About Government Refinance and Home Purchase Programs

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.

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.

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.

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 holidays and government-backed mortgage lending have a rocky relationship. The problem is that even when authorized lenders are at full strength, completing a refinance normally takes about three weeks. But the holidays always cause additional delays. First there are all those actual holidays that reduce the number of business days in November and December. Add to that the extra time processors and underwriters normally take off and you are often looking at weeks added to the process of completing a mortgage transaction. For those reasons, if you were considering looking into refinancing your mortgage at the start of 2011 it would probably be wise to start your investigations now.

Further, some banks are holding off on foreclosures until January. When banks get back to foreclosing on homes at the start of 2011 that could further depress housing values throughout the country. That in turn could reduce the amount of equity you have in your home. In cases where the equity is tight already waiting too long could cause troubles.

So if you have been thinking about refinancing while rates are still near historic lows we recommend you get a jump on the post-holiday crowd and contact us in the sidebar right away. Our counselors can help you figure out which programs are available for your situation. Getting the ball rolling now could save you time and headaches in January.

Interest rates on government-backed mortgages are still near the recent historic lows. However they have been slowly inching higher for a few weeks now. The trend continued this last week with average rates moving slightly higher. If you have considered looking into a refinance the time to investigate is now before the record low interest rates go away for good. Contact us in the sidebar to learn which programs apply to you.