Mortgages And More

2009-03-11

 Home Affordable Refinance Program

The goal of the Home Affordable Refinance Program is to allow homeowners who because of past guidelines could not refinance to lower their payments to a more affordable level.  This program will begin April 4, 2009. In my last post, I promised to give you the nitty gritty of the Home Affordable Refinance Program. So, here it is.

Loan to Value:The previous guideline required the new mortgage to be no higher than 80% of the current value. This program allows for a loan to value of 105% of the current appraised value.  This 105% may include the principal balance, closing costs and prepaid expenses.  This new mortgage may not include a 2nd mortgage. Also, a new 2nd mortgage cannot be created, thus if the 105% is not enough to pay off the current mortgage and finance closing costs and prepaid, do not attempt to obtain a 2nd mortgage to pay for those items. Although a new 2nd mortgage is prohibited, if a current 2nd mortgage exists, this mortage can be resubordinated.    The 105% loan to value is only for the 1st mortgage.  There is no cap on the total loan to value which would inclue the 1st and the 2nd mortgage. 

Eligibility:  The current loan must have been in effect prior to 3/1/2009 and must be a Fannie Mae or a Freddie Mac loan.  To determine this either contact your lender or contact Fannie Mae at 800-7FANNIE or 800-FREDDIE between the housrs of 8am and 8pm EST.  You can also contact them online to request the information at:  www.fanniemae.com/homeaffordable or www.freddiemac.com/avoidforeclosure/. You can also email Fannie Mae at Resource_center@fanniemae.com.

Other eligibility criteria:  The borrower on the new mortgage must be on the existing mortgage.  New borrowers may be added providing the existing borrowers are retained. 

Property Eligibility:  The property may be owner occupied (1-4 units), a second home or investment property.  It can be a single family dwelling, 1-4 units, condo, PUD, cooperative or manufactured housing. No hotel/motels are allowed.

Appraisal Requirements: Automated underwriting (DU) will determine if the property requires an appraisal, and if so if a full appraisal or drive-up is needed.  In certain cases, the appraisal will be waived. If the lender determines that an appraisal is warranted and DU has waived the appraisal required, the lender may obtain an appraisal at the lender's expense.

Documentation Requirements: 

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  • Mortgage Application - 1003
  • Tri-merged credit report
  • If Salaried/Bonus/Overtime - 1 current paystub & a verbal verification of employment
  • If Self-employed/Commissioned - 1 years federal income tax return

Additional Facts: 

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  • There is no minimum credit score, however credit must meet guidelines for mortgage delinquency, bankruptcy and foreclosure policies.  The credit report is obtained for pricing purposes.  Credit worthiness is based on mortgage payment history.
  • There is no seasoning requirement on how long the home has been owned.
  • Multiple mortgages are allowed - no limit.
  • The new mortgage is a rate and term mortgage, therefore, cash back is minimal - 2% of the loan amount or $2,000, whichever is less.
  • The new mortgage may be 30 years, 40 years or an adjustable rate mortgage with a fixed payment for at least 5 years.
  • If the new mortgage is greater than 80% of the current value, mortgage insurance will be applied, unless the current mortgage had mortgage insurance which has terminated. 
  • Current reverse mortgages, 2nd mortgages and government loans are not eligiblefor this program.

Comments: The Affordable Housing Refinance Program is a step for many in the right direction.  Benefit testing will be done to ensure that either the new mortgae has reduced monthly payments or, at least, is a more stable product.  Please bear in mind that it is imperative that the homeowner continues to make the monthly payment on time up until closing of the new transaction.  The underwriter may require up to closing information on the payment history. 

One last item: The homeowner does not have to refinance with their current lender.  This is a Fannie Mae product, and as such, any lender who participates may assist in the refinancing.  So, contact me and let's see what we can do to help you take advantage of the lower interest rates. Don't wait until April 4th. Let's get started today.

 

 

 

My Gosh!  My head is in a whirlwind!  First came the Economic Stimulus Plan for 2009; and right behind it came the Homeowner Affordability and Stability Plan.  Is help on its way?  I think so.  The news for homeowners and soon-to-be homeowners is promising.  So, get your documents ready because now is the time to either refinance or purchase a home.

