Program to Assist Homeowners Overhauled
In 2011, the federal government the nuts and bolts of its overhauled refinance program to assist homeowners who's loans are current, although they can't benefit from low interest rates due to them having no home equity. The Federal Housing Finance Agency made an acknowledgement that 894,000 mortgages which were refinanced using the Home Affordable Refinance Act had not kept up with expectations of White House administration.
The revamped effort will certainly attract the attention from homeowners in hard-pressed housing markets. However not every homeowner with a loan that's upside-down will qualify, while it is still to early to determine how many real estate lenders are going to participate. This program is only available to borrowers who have loans which are guaranteed or owned by Freddie Mac or Fannie Mae and have only 20 percent or less home equity. To find out if either Freddie or Fannie backs a mortgage, logon to http://www.fanniemae.com/loanlookup or http://www.freddiemac.com/mymortgage . The only eligible loans are those that are backed by Fannie and Freddie and originated prior to May 31, 2009.
This program starts Dec. 1, 2011 although some lenders in the program may not be in a position to accept applications that soon. This program runs out on Dec. 31, 2013.
Lenders voluntarily participate, although one of the key components of the revised program has been designed to allow lenders to feel more at ease when writing a new mortgage on an upside down property. Looking forward, a lender with HARP is not deemed responsible if a mortgage it refinances goes into foreclosure because of errors in the initial purchase mortgage. The change was thought to be crucial in creating competition among mortgage lenders for loan business and attracting new lenders into the program. although, lenders still must follow underwriting guidelines.
The agency doesn't want you to have any delinquent payments during the previous six month period, however a borrower may be late 30 days for a single payment during months seven through 12 for the past year.
For loans that fully amortize over 20 years or less, every fee related to any risk of these loans have been removed. For loans that fully amortize in excess of 20 years, fees have been restricted to 0.75 a percent total of the amount of the loan.
For fixed-rate 30 year mortgages, no upper LTV ratio exists. For loans with fixed-rates in excess of 30 years and under than 40 years, there is a maximum LTV of 105 percent. The upper LTV is also 105 percent on adjustable-rate loans having an initial fixed term exceeding 5 years with terms as high as 40 years.
The Federal Government is encouraging borrowers to refinance for a shorter loan term and interest rates are typically less on lower-term loans while it lets borrowers increase their home equity at an increased rate.
However to be qualified for a lesser-term mortgage under this revised program, the borrower must meet added criteria, such as having a minimum credit score 620 and must also have a debt-to-income ratio that is no higher than 45 percent.
Lenders may solicit and advertise this program to borrowers who are potentially eligible with loan-to-value ratios having 80 percent or better, they must promote it for both Freddie and Fannie-backed loans.
Nov 17, 2011
Real Estate Finance
|
