Archive for the ‘Refinance’ Category

HARP – HAMP – HAFA etc

 | 1 comment

For borrowers unable to afford their mortgage payment, listed below are the options you will need to consider in the following order… HARP is always your 1st Option

1.) HARP (Home Affordable Refinance Program) this allows you to convert to a low 30Y Fixed. You must have a Fannie or Freddie loan with good credit and be current on your payments.

2.) HAMP (Home Affordable Modification Program) this is where most of the borrowers will be; however not everyone will qualify. You will need to have a financial hardship and there are front and back end financial conditions that need to be met.

3.) HAFA (Home Affordable Foreclosure Alternative) If you were denied a loan modification and unable to afford your mortgage payments, then you may want to consider selling your property at a loss (Short Sale). Your lender would first need to agree to the short sale and the credit impact will be two years and is less damaging then a foreclosure.

4.) Deed in Lieu (DIL). This is where you give the property back to the lender by signing a Deed-in-Lieu of Foreclosure. This also avoids a Foreclosure. DIL is not possible if you have more than one loan i.e. 2nd mortgage or Home Equity Line of Credit as these stay in force and the 1st mortgage holder would have to accept responsibility for them.

5.) Foreclosure. People with excellent credit are now foreclosing on their properties by walking away from it. They believe the property will not go up in value and have suffered a substantial loss from it. Consequences apply as this will stay on your credit report for 7 years.

6.) Bankruptcy. Regardless if it’s a Chapter 7 or 13, it will stay on your credit report for 10 years.
With the new Bankruptcy ACT of 2005 it is now more difficult to file for Chapter 7 and most likely you will need to file a 13, which still requires you to pay back your debts.

NEGATIVE EQUITY REFINANCING

 | Comments Off on NEGATIVE EQUITY REFINANCING

The Home Affordable Refinance Program (HARP) is now available to 5 million homeowners who have a solid payment history on an existing mortgage owned by Fannie Mae or Freddie Mac. Normally, these borrowers would be unable to refinance because their homes have lost value, pushing their current loan-to-value ratios above 100%. Under the HARP Program, many of them will now be eligible to refinance their loan to take advantage of today’s lower mortgage rates or to refinance an adjustable-rate mortgage into a more stable mortgage, such as a 30-year fixed HARP loan.
The HARP Program and HARP 2.0 are available now.
For a full description of this great program and to see if your loan qualifies go to http://www.harploan.org/faq.html
Here are some recent statistics to illustrate the success of HARP 2:
o. One in 7 of all refinances in the 1st quarter of 2012 was through HARP.
o. The number of refinances in the 1st quarter was double that for the last quarter of 2011 driven by a sharp increase in those with above 105% Loan to Value (LTV)
o. FHFA officials attribute the increase to the removal of the loan-to-value (LTV) ceiling for borrowers who refinance into fixed-rate loans and the elimination — or lowering — of fees for certain borrowers.
o. In March, there were nearly 80,000 HARP refinances, a quarter of them on loans with LTVs greater than 105 percent.
o. More than 4,400 loans with LTVs greater than 125 percent were refinanced since the beginning of the year; over half these loans were refinanced in the states of California, Florida, and Arizona.
• The number of loans refinanced through HARP in the first quarter of 2012 nearly doubled compared with the number of loans refinanced through HARP in the fourth quarter of 2011, driven by a sharp increase in the number of loans refinanced above 105 percent LTV.
• In March, there were nearly 80,000 HARP refinances, a quarter of them on loans with LTVs greater than 105 percent.
• More than 4,400 loans with LTVs greater than 125 percent were refinanced since the beginning of the year; over half these loans were refinanced in the states of California, Florida, and Arizona.

Obama Refi Plan: 580 FICOs Okay, So Are 140% LTVs

 | Comments Off on Obama