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

RATES ARE LOW, BUT ....

Mortgage rates are low but there are costs associated with acquiring a loan. Those borrowers with less than perfect credit have incurred increased fees recently implemented by Freddie Mac and Fannie Mae. Many of us in the mortgage industry think that with the uncertainty in the mortgage market, other costs will increase as lenders look to reduce their costs and anticipate rates.

Lending standards are really tight which means that borrowers who qualify for the really low rates must meet a strict and narrow set of guidelines.

In general, to get the headline making rates, borrowers are often paying more points, or prepaid interest, that brings the mortgage rate down.

Over the past year and a half there has been many changes in mortgage pricing, and from the borrower’s standpoint, it’s mainly negative. Fees are added based on a borrower’s credit scores according to Fannie Mae and Freddie Mac’s new risk-based pricing. Now, borrower’s must have a FICO score of 740 or higher to avoid the extra fees, according to Dan Green, author of TheMortgageReports.com and loan officer with Mobium Mortgage in Cincinnati. Lenders incorporated the new rules into the rate sheets in the middle of January even though the official effective date is April.

These new fees, Loan Level Price Adjustments, are an unpleasant surprise for some borrowers wanting to take advantage of low rates. These fees create different pricing scenarios from one person to the next. What works for one borrower may cost the next person 1% more.

For those wanting to pull equity from their home through a cash-out refinance, fees have increased as well. And the lenders have added costs to condo financing.

A point is 1% of the mortgage amount, and is charged as prepaid interest. The more in points a borrower pays, the lower the rate. If points rise a bit, it’s a sign that lenders are looking for up front money as opposed to over time, thus covering a portion of their risk.

With government intervention in the mortgage market these days, rates are unpredictable, which generally causes lenders to price conservatively.

Why pay points? A borrower needs to decide whether paying a point (or more) makes more sense for them , or if a mortgage with a higher rate with no points would be better. Factors to consider would be how long does the borrower plan to stay in the home , and how long it will take for buying points to pay off. The more time a borrower plans to remain in the home, the more paying points makes financial sense. In the past one point in fees would buy a drop of 0.25% to 0.375%. These days the percentage is greater, dropping a rate 0.625% to 0.875%.

An example: A 30 yr fixed rate of 5.625% on a $417,000 loan with no points. By buying a point ($4,170), the rate dropped to 4.875%, which saves the borrower $261 monthly in interest cost. With that savings, it takes only 16 months to pay back the buy down. From this point on, everything is a benefit. Given traditional guidelines, the breakeven point would be double that 16 months.

Borrowers are also seeing some fee increases in underwriting and processing. It takes more expertise and work to process a fully documented file than the popular no-document loans of several years ago, thus the higher charges.

Mortgage rate lock fees are also more common. The largest increases in the title & settlement category are in the real estate transfer taxes charged by counties and cities. You may be able to save money when refinancing by using the same title insurance company who closed your first loan. Many title companies have gone out of business, or one company buys out another, so surviving companies are raising prices for title and settlement fees too.

A rule of thumb is that mortgage fees generally run 3% or so of the loan amount.

As a mortgage broker, InSight Mortgage Group has an advantage over the standard lender. We work with many different banks and lenders allowing us to shop around for you to find you the right product and best rate for your home financing. With so many banks and lenders discontinuing loan programs, constantly changing the guidelines or going out of business overnight, it’s good to have other options at our fingertips if the need arises. This keeps you from completely starting over.

Call us at 913-642-3344 for professional, integrity minded help in finding the right loan program for your specific needs. Or, email me at michele@wantinsight.com with your question or concern. My staff and I are ready to work for you. Have a blessed day.

The HOME AFFORDABLE REFINANCE Program: Questions and Answers

Our post the other day on the new Obama Home Affordable Plan generated alot of questions from you. We appreciate our readers and welcome your inquiries. The following information should clarify the REFINANCE portion of the program. We'll address the Modification portion in another blog.

I’m current on my mortgage. Will the Home Affordable Refinance help me?
Eligible borrowers current on their mortgage but who haven’t been able to refinance into today’s lower interest rates because of decreased home valuation, may be eligible to refinance into a 30 or 15 year fixed rate loan. Through the HAR program, Freddie Mac and Fannie Mae will allow the refinancing of mortgage loans that they own or that they placed in mortgage backed securities.

