THE administrations recently making changes into its original Obama Refinance program because it seems to have not helped enough people and really made a very small dent in our real estate problem. The changes are not what I would have wanted them to do but it actually might help a little bit more homeowners in trouble. I will provide info on the new guidelines and will make small comments as far as what I think should be done here.
Here’s are some frequently asked questions:
What is HARP?
The idea was simple: If you were making your payments on time but didn’t have enough equity to refinance, you would be able to lower your rate without having to pay down your mortgage balance or take out mortgage insurance.
Information: Yes, you will be able to refinance up to about 105% or even 125% of your existing value of your property, but the lenders has a pricing matrix that will cost about 1.5-2% points more if you were to refinance these loans under these high Loan to Value ratios. Let me explain further, if you were currently refinancing an 80% LTV on one loan, you would probably get the best pricing available like maybe 3.75%/ But if you were refinance thru this program and you need a 105% LTV, the pricing will be higher by about 1%-1.75% on the fees. The fees could either be factored into the rate or it would have to be paid thru the loan. This is assuming you have the highest of fico scores and do qualify for the loan.
Initially, the program was limited to borrowers who owed between 80% and 105% the value of their homes. In mid 2009, the program was opened to borrowers who owed up to 125% the value of their homes.
Information: If you are over that 105-125% LTV you actually might be in the 150%-200% LTV meaning your home value might be half (50%) of what your mortgage balance is ? Then is there really a motivation for you to refinance your loan? Will you be whole heartedly wanting to continue to pay a house worth half of your amount owed.
I wish the lenders would currently allow a payment of your actual value and just put a long term balloon balance on the difference, I have seen Chase and some other lenders start to do that
How is HARP being expanded?
Borrowers will soon be able to refinance no matter how far underwater they are. This should have a big impact in certain parts of Nevada, Arizona, and Florida where many borrowers owe more than 125% of the value of their homes. In Nevada, for example, two thirds of all loans backed by Fannie Mae are underwater, and half of all loans are above the 125% loan-to-value cut-off.
Will I be able to refinance through HARP if I’ve already used the program once?
No. The program will continue to be limited to loans that were delivered to Fannie and Freddie before June 2009, which means that anyone who has already refinanced under HARP won’t be able to refinance again.
Information: Major road block, there is a small percentage of homeowners that had bought after 2009 that actually have seen their values decline. Now, they have no help.
How will this change help borrowers?
This will streamline the refinance process, eliminating the need in many cases for borrowers to obtain appraisals or to provide extensive income documentation. Instead, borrowers will have to show that they’re current on their mortgage, that they have a job or another source of regular income, and that they meet the other eligibility criteria for HARP.
What if I have a second mortgage?
Borrowers with a second mortgage, such as a home-equity loan, need the mortgage owner to agree to “re-subordinate” the loan before refinancing the first mortgage. Federal officials say the largest lenders have agreed to automatically re-subordinate all second mortgages under HARP
Comments: This is going to be a battle with lenders, I don’t see them changing their re-subordination policy on this. But hopefully they do.
What else is being done to lower costs?
Another change involves fees that Fannie and Freddie charge banks for riskier borrowers. The firms, and their regulator, the Federal Housing Finance Agency, have agreed to waive those fees for borrowers who refinance into loans with a shorter term, such as a 15-year mortgage. They’ll also reduce the fees, but not eliminate them entirely, for everyone else.
Comments: This will actually be helpful if it allows reduce fees for everyone, not just for homeowners who wanted a shorted term loan? Very tricky.
When will these changes take effect?
Fannie and Freddie will issue final pricing information and other technical details around Nov. 15, and some banks have said that they could begin taking applications under the new program by as soon as Dec. 1. The HARP program will also be extended through 2013, beyond its current expiration date of June 2012, in order to encourage lenders to invest more resources into staffing up the program.
What if Fannie or Freddie don’t own my loan – can I refinance through this program?
No. That’s a major limitation, of course, because “jumbo” mortgages aren’t held by Fannie and Freddie, and many of the most underwater subprime mortgages are in privately held mortgage securities that weren’t issued by Fannie and Freddie.
Hopefully this will help many homeowners stay in their homes in order for the RE market to recover.
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Please call Ken Go of 1st Innovative Finance at 562-697-7028 if you have any further inquiries you can also write to Kennethgo@ verizon.net. Thanks.
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(www.asianjournal.com) (LAWeekend Nov.05-2011, 2011 Sec C pg.04)
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