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June 15, 2010

Home Refinancing Appealing But Tough to Qualify for

Mortgage refinance rates have dropped almost two percentage points below their housing boom peak and they remain available at record lows.  Freddie Mac reported that mortgage rate average fell to the lowest point in 2010 4.72% plus 0.7 point for a fixed rate home loan on a thirty-year term.  Clearly this is a great time for a home refinance loan, if you can get approved.  Credit, Lack of Equity and Inability to Document Income are the 3 most common reasons that homeowners have not been able to refinance into these record low rates.  A few years ago if you had good credit, you could pretty much qualify for any mortgage, but things have changed dramatically.  Today even people who have 700+ credit scores are finding it difficult to qualify for a conventional or FHA mortgage and it is frustrating millions of borrowers who need to refinance.  To receive the best mortgage refinance rates, you need good credit scores and the ability to document your income.  Stated and no-income verification loans are no longer viable options for home refinance opportunities.   You also need enough home equity to meet the refinance guidelines.  Many California borrowers had sufficient equity a few years ago, but the housing crisis has taken its toll on property values statewide.

The Mortgage Bankers Association released a report recently that outlined borrower problems in its latest report on home refinancing activity, which declined 14% last week after consecutive weeks of increased refinance loan volumes.  The low interest rates and homebuyer tax credit have clearly made a positive impact on the mortgage refinance market in 2010.  However, “despite the record low mortgage rates, many homeowners remain underwater on their home loans.  This means that their mortgage is greater than their property value.  According to MBA’s vice president, Michael Fratantoni, many distressed borrowers have been late on their mortgage payment which significantly damaged their credit and taking them out of contention for mortgage refinancing this year.

Since the pool of qualified borrowers looking to refinance is shrinking many lenders are offering aggressive mortgage specials.  Many reputable mortgage lenders are offering a no point refinance and some are going further with the no cost mortgage that enables borrowers to refinance without coming out of pocket for any lending expenses.  The no cost home loans also help borrowers avoid raising their mortgage balance in an effort to finance the lender fees and closing costs.  According to mortgage marketing executive, Bryan Dornan, “Again qualifying for no cost refinancing is difficult because you need good credit, sufficient income that can be documented and enough equity in your home to qualify for the loan refinance program.”  Dornan continued, “It’s not a motivation factor.  The borrowers who need home refinancing most simply do not qualify under today’s tighter lending guidelines.”

To put it into perspective, interest rates dropped last week, yet refinancing volumes fell.  In most cases, mortgage refinance rates follow the yields of longer-term Treasuries whether they rise or fall.  In recent months it’s been down, as the European debt crisis has led to banks dropping interest rates even further.  The vice president of HSH Associates Keith Gumbinger, “We have not seen mortgage rates lower than this in upwards of 50 years.” Gumbinger believes that the rates will begin trending higher once we get some good news regarding the economy.


February 3, 2010

Homebuyer Tax Credit Extended

According to data released by the Commerce Department’s Census Bureau and the Department of Housing and Urban Development, the expansion to the homebuyer tax credit, an exceptional government stimulus measure was passed to boost housing activity, new home sales took a 7.6% decline in December. The results come on the heels of National Association of Realtors (NAR) reports of similar December declines in existing home sales.  First time home buyer loans have seen a recent spike in loan application volumes since the tax credit news hit the street.


The homebuyer tax credit extended for first time homebuyers and expanded to include existing homeowners requires buyers have a contract in place by April 30 and close by June 30th. The problem, home-builder insiders and real estate agents tell HousingWire, is that consumers who tried to take advantage of the tax credit too late in the fall before realizing there wasn’t enough time to close a deal by the original November 30th expiration date have yet to reengage themselves in the home loan process.  FHA mortgage lending continues to support a majority of the first time homebuyer loans.  “With new homes, the home-builders ran out of everything they could close by the end of November,” Burns said. “There were people that wanted to buy in these communities that didn’t because they couldn’t close in time.”

As HousingWire previously reported, the JBREC December monthly builder survey showed optimism among 264 home building industry executives from public and private companies. The belief that builders will have increased community count, better orders and slightly higher prices has 57% of respondents planning for more revenue in 2010 than in 2009.

