Thursday, November 17, 2011

Home Affordable Refinance Program Update 11/15/11

The Federal Housing Finance Agency (FHFA) has announced the extension of the Home Affordable Refinance Program (HARP) until December 31, 2013; therefore any loan originated on or before this date in the Refi Plus program is eligible for these new features.

The FHFA has also made changes to the Home Affordable Refinance Program (HARP) in an optimistic attempt to attract more qualified borrowers who can benefit from refinancing their mortgage loans.  In these efforts Fannie Mae will make changes to their program with Freddie Mac following.

Changes to the program:

  • Fannie Mae will now make loan to values secured by fixed rate mortgages with a term to 30 years. This will include those loans with terms of 15 years and were previously restricted to 105% loan to value.  There will not be a limit to the combined loan to value (CLTV); first mortgage and second, if applicable or home equity line total value ratio, (HCLTV).

Maximum LTV ratio limits for all occupancy and property types

  • there will be no maximum loan to value ratio for fixed-rate mortgages with a term up to 30 years,

  • 105% loan to value for fixed-rate loans with terms greater than 30 years and up to 40 years, and 

  • ARM loans with initial fixed periods greater than or up to 5 years and terms up to 40 years; will have a maximum limitation of 105% also.  (when the loan program permits)

This program will begin with applications taken on or after December 1, 2011.

Current Mortgage Payment History:

  • the borrower cannot have any mortgage delinquency on the existing mortgage in the most recent 6 month period.  No more than one (1) 30 day late payment  in the months seven (7) through twelve (12).


  • the middle (representative) credit score can be no lower than 620

  • maximum DTI (debt to income) ratio of 45%

  • income verified per policies already in place

  • assets to close (if applicable) will be verified as normal policy


Fannie Mae has announced that they are not restricting the borrowers on the new loan to meet the standard waiting period and re-establishment of credit criteria for bankruptcy and foreclosure.  They have also removed the same guideline and requirement on bankruptcy and foreclosure for the original loan in effect at the time the loan was originated. Please remember that you must qualify in all aspects other than this for the Home Affordable Refinance Program.

As always it is necessary the you; the borrower receive a benefit from the transaction to qualify for the Refi Plus; Home Affordable Refinance.

  • This can be done by reducing the monthly payment, principal and interest

  • changing the program from an ARM to a fixed rate

  • reduction of interest rate or

  • a reduction in the loan term, ie:  (30 to 20) (20 to 15)

Again, please note that sometimes the lender may have a credit score limitation that FNMA does not have but normally if it fits Fannie or Freddie guidelines and in acceptable to the Home Affordable Refinance Program (HARP) there should be no problems.  As always these is a synopsis of the changes and there could be other criteria not mentioned here that applies to the lender or Home Affordable Refinance Program.

Saturday, October 22, 2011

Mortgage News

Well, I am back after a hiatus from writing and I am here today to voice my thoughts on all of the Mortgage News Now.  I have made a new website and I am geared up to keep everyone posted on not only the Mortgage Facts U Need, but other things I enjoy writing about also.  Mortgage changes are symbolic of the economy, ever changing from one day until the next and hopefully I can give some of the most important mortgage news that will benefit your needs.

Interest Rates in Mortgage News

Yes, the mortgage rates are low, running about 4.000 % +-  an .125, .375; here and there. Yes it is important to watch the rates if you need to refinance you current mortgage loan, and if you can drop your rate by a significant 2 percentage points.  I know, I am old fashioned, but you will not know the difference (hardly) if you can't drop your rate by at least 2.000%. You can merely pay a small additional principal to each payment you are making and it will be the same difference.  In fact, you are doing yourself an injustice if you do.  Okay, I know that you want better mortgage news than this because you want to save every dime you can as the economy seems to be getting worse; not better.  This mortgage news will tell you exactly how you can skip the refinance (if you can't drop by 2 points) and save money.  That is actually what we are after, right?