Who is considered eligible?
* Owner occupant of a one to four unit home.
* The loan is owned or controlled by Fannie Mae or Freddie Mac (unsure? See below)
* Are current on mortgage payments – haven’t been more than 30 days late in past 12 months
* The amount owed on the first mortgage is about the same or slightly less than the current value of the home
* Have a stable income sufficient to support the new mortgage payments.

How do I know if my loan is owned or has been securitized by Fannie or Freddie?
You should call your mortgage lender or servicer (company you send payments to) and ask about the program. Both have toll-free numbers and web submission processes to make this data available. Borrowers will enter/provide information to determine if either agency owns or securitized the loan. NOTE: other qualifying criteria must be met in addition to the loan being owned or securitized by either agency.
* Fannie Mae: 1-800-7fannie (8am-8pm EST) or www.resource_center@fanniemae.com
* FreddieMac 1-800-freddie (as above) www.freddiemac.com/avoidforeclosure

Who is my “loan servicer”? Is that the same as my lender or investor?
The company that collects your mortgage payments and who is responsible for the management and accounting of your loan is the servicer. Your servicer may also be your lender, which means they own the loan. However, many loans are owned by groups of investors (like pension funds) or individuals who buy mutual funds. These loans are managed by banks and other firms that specialize in servicing loans. If you have questions about the loan OR you are behind on your payments you should call your loan servicer at the number on your payment coupon or monthly statement.

I owe more that my property is worth. Do I still qualify to refinance under MHA?
Eligible loans include loans where the first mortgage will not exceed 105% of the properties’ current market value. Example: if your property is worth $200k, but you owe $210,000 or less, you may qualify. The current value of your property will be determined after you apply to refinance.

I have both a first and a second mortgage. Can I still qualify to refinance under MHA?
Borrowers with more than one mortgage may be eligible as long as the first mortgage is less than 105% of the value of the property. Eligibility will depend, in part, on agreement by the lender that holds the second mortgage to remain in a second position, and on your ability to meet the new payment terms on the first mortgage.

Will refinancing lower my payments?
The objective of the Home Affordable Refinance is to provide creditworthy borrowers who have shown a commitment to paying their mortgage the opportunity to get into a safe fixed rate mortgage with payments that are affordable today and sustainable for the life of the loan. You could see an immediate reduction in your payment if your rate is much higher than the current rates. But, if you’re paying on an interest only note, or have a low introductory rate that will increase in the future (variable rate), monthly payments may not go down if refinanced into a fixed rate, but may you avoid future payment increases AND you could save a great deal over the life of the loan. Your lender will give you a Good Faith Estimate that includes your new interest rate, mortgage payment and the amount you will pay over the life of the loan. Compare this to your current loan terms to see if it is an improvement. If not, then refinancing may not be right for you.

What is the interest rate and other terms of this refinance offer?
The objective of the refinance is to provide a fixed, affordable, and safe loan. There will be either a 15 or 30 term with fixed rate. The rate will be based on market rates in effect at the time of the refinance with any associated points & fees quoted by the lender. These rates may vary across lenders and over time as market rates adjust. The refinanced loans will not have prepayment penalties or balloon notes.

Will the amount owed on the loan be reduced?
No. Borrowers will be getting into safer, more affordable fixed rate loans. The principal amount owed to the first mortgage holder will not be reduced by refinancing. But the amount of interest repaid over the life of the loan will be reduced, saving you money.

Can I get cash out to pay other debts?
No. Only transaction costs, like the appraisal or title report fees, may be included in the refinanced amount.

How do I apply for a Home Affordable Refinance?
Call your mortgage servicer or lender and ask about the application process. PLEASE be patient. Detailed program requirements were just sent to lenders and servicers and it may take some time before they are ready to accept applications. Be prepared with your documents and information before you call.

What documentation will I need?
It's best to be prepared before you call. Have available:
* Household gross income (before tax), including recent pay stubs and/or other documentation of additional income sources
* Your most recent income tax return
* Information about any second mortgage on the house
* Account balances & minimum payments due on all credit cards
* Account balances & monthly payments on all other debts such as student loans and car loans.

If borrowers are delinquent on their mortgage, they will not qualify for the refinance plan.

Please call the office, 913-642-3334 with any questions or comments, or email me at michele@wantinsight.com We can provide insight and guidance to you and your specific financial picture.

THE NEW MAKING HOME AFFORDABLE PROGRAM

Right now there’s a lot of confusion and big talk about the new government interventions in the mortgage and housing markets. The Obama administration hopes that two new programs should cut mortgage bills for up to 9 million homeowners who are having trouble making their monthly payments and there are also incentives that may pay down principal in some cases.