Another confidence booster is the tax credit many builders are receiving from the temporary extension of the terms of net operating carry-back laws, which let builder recoup losses from taxes paid in profitable years.  “It’s given them more confidence in their cash balances and they want to start more speculative homes because of the extra cash that they now have,” Burns said.


November 11, 2009

Mortgage Refinance Guidelines Improving

Mortgage rates are at record levels and refinance guidelines are beginning to lighten up for homeowners with no equity.  The government announced the HARP program that promotes affordable home refinancing with flexible requirements.  People can refinance from 105 to 125%, but no cash out is allowed with these special government relief loans. These government 125 mortgage loans are not for debt consolidation, rather for loan refinances of Fannie Mae and Freddie Mac backed loans.

According to the Nationwide website, mortgage refinancing is a fundamental way for homeowners to increase cash flow.” The options for home mortgage refinancing vary by borrower, but there are many options out there. Of course, refinancing options are dependent on a borrower’s credit history, home value, home equity and other factors. However, do not let a poor credit history or a home whose value has fallen deter you. There are many refinance programs available through the VA or FHA for some people. Others can take advantage of opportunities provided in the conventional loan market. Even with tightened credit requirements, there are loan options available for people with poor credit. All of these options can be discussed with a mortgage professional.


November 2, 2009

Fannie Mae Refinance Loans to 125%

Fannie Mae provides several refinance options including the Home Affordable Refinance Program.  Fannie Mae refinance solutions are only available eligible borrowers who have a mortgage balance less than $417,000 that is owned by Fannie Mae.  125 mortgage options are available for no equity home refinancing.

Fannie Mae Refinance Plus simplifies the refinancing process for loans that are already in a mortgage lender’s servicing portfolio. This Fannie Mae mortgage program allows refinancing to 125% LTV. The Home Affordable Refinance Programs offers a unique refinance alternative because no equity is required.  Fannie Mae pledges to provide home refinancing with increased efficiencies for the origination and underwriting of Fannie Mae.   Fannie Mae allows limited cash-out refinance transactions up to 125 percent loan to value.


June 5, 2009

Refinance or Mortgage Modification with Bad Credit or No Equity

In a recent article, California mortgage broker, Jeff Morris, formerly with GMAC and Ditech estimated that one in ten of homeowners who visit him online are able to get approved for a conventional or FHA-refinance.  Morris said, “People simply don’t qualify with the mortgage lenders tighter guidelines and lack of home equity.“ Borrowers seeking home refinancing, outside of California, Arizona and Nevada may have a better chance because fewer borrowers in the mid-west and south are under water with their mortgages being greater than their home’s value.  Even with mortgage lenders extending 97% FHA and 105% mortgage refinancing, California homeowners have little opportunities to be approved because home values have declined so significantly since they bought their properties years ago.   


The goal should be for homeowners to invest in a home that they can afford and if refinancing with a lower mortgage payment is an option, then borrowers would be foolish not to seize the savings opportunity. Morris added that “the demand for loan modifications has not waned and he sees an increase in loan workout requests for borrowers who are stuck in jumbo mortgage loans that have interest rates set to adjust.” The banks just aren’t handing out loan modification agreements to just anyone anymore.  Homeowners seeking foreclosure prevention alternatives from their mortgage lender must be able to document that they have the income to support the modified home loan payment. 


In Maui, Caleb Palmer, a broker, said “Consumers should stop whining about things they can’t control and focus the affordable home buying opportunities that have become available since the housing market crashed in 2006.” Palmer continued, “Mortgage rates were under 5% for thirty year fixed rate loans and inventories were beginning to open up in neighborhoods that haven’t been available for years.”  Palmer believes that 2010 will see more buying opportunities in Hawaii and California before the market shifts back to appreciation mode. 