 

 Here is what the Economic Stimulus Plan has to offer for the soon to be homeowner:

The $787 Billion stimulus bill is made up of tax cuts and spending programs aimed at, just as the name of the name of the plan implies, stimulating the US economy. One of the major benefits of the plan is a tax credit for new homebuyers. According to the plan, first-time homebuyers who purchase homes from the start of the year until the end of November 2009 may be eligible for a tax credit of $8,000 or 10% of the value of the home, whichever is lower. Therefore, if the home you purchase is valued at least $80,000 you will eligible for the $8,000 tax credit.  If the home is valued less than $80,000, the tax credit will be 10% of the value of the home.

 

The $8,000 tax credit is a true tax credit. It's a dollar-for-dollar tax reduction, rather than a reduction in a tax liability. In other words, the $8,000 is not subtracted from your income before taxes are applied. Instead, the tax credit is deducted from taxes due.  So, if you were to owe $8,000 in income taxes and would qualify for the $8,000 tax credit, you would owe nothing.

 Even more amazing, the tax credit is refundable, which means you can receive a check for the credit even if you have little income tax liability. For example, if you owe $4,000 in income tax, the $8,000 tax credit will be applied to the amount owed... and you will receive a check for the remaining $4,000!

The tax credit starts phasing out for couples with incomes above $150,000 and single filers with incomes above $75,000.

 

The tax credit is applicable to any home that will be used as a principle residence. Qualifying "homes" include single-family detached homes, as well as attached homes such as townhouses and condominiums. In addition, manufactured homes and houseboats used for principle residence also qualify. The only catch is that buyers will have to repay the credit if they sell their homes within three years.

 

The Homeowner Affordability and Stability Plan is twofold:

 

This plan includes two initiatives to help struggling homeowners. One is a refinancing program for homeowners with less than 20% equity in their homes, or who owe more than their home is worth. The second program attempts to lower monthly payments for homeowners at risk of losing their home. Many of the plan's details are still being worked out and will not be announced until March 4. Here is an overview of the plan's main components.

 

Refinancing Initiative

 

For those whose homes are in an “upside down” position, meaning the mortgage balance is more than the current property value, refinancing the mortgage may be possible. This initiative is open to homeowners who have conforming loans which are guaranteed by Fannie Mae and Freddie Mac, and who owe up to 5% more than their home is worth.

 

According to the plan, "responsible" homeowners, those that have been making their payments, but are struggling to do so, can refinance their mortgage into a 30- or 15-year, fixed-rate loan based on current market rates. The refinanced loan, however, cannot include prepayment penalties or balloon payments. For many families, this low-cost refinancing may help reduce their mortgage payments by up to thousands of dollars per year.

 

As with the rest of the plan, details about this initiative will be released at a future date--including what, if any, credit score requirements will be included.

 

Stability Initiative

 

The stability initiative aims at providing help to individual families, as well as entire neighborhoods, by helping reduce foreclosures and stabilize home prices. Remember that a foreclosure in the neighborhood affects everyone – prices go down, property values are reduced.

 

This plan is intended to help homeowners who are struggling to afford their mortgage payments, but cannot sell their homes because prices have fallen significantly. The goal of this initiative is simple: "reduce the amount homeowners owe per month to affordable levels." To accomplish this, lenders are encouraged to lower homeowners' payments to 31% of their income by lowering their interest rate to as low as 2% or by extending the terms of the loan. In addition, lenders can also lower the principal owed by the borrower, with the Treasury Department sharing in the costs.

 

An important part is that homeowners who are current on their mortgages but are struggling can still apply for this program. As such, this is one of the few programs designed to help homeowners who may face delinquency soon, but are current at the moment.

 

This initiative also includes a number of additional elements and incentives, including an extra incentive for borrowers to keep paying on time. The initiative will provide a monthly balance reduction payment that goes straight towards reducing the principal balance of the mortgage loan. As long as a borrower stays current on his or her loan, he or she can get up to $1,000 each year for five years.

 It is important to note that both the refinance initiative and the stabilization initiative are for owner occupancy residences only.  Neither plan is for investment property.   My Comments 

In a nutshell, we should all have hope of a recovery.  This recession has been hard on all Americans.  I truly believe that the first step out of this recession is the stabilization of the housing market.  We would be silly not to take advantage of these soon to be available programs.  March 4^th is just a few days away, so pay close attention to news broadcasts and to my blog.  I will keep you posted as to what steps to take.  In the meantime, gather your documents together – 30 days of paystubs, the last 2 years of W-2’s, and 2 months of bank statements (all pages).  If self-employed, you will need the last 2 years of tax returns (all pages). 

Granted, these plans will not help everyone.  But, for the majority, those who did not buy more than they could afford, they are a lifeline.  Grab onto and do your part to get this economy moving again.