sidebar to learn which programs will best assist your family.

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.

Below is an interesting interview from the folks at Yahoo Finance with Senator Ted Kaufman. Kaufman chaired a recent panel looking at the effectiveness so far of the Home Affordable Modification Program and has come to the conclusion that the program has generally been a failure. That is largely because the program started with a goal of modifying 3-4 million mortgages in order to avoid foreclosures but is on pace to actually modify 800 thousand or fewer.

Of course for those 800 thousand homeowners the program has not been a failure but the overall numbers are much lower than hoped for. The good news for those of you who are interested in a loan modification is that The Treasury is still hoping to work toward that 3-4 million goal. So if you are interested in a modification or a government-backed refinance contact us in the sidebar and we will give you some guidance on the best programs for your family.

Here are some excerpts from the write up associated with the interview:

The Congressional Oversight Panel has declared President Obama’s Home Affordable Modification Program (HAMP) a failure, laying much of the blame at the feet of the Treasury Department.

“Treasury was in a very tough situation but the result is a lot less mortgage modifications than we hoped for,” says Sen. Ted Kaufman (D-Del.), the panel’s chairman. “It’s a failure in regard to fact we originally hoped to save 3 to 4 million American families from foreclosure and are now on target to do 700,000-800,000.”

The version of the Home Affordable Refinance Program directed toward second mortgages is to be implemented at the start of 2011. We get this from a recent HousingWire report on the subject:

Fannie Mae, which administers the Home Affordable Modification Program for the Treasury Department, released guidance for servicers participating in the Second Lien Modification Program (2MP).

Fannie requires servicers to implement 2MP by Jan. 1, 2011. Fannie released the guidance Tuesday in a letter to servicers. All Fannie servicers are required to join the program, and the top-four banks have committed, too.

Under 2MP, only second liens originated on or before Jan. 1, 2009 will be eligible for a modification if its corresponding first lien has been modified under the HAMP. Through August, more than 468,000 distressed loans have been given a permanent modification.

The second lien can be either current or delinquent, but it must hold an unpaid principal balance of more than $5,000.

…

The modification of the second lien will not become effective until the first-lien is modified through HAMP and the borrower has made all required 2MP trial period payments.

Servicers participating in the program must offer a 2MP trial period within 120 calendar days after receiving the first and second-lien matching information from LPS.

There was a recent news release over at MakingHomeAffordable.gov on the details of the new program designed to help unemployed homeowners. Fill in the contact form in the sidebar to learn more about the programs that might apply to you. Here is an excerpt from that release:

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.

The numbers of permanent loan modifications through the Home Affordable Modification Program (HAMP) continue to increase. For instance Bank of America recently reported it granted 70,000 permanent loan modifications total through May of this year. We get the following from a HousingWire article on the topic:

Bank of America pushed its total number of permanent modifications under the Home Affordable Modification Program (HAMP) to roughly 70,000 in May, up from 56,400 in April.

BofA reported more than 630,000 modifications through all of its programs since January 2008. The Treasury Department launched HAMP in March 2009 to provide incentives to servicers for the modification of loans on the verge of foreclosure. Borrowers must make three monthly payments under a trial modification and provide all financial documents to the servicer before it becomes permanent.

In April, servicers reported more than 300,000 permanent modifications under HAMP. Earlier in June, BofA began reducing principal for some qualifying underwater borrowers as part of the modification process.

Fill in the contact form in the sidebar to learn more about which program you could take advantage of.

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.