In addition, if you’re older than 40, shortening your mortgage term now could help leave you mortgage-free in retirement, reducing the income you’ll need to generate from your battered 401(k).
But before you jump in, you should know that most single-family home loans today need to fall within Fannie Mae and Freddie Mac limits — up to $417,000 in most places, and up to $729,750 in certain high-cost cities such as San Francisco and New York. “Jumbo” mortgages, or those larger than those limits, are still very hard to find. Then you’ll need two crucial and tough-to-acquire bits of information: your credit score and your home’s current value. Those will determine whether you can refinance at all and how close you can get to the lowest rates available. Even then, you may find the process unusually long and unpleasant; some banks are taking up to 90 days to complete a refinancing.  If you got your current mortgage in the past few years, when less documentation was needed, you may be surprised by the financial colonoscopy that awaits you. You need pay stubs, bank statements, brokerage statements and maybe tax returns to convince the lender that you can and will repay the loan. If you’re self-employed, you may be asked for a profit-and-loss statement for this year; if you rely on bonus income, expect the lender to assume this year’s bonus will be a lot less than last year’s.


What is home equity? Having some equity in your house is essential to qualifying for a new mortgage loan. If your current mortgage is less than 80% of the value of your home or less than 75% of your condominium, you should have refinancing options as long as you don’t have late mortgage payments and bad credit scores.  Subprime refinancing and bad credit mortgage options have disappeared with the exception of VA and FHA loans.  VA home loans are only offered to military veterans and FHA mortgage guidelines require full income documentation and most bad credit home loan applicants need a stated income program.


If your mortgage is between 80% and 105% of your home value, you’re current on your payments and your loan was bought by Fannie Mae or Freddie Mac, you may be able to refinance under a two-month-old government program called “Making Home Affordable.” Some kinks are still being ironed out, and Fannie and Freddie have different requirements, so go to the program’s Web site at MakingHomeAffordable.gov or contact your mortgage servicer to see if you qualify.

Sometimes under this program, Fannie and Freddie will waive appraisals and other underwriting steps. And if you’re refinancing a Veterans Administration or Federal Housing Administration loan, a new appraisal isn’t needed. 


June 3, 2009

Streamline for VA Home Loan Refinancing

Mortgage brokers continue to report that FHA mortgage and VA home loans are the hottest products in the home financing sectors of the U.S.  The VA provides low mortgage rates for streamline programs to veterans who currently have a loan guaranteed by the U.S. Department of Veterans Affairs.  In addition to the VA streamline refinancing, Mortgage Related News reports that and VA loan officers are originating the Interest Rate Reduction Loan at a high volume than previous years because this VA loan has no “seasoning” requirement.


In the mortgage industry, this type of seasoning refers to borrowers who recently completed a mortgage refinance transaction.  In addition, these VA loans entail very little documentation and usually do not require an appraisal. In order to qualify, borrowers must have a VA home loan that is not delinquent. In a recent VA mortgage article, Tom Kelly highlights the opportunity that military veterans and their families have financing and refinancing with VA home mortgage loans.  He points out that one of the simplest ways for homeowners who have a VA mortgage is with the VA streamline refinance. 

VA mortgage lenders will assess that veteran borrowers meet basic program requirements including:

·         The new monthly mortgage loan payment must be for less than the original loan.

·         The VA mortgage rate must be for less than the original loan (unless refinancing from an adjustable interest rate).

·         The term cannot exceed thirty years or ten years more than the original mortgage term (up to a max of 360 months).

After 50 years of offering loans only to vets who served active duty, the VA changed its rules in 1992. Men and women who have completed six years in the Army, Navy, Air Force, Marine Corps or Coast Guard Reserves, or the Army National Guard or Air National Guard, are eligible for VA home loans, including programs with zero down required. 


March 31, 2009

US Homeowners Looking for Low Rate Home Refinancing

Category: Home Loan News,Loan Programs,Published Articles – admin – 4:04 pm

Record low interest rates on mortgage refinance loans have been drawing more buyers to the stalled housing market, new figures suggest. Data from the Mortgage Bankers Association reveals that total home financing applications that includes refinancing and new home purchase loans jumped by nearly 33 % last week.

Existing homeowners looking for a better mortgage payment with a home loan revision made up the most significant proportion of the mortgage applications, at 79 %. With the average mortgage rate on a fixed interest rate 30-year home loanhovering near 4.6 %, it is not difficult to see why people may be looking for a change. However, not everyone who applies for a mortgage these days can expect to be successful as mortgage lenders are seeking higher fico scores and theyr are charging more loan fees on those who do not measure up. Meanwhile, there are also signs that first-time buyers could be coming out of the woodwork as well.

