About Government Refinance and Home Purchase Programs

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.

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.

The state of Pennsylvania has been running a foreclosure prevention program in which it reportedly loans unemployed people significant amounts of money to pay their mortgages while they are out of work. A variation of the plan is now being introduced nationally as it is included in the Financial Reform Bill being worked on in the senate right now. Here is more info from a recent HousingWire article on the subject:

The Senate passed the Restoring American Financial Stability Act last week, approving a new program that would reduce mortgage payments for the unemployed.

The program would provide $3bn from the Troubled Asset Relief Program (TARP) to lend up to $50,000 to unemployed homeowners, who could reasonably resume making payments again within two years. The program was modeled after the Homeowners’ Emergency Mortgage Assistance Program (HEMAP) in Pennsylvania.

The Senate passed the bill last week but transplanted its own language into the one passed by the House of Representatives. The status of the reform is still “resolving differences.” But, lawmakers hope to have it in front of President Obama to sign by the July 4, 2010 recess.

Please fill in the contact form in the sidebar to see which programs you could qualify for.

As the euro continues to struggle more and more investors all over the world are buying US treasuries. That in turn is lowering the yield on 10-year treasury notes and that in turn is temporarily reducing mortgage interest rates. These low rates certainly won’t last forever so if you have been considering refinancing to a lower rate now is the time. Contact us in the sidebar to learn more.

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.

In the latest attempt to help prevent foreclosures, House Democrats recently introduced a bill that would give borrowers on the verge of foreclosure the right to rent their home from the bank even after the home is foreclosed. We get this from the recent Housing Wire story on the subject:

A bill filed in the US House of Representatives would allow mortgage borrowers to remain in their homes, as renters, for up to five years after receiving a foreclosure notice.

The “right to rent” bill, House Resolution (HR) 5028, would allow borrowers to petition a judge to stay in their homes as renters under a lease for up to five years. The judge would be empowered to appoint an independent appraiser to set fair market value, which would be allowed to rise with inflation, Representatives Raúl Grijalva (D-OH) and Marcy Kaptur (D-OH) said in a joint release. The bill is an updated version of a similar bill Grijalva introduced in 2008. …

The right to rent program would be limited to homes purchased at or below the median price for its metropolitan statistical area, and must have been the borrower’s principal residence for no less than 2 years. Only mortgages originated before July 1, 2007 will be eligible.

Of course the bill has a long way to go before becoming law but it is an interesting idea.

There was a really interesting article in the NY Times recently on the growing number of struggling homeowners who have stopped paying their mortgages and are living in their homes for free until the bank evicts them. In some cases the process of foreclosing on such a home can take well over a year. Here are some quotes:

A growing number of the people whose homes are in foreclosure are refusing to slink away in shame. They are fashioning a sort of homemade mortgage modification, one that brings their payments all the way down to zero. They use the money they save to get back on their feet or just get by.

This type of modification does not beg for a lender’s permission but is delivered as an ultimatum: Force me out if you can. Any moral qualms are overshadowed by a conviction that the banks created the crisis by snookering homeowners with loans that got them in over their heads. …

The average borrower in foreclosure has been delinquent for 438 days before actually being evicted, up from 251 days in January 2008, according to LPS Applied Analytics. …

In some states, including California and Texas, lenders can pursue foreclosures outside of the courts. With the lender in control, the pace can be brisk. But in Florida, New York and 19 other states, judicial foreclosure is the rule, which slows the process substantially. …

Both generations of Pembertons have hired a local lawyer, Mark P. Stopa. He sends out letters — 1,700 in a recent week — to Floridians who have had a foreclosure suit filed against them by a lender.

Even if you have “no defenses,” the form letter says, “you may be able to keep living in your home for weeks, months or even years without paying your mortgage.”

About 10 new clients a week sign up, according to Mr. Stopa, who says he now has 350 clients in foreclosure, each of whom pays $1,500 a year for a maximum of six hours of attorney time. “I just do as much as needs to be done to force the bank to prove its case,” Mr. Stopa said.

There was an interesting piece over at the WSJ blog recently. The part that really caught my attention was the claim that some borrowers are remaining in their homes for up to two years after they stop making mortgage payments. I had heard of people staying in homes for 6-12 months but never anything like that. Clearly these sorts of things vary by region but it is another indicator of the deep hole the US housing market is trying to dig out of. Here are some excerpts from the piece:

Some borrowers remain in their homes for a year or two after they stop making payments, waiting to be ejected through a clogged foreclosure system. Around 2.6 million households are more than 90 days overdue but still not yet in the foreclosure process, which can take more than a year.

Distressed borrowers are staying put for long periods partly because the federal government has leaned on banks to try to avert as many foreclosures as possible by offering lower payments, a time-consuming process. New state laws also require banks to take more steps to determine which borrowers might be rescued. Further slowing the process, many banks and other loan servicers still don’t have enough capacity to handle all the requests from borrowers for help.
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There were fears that when the Fed stopped buying mortgage-backed securities at the end of March 2010 mortgage interest rates wold shoot way up. There was some validity to those fears. When the MBS purchasing program concluded the rates on mortgages bounced up more than a quarter of a percent in the following weeks.

Since then other global factors have kicked in and mortgage rates are back down again. The main driver of the dip in rates is the troubles the European Union are facing lately. With the troubles across the pond more global investors are buying the relatively safe US treasury bills and that is in turn compressing mortgage interest rates.

The takeaway from all of this is that if you have been considering refinancing to a better mortgage interest rate contact us in the sidebar now. The current dip in interest rates is a temporary thing so rates will likely only move up from here.