Friday, July 10, 2009

Expanded Mortgage ReFi Program

The Making Home Affordable plan, introduced by the Obama administration, has just been expanded to include homeowners whose loans are up to 125% of their home’s value. This allows more borrowers who are hit hard by deeply falling home prices to participate in the mortgage refinancing program. The previous limit was 105%.

Many parts of the country have seen drastic drops in home values and those borrowers were shut out of the original program. An example is Las Vegas, where almost 66% of homeowners owe more than their homes current valuation. A current report by Zillow.com, a real estate web site, indicates that about 20 million homeowners own homes that are worth less than their mortgages. Sections of Florida and California have lost 50% (or more) of their value.

Housing Secretary Shaun Donovan said that the presidents plan “is already helping far more than any previous foreclosure initiative and with this announcement we will extend it even further.” The Treasury Department indicates that so far approximately 20,000 loans have been refinanced.

This newly expanded program waives the 20% equity requirement. However, borrowers must still meet other major requirements: being current on their payments and having mortgages owned or backed by Freddie Mac or Fannie Mae. http://www.makinghomeaffordable.gov provides details.

But, refinances are slower than originally predicted. There’s been a recent rise in mortgage interest rates, from the lowest rate of a 4.84% on April 28, to the current mid 5% range. Also impacting the decline in refinances is the rising unemployment rate. When the program was introduced, lenders were overwhelmed with requests and were understaffed, thus slowing the actual numbers of borrowers able to complete the refinance process. Lenders have not yet added enough staff to adequately handle the requests, so processing times are extended. All we can do is have patience.

Those with Freddie Mac loans can apply now with their current servicer, but those who chose a different lender need to wait until October 1. Borrowers with Fannie Mae loans must use their current servicer and also must wait until Sept. 1 for a refinance if their home loan is more than 105% of its value.

Another part of the program addresses loan modifications. Eligible borrowers who are at risk or in default may lower their monthly payments to no more than 31% of their pre-tax income. This helps those who can’t handle their monthly payments due to reduced income, etc. Also, mortgage investors, services and homeowners can receive incentives in order to participate in the program. Nearly 200,000 trial modifications have been initiated according to the Treasury department. Three on-time monthly payments must be made prior to making the modification permanent.

At InSight Mortgage Group our mission is to provide up-to-date information on available programs to meet the individualized needs of our clients. Please call us at 913-642-3334 or email us at michele@wantinsight.com or dickw@wantinsight.com with your mortgage or finance related questions. Blessings

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