In other mortgage news from the U.S. Census Bureau indicate new home sales increased by 4.7 % in February.  That was the first rise in housing sales since July 2008. FHA mortgage applications continued to rise as brokers and wholesale lenders expressed more confidence with 2009 FHA refinance guidelines in underwriting and closings.


February 24, 2009

Obama’s Mortgage Plan for Fannie Mae & Freddie Mac Need Legal Nod

Category: Foreclosure Crisis News,Home Loan News,Loan Programs – admin – 1:00 pm

In a recent Bloomberg article, President Barack Obama rolls out plan to use mortgage lending giants Fannie Mae and Freddie Mac to refinance as many as 5 million home mortgages may face legal challenges over whether the administration is overstepping its authority.   The proposal may violate requirements that homeowners put up at least 20% of the appraised value of a home or carry mortgage insurance, said U.S. Representative Scott Garrett of New Jersey, the ranking Republican on a panel that oversees the mortgage companies.  


Fannie and Freddie’s chief regulator, James Lockhart, has said the changes are exempted from mortgage-insurance rules written into the companies’ charters and won’t require new appraisals. Lockhart said the strategy will make it easier to help struggling homeowners to refinance and get more affordable mortgage loans with lower monthly payments.  


Loan-to-Value Ratio

Fannie and Freddie’s charters prohibit the acquisition of new loans with a loan to value ratio of more than 80% — meaning the homeowner has less than 20% equity in the property — unless mortgage insurance or some other credit backing is used.   Regulators will work around that requirement by treating the refinance loans as a loan modification programs “for charter purposes,” not as new mortgage loans, Lockhart, director of the Federal Housing Finance Agency, said in a February 20th letter to a mortgage insurance trade group.   The difference is that a mortgage modification retains the original contract, changing its terms. Mortgage refinancing requires an entirely new mortgage, which Fannie and Freddie would have to repurchase and repackage into a new security, according to analysts and the companies.   “The new home loan is treated as a new origination because the old loan is paid off,” said Amy Bonitatibus, a Fannie spokeswoman.


No Appraisals Required with New Refinance Program

The Obama mortgage rescue plan would temporarily approve Fannie Mae and Freddie Mac to provide refinance loans that they own or guarantee with loan-to-value ratios (LTV’s) of as much as 105% without appraising the property or requiring additional mortgage insurance.  



December 15, 2008

Reverse Mortgage Loans Help Seniors

Category: FHA,Loan Programs,Published Articles – admin – 10:37 am

Reverse mortgages have long been a way for seniors to turn the equity in their homes into extra cash in their pockets. Now, a higher lending limit is making it possible for some seniors to get more money out of a reverse mortgage than before.  The new $417,000 lending limit for reverse mortgages insured by the Federal Housing Administration was rolled out nationwide (except for parts of Hawaii, which have higher home loan limits) on Nov. 6. To qualify for the lending limit, a home has to be appraised at $417,000 or higher. The actual amount of the reverse mortgage would be a percentage of the $417,000 lending limit or appraised value of the home, whichever is lower.

The higher limit made it possible for Oakland resident Michael Goldsmith to receive a reverse mortgage that was $50,000 larger than he would have under the old loan limit of $362,790 that applied in the Bay Area and other high-cost regions.  “It made a difference of about $50,000 … It’s pretty significant,” said Goldsmith, the 74-year-old owner of a transportation management business.  Goldsmith and his wife, Dorothy, took out a reverse mortgage with Bank of America so they would have funds available to remodel their Oakland condo.  The Goldsmiths were able to qualify for a reverse mortgage loan of about $275,000 on their $450,000 condo. After using most of the proceeds to pay off an existing $180,000 home equity line of credit, they were left with a $95,000 line of credit to draw from when they choose to use the money. “We’ll still have some money left over in case we need it sometime in the future,” Michael Goldsmith said. “I don’t have to use it all but it’s sitting there anytime I want it.”