Saving money without the refinance:

If you have a rate of only 5.50% and you can get the rate of  4.000%; why would you pay three (3) % closing cost on, let's say $351K just to change your rate no more than 1.50%.  Unless of course you are fortunae to have a hunk of money to either pay out of your pocket or add back to your principal balance.  Why, my friend would you want to do that? 

Let's say your current mortgage was $353,400 principal balance when you last refinanced.  Your payment for 30 years on $353,400 would have been $2006.57 principal and interest per month.  If you decided to refinance now at 4.000+-, and if you have paid $17870 on the principal in 42 months the new balance would be $335,529 and you new payment would be;  $1601.87, a difference of $404.70.  This sounds like a lot of money to save and it is, but you have forgotten about the 2.50 to 3.000% closing cost that you will have to either pay out of pocket, or add back to the loan.  (If your appraisal dictates the value needed to add back the closing cost).  If you add back the closing cost to current principal balance;  $335,529 + 2.75% (being conserative) = $344,756, decreasing your equity position by $9,226.  That is of course if you reamortized the loan over 30 years again.  If you changed the term to a 20 or 15, your payment will be higher of course but you will save interest and payoff earlier.  It will take you a 18 months to regain your equity position of  335,556.94.  Oh boy; the originators will hate me for this, but it is something one needs to think about really hard and see how they can save money without refinancing.

How you can actually accomplish about the same thing without paying more closing cost..or adding it to the principal of your loan:

  • If you have money to burn; take the closing cost and pay down your principal and you have automatically decreased your 30 year mortgage by 20 months almost 2 years, instead of adding back years.

  • Take the money and just pay an additional 100 dollars a month.  You are still increasng your equity position and you will pay off you mortgage early.  The more principal balance you pay; the quicker you will pay off your mortgage loan.  Be it $25, 50 etc.

  • You can also amortize you balance for a 20 year payout or 15 year payout and pay that amount each month and this will benefit you as much as the refinance. You are using your own money to pay down your mortgage without paying the additional closing cost that you would have had to pay the mortgage company up front...if you did the new refinance.  This latter of course will be the best most beneficial in terms of paying off more quickly.

Mortgage News in General:

Some of the larger mortgage companies are still have foreclosure troubles and bouncing back after the fall.  Bank of America is no longer doing business in wholesale.  I still say that the banks did not cause the breakdown in mortgage lending.  It started at the top and flowed down to the rest of the mortgage industry.  If the GSEs has not followed suite with the SubPrime lending would not have been as we see it now.  In fact; if congress had not decided that "everybody deserves a home" (at all cost and they do, but not all cannot afford a home);  which began the SubPrime lending, then we definitely would not be where we are today.  Little good does it do to try and place blame so we just have to accept things as they are and the consequencies of the behaviors.  A lot of people made a lot of money without any quilt.

New disclosures are still in the developing process but samples do indicate that they are to implement more transparency and simpleness.  This includes the good faith estimate (GFE), truth in lending (TIL) statement and the closing statement (final HUD1).  Of course now the regulatory agencies are making sure all things mortgage will benefit the applicants more than ever.  My question is where were they in the early 2000's and up?

The mortgage news for the big banks is that they have reported some increased earnings, but stocks have taken a hit for their other losses such as foreclosures or repurchases. Bank of America announced $6.3 billion of new income for the third quarter.  This is an increase from a $7.3 billion loss one year ago.  Wells Fargo also had about $89 billion of residential loans in the third quarter, but that does not help as they increased their repurchase division by 61%.  Citi reported an increase of about 50% in residential loans the 3rd quarter and Goldman Sachs reported a loss for the third quarter.  The latter was only the 2nd loss that Goldman had reported since 1999. 

Hopefully we can keep you up to date on the major news in mortgage lending and mortgage news worth reporting but always looking out to save you money and give you some hints you might not have thought of.

references:  mortgage news daily & mortgage loan facts-u-need.