The government program has two parts:
* The Home Affordable Refinance
* The Home Affordable Modification.

PLEASE NOTE : The details of this program are not finalized! Most importantly, it remains 100% VOLUNTARY and mortgage servicers (the companies that collect the mortgage payments) are not obligated by law to follow these rules and guidelines…YET. Financial institutions who have already received government funding are not obligated to participate. However, financial institutions receiving new, or more, government funding in the FUTURE, WILL be obligated to participate.

SO, no one really knows yet who will participate and how it will all work from a practical standpoint. Most of the media news at this point is generally speculative. After reviewing the Making Home Affordable government program, I can share with you some insights you may find useful.

MODIFICATION Program:

Three elements in the program:
* The government is offering financial incentives to mortgage servicers who modify loans for borrowers.
* Financial reimbursement is being offered to investors if they allow servicers to modify loans and then take a hit on the borrower’s re-default if the property declines in value after the loan modification.
* The government is offering incentives to borrowers who modify their loans and make their new payments on time.

Only primary residences are eligible, investment properties and vacation homes don’t qualify. Only borrowers who have experienced some sort of financial hardship can qualify. Borrowers will need to document that their current financial situation is worse than when the original loan was made. Income needs to have gone down, and/or expenses need to have gone up. The link provided will allow you to see if you qualify for at least the minimum requirements for the program:

http:/www.financialstability.gov/makinghomeaffordable/modification_eligibility.html
Remember, even if you do qualify under these minimum requirements, your servicer might not be participating in the program yet.

REFINANCE Program:

Basics: You must be current on your mortgage payments (no late payments in
the past 12 months);
Your mortgage balance cannot exceed 105% of the current value of your home;
Your mortgage needs to be owned/guaranteed by Fannie Mae or Freddie Mac

Based on the current market conditions, a refinance might make sense for you IF:
You have an adjustable rate, interest only, or balloon mortgage that you
want to convert into a fixed rate; or
You have a fixed rate where the rate is 6% or greater. Actually, if your
rate is as low as 5.5%, I’ll put you into my rate watch program and let
you know when rates get to the point where it would benefit you to
refinance.

Other Developments of Interest:

There has been some new government legislation impacting homeowners and first time home buyers:

* Home improvement tax credit
* First time home buyer tax credit
* Reverse mortgages for home purchase transactions (age 62 and older)
* Suspension of required minimum distributions for certain retirement accounts (age 70 ½ or older)

I’d be happy to discuss any of these programs with you. Call me at 913-642-3334 or email me at michele@wantinsight.com. I can lend insight into the confusion of todays market and help you determine the mortgage and home buying choices right for you.

US takeover of Fannie Mae and Freddie Mac offers hope of recovery!

The US takeover of Fannie Mae and Freddie Mac will likely ease the housing and credit crisis, by lowering mortgage rates and allowing greater availability of credit for consumers. Rates could realistically drop by 1 percentage point for a 30-year fixed mortgage rate.
There is not a clear picture of what Fannie Mae and Freddie Mac will look like over time, but the market reaction of this bailout was overwhelmingly positive. The takeover drastically lessens the probable threat to the housing market, financial industry, and the overall economy. Combined losses for Fannie Mae and Freddie Mac were $3.1 billion between April and June. Fifty percent of these credit losses were due to risky loans with ballooning payments. Both companies said that they could handle these losses, but many investors felt that with more defaults and foreclosures ahead, these reserves could diminish quickly.
Don’t expect lending standards to ease though. Fannie and Freddie will still keep a close eye on underwriting practices, and fees for borrowers with weaker credit histories will remain in effect. The primary goal is to increase the availability of mortgage finance while remaining proactive in the processes. Our economy and markets will not recover until a large portion of the housing correction is behind us. Fannie and Freddie are crucial to that turn-around.
Under the plan, both firms will abandon their goal of shareholder profit, will receive government chosen CEO’s, and the Treasury has agreed to boost each firm with 100 billion dollars if necessary. The hope is that by tapping into the enormous reserves of the US government to the government-sponsored enterprises, this plan will begin to calm down the housing market and confidence will return. The overall effect of funneling money back into housing should put a floor on the housing market. Hope is on its way! Call or email me anytime at michele@wantinsight.com.

Michele “MAC” Cole
913-642-3334
www.wantinsight.com