Seniors who are 62 years or older and have a good portion of equity in their home or have paid off their mortgage can apply for a reverse mortgage, which amounts to a home loan made by a mortgage lender to the homeowner that has to be paid back eventually along with interest payments and other fees that are tacked on.   The homeowner retains title to the house while the loan is active. Interest rates on federally-insured reverse mortgages are adjustable and linked to an index based on one-year yields derived from a basket of various Treasuries. And while the adjustable-rate interest has a built-in cap, the product does not provide the certainty of a fixed-rate loan. The actual cost of repaying the loan will vary depending on whether the proceeds are taken out as monthly payments, a lump sum, or a line of credit. Also, the homeowner has to keep on paying homeowner’s insurance and property taxes.

Since the higher loan limit was announced in October, Bank of America has seen a 40 percent increase in reverse mortgage loan applications compared to October 2007, said Steve Boland, a Bank of America reverse mortgage executive based in Thousand Oaks.   “We really see this as an instant ability to help people who need the additional access to equity,” Boland said. “A number of people see their retirement assets declining and they are finding they are less prepared to meet their cost of living in retirement. A reverse mortgage can really play a big role in supplementing that.”  Even Seniors with homes appraised below the $417,000 mortgage limit can benefit from the reduced loan origination fees, he said. For example, a borrower with a $335,000 home would get $1,350 more in net proceeds due to being charged $1,350 less for the loan origination fee.

While a reverse mortgage loan may offer tax-free income for some seniors, it is not always the best solution. Reverse mortgage loans can be complicated and may not meet the needs of all seniors seeking cash out from their home equity.  There are substantial costs for home financing and mortgage insurance that can run into thousands of dollars that have to be paid on top of principal and interest. Also, the interest that’s due on the loan can erode the equity in a home. Taking out the loan while in your sixties can result in getting a reduced mortgage amount and owing more on the loan when it is repaid than if you waited until you’re in your seventies. Heirs who inherit the home can end up with a substantial home loan to pay off if they want to keep the property.  More than 90% of reverse mortgages are FHA-insured products known as Home Equity Conversion Mortgages (HECM) loans. That number is bound to get higher given that the market for so-called jumbo reverse mortgages, which are above the FHA loan limit of $417,000 and not insured, had dried up in response to the ongoing credit crunch.

The higher loan limit for federally insured reverse home loans was made possible by the passage in July of the Housing and Economic Recovery Act, which among other things included provisions to help struggling homeowners of all ages avoid foreclosure. The legislation also lowered lender origination fees for reverse mortgages while setting a $6,000 cap on origination fees.  The higher lending limit comes at a time when some seniors are using reverse mortgage loans to help avoid foreclosure in addition to the more traditional reasons such as tapping a home’s equity, said Ray Fry, an East Bay certified senior advisor and a specialist in reverse mortgages who goes by the name “Mr. Reverse.”

Some seniors who been caught up in negative amortization mortgage loans — which is when a loan’s outstanding balance gets bigger while monthly payments stay the same — are turning to reverse mortgages to pay off the balance, he said. (A reverse mortgage requires that it be the only home loan on a property so existing mortgages are automatically paid off from the proceeds).  “The key thing right now is that the (falling) value of the home is preventing people from refinancing existing mortgage loans,” said Fry, adding that some seniors then turn to reverse mortgages.

There are many factors that go into figuring out whether a reverse mortgage loan is the right move. How long a homeowner intends to stay in the home is a key factor as is the age of the borrower.  “You are really talking about individuals who want to age in place; they want to remain in their home. If someone was thinking of moving in a few years, a reverse mortgage is not the right product,” Boland said.  The borrower’s age, current interest rates and equity held in the home are used to determine the size of the loan.  “Age is the real determining factor. The older person qualifies for more than the younger person and the interest rate is the second factor. A lower rate means you qualify for more money,” Fry said.  “It is true you get more money when you are older and you have less of a period of time your loan is going up in value, that is in accrued interest,” said Judy Schwartz, a principal at San Carlos-based Reverse Mortgages Only.  Still, Fry and Schwartz point out that age should not be the only consideration.  “It’s really borrower specific,” she said. “You really have to look at the amount of money you are trying to get access to in exchange for the (reverse mortgage) costs.”

