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

BIG HEADLINES, LOTS OF SPECULATION! 4.5% RATE?? ON THE AIR WAVES!

Fence sitting can be painful—don’t wait too long!

I imagine you’ve heard or read about the 4.5% mortgage rate thing being promoted by the government. The Treasury Department is being lobbied hard to consider a plan to purchase mortgage-backed securities with the hopes of driving mortgage rates down to possibly 4.5%, reported an industry source.

Timeline:
Wednesday (12/3): A story is “leaked” regarding the Treasury Department lowering mortgage rates to 4.5%
Thursday (12/4): That headline leads the news
Friday (12/5): 40+ Million American homeowners sit on the fence and Consider “Should I refinance today or wait for
something better?

The most obvious consideration is if the rates are low today, take advantage of it now! Because they may not be low tomorrow, or even 4 hours from now. Mortgage rates could fall a bit tomorrow – or not—so why take a chance? Refinance at today’s low rates, and if rates fall again in the future, you can refinance again. A wise move is to lock up your savings today!

Details of the plan remain vague at this time; each article specifically stated that there were no facts – just speculation. The plan appears to be similar to the move made recently by the Fed, in which securities backed by 30-year fixed rate mortgages would be purchased from Fannie Mae and Freddie Mac. Spokespeople from the Treasury Department and the Federal Housing Finance Agency are declining to comment on the proposed plan.


Mortgage rates dropped sharply, from 6.06% a week earlier to 5.5%, after the Fed’s announcement. The Mortgage Bankers Association said mortgage applications more than doubled as a result, with a majority of the business in the refinance sector.

An increased demand for mortgage-backed securities prompts mortgage rates to drop. In turn, homeowners can then refinance into lower-cost loans and it also makes it cheaper for potential buyers to get into the market. This move would help buyers and current homeowners with good credit, says industry experts, but would not provide much help to troubled borrowers.

Experts weigh the positives and negatives

This potential move by the Treasury has prompted mixed views on how much homeowners and the economy would benefit. Lower rates could help stabilize the housing market by bringing in new buyers, reducing housing inventory; those who refinance could have more money to spend.

Scott Talbot, senior vice president of the Financial Services Roundtable, which is encouraging the move, said “If it gets people buying homes and spending, it will help reverse the economy and get us out of this recession.” A senior financial analyst at Bankrate.com, Greg McBride, said “it is clearly designed to bring buyers into the marketplace and soak the inventory of unsold homes.”

But, rates are volatile, hovering around 5.25% on Friday, Dec.5th (dependent upon credit scores and other factors) and others have pointed out that several government attempts to lower mortgage rates this year have not had a lasting effect. Also, homeowners who have fallen behind on their payments, have little to no equity in their homes, or who have lost jobs would receive minimal benefit. And with tight credit standards, these borrowers would not be able to refinance to take advantage of the lower rates.

Sound financial decisions shouldn’t be made on speculation. So what do we know now:
*Mortgage rates are lower than they’ve been in years
*Mortgage guidelines are tight, even for “prime” borrowers
*Home prices nationally are falling, making qualifications harder

Rates are still volatile and could rise again overnight to price you out. What was that old saying of Mom’s “a bird in the hand …” And if rates fall after closing, maybe even reaching the “projected” 4.5%, we’ll refinance again.

Call me at 913-642-3334 or email me at michele@wantinsight.com with your comments or questions. It’s a great time to review your financial situation and ring in the holiday season on a positive note, and lower interest rate.

I also recently apeared on Pal Van Sickle podcast "The After Show" check out my interview on his site the after show

Michele A. "MAC" Cole

913-642-3334

www.wantinsight.com

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