A consumer might also want to consider a reverse mortgage now instead of later since home values are falling and the proceeds available from a reverse mortgage would be lower, she said.   Another reason to consider taking out a reverse mortgage now is that mortgage rates are very low — starting in the 3% range when mortgage insurance is included — at a time when the stock market is falling, she said.  “It may make sense to tap the equity in your home rather than deplete an already decimated portfolio,” Schwartz said.  -Article written by Eve Mitchell


November 2, 2008

Banks Modify Home Loans to Stem the Tide of Foreclosures

Category: Editorial,Home Loan News,Loan Programs – admin – 10:41 am

On Friday, JPMorgan Chase became the latest big bank to pledge to cut monthly payments, by lowering interest rates and temporarily reducing loan balances for as many as 400,000 homeowners. Early in October, Bank of America, which acquired the large mortgage lender Countrywide, announced a similar effort aimed at 400,000 borrowers as part of a settlement with state officials. Wachovia initiated a home loan refinancing program before agreeing to its pending takeover by Wells Fargo & Co. The loan modification effort targets the option-ARM portfolio.

“The banks are doing the cost-benefit analysis,” said Gerard S. Cassidy, a banking analyst with RBC Capital Markets. “The banks don’t want these customers going into foreclosure because it is a costly and punitive way of trying to collect your money.”

Roughly 1.5 million homes were in foreclosure at the end of June, and economists expect several million more borrowers may default in the coming year as housing prices erode and job losses rise. Nearly 1 in 10 mortgages is either delinquent or in foreclosure.

By renegotiating mortgage rates loans with borrowers, Chase is hoping to reduce the losses that it incurs in the foreclosure process and when it sells repossessed homes. Chase said it has already modified 250,000 loans since the start of 2007.

“What we are doing is a process that just makes a lot of sense,” said Charlie Scharf, chief executive of retail financial services at Chase. “If the government can come in and help us find ways to modify more people that would be wonderful.”  Like other banks, Chase is largely aiming at loans that the bank owns and not the mortgages that it services on behalf of bond investors who own mortgage-backed securities. Banks have less leeway in changing the terms of loans packaged into securities, because contracts that govern them can be very restrictive.

Chase is following the example set by Sheila C. Bair, the Chairman of the Federal Deposit Insurance Corporation (FDIC). They are lowering interest rates on existing mortgages and temporarily reducing the principal owned on loans. The goal is to lower a borrower’s mortgage payments to 31 to 41% of disposable income—income after monthly debts are paid.

“A clear consensus is emerging that broad-based and systematic loan modifications are the best way to maximize the value of mortgages while preserving homeownership — which will ultimately help stabilize home prices and the broader economy,” Ms. Bair said in a statement that applauded the announcement by Chase.

“A clear consensus is emerging that broad-based and systematic home loan modifications are the best way to maximize the value of mortgages while preserving homeownership — which will ultimately help stabilize home prices and the broader economy,” Ms. Bair said in a statement that applauded the announcement by Chase.

The mortgages affected by J.P. Morgan’s program represent 4.7% of the home loans it owns or that are serviced by one of the bank’s units, EMC Mortgage Corp. While the program to give these mortgages easier terms is likely to cost J.P. Morgan billions of dollars in interest payments and loan fees, it is also likely to save the bank from the costly and lengthy process of foreclosing homes and selling them.

Up to this point, the Bush Administration has taken a top-down approach to trying to stimulate the economy. But, it hasn’t been successful because the problem that still remains untouched is the mortgage meltdown that started this financial crisis. Because of the big bank losses as a result of their investments investment of trillions of dollars in securities backed by risky mortgages, a wider credit crunch spawned, crippling the financial industry even further. Until now, mortgage holders have been reluctant to renegotiate loans or have been doing so one-by-one, a time-consuming process.

The announcement by J.P. Morgan steps up pressure on other mortgage companies to respond with relief programs for stressed borrowers, said Stuart Feldstein, president and co-founder of SMR Research Corp., a Hackettstown N.J., firm that specializes in consumer lending.  Sources: New York Times and Wall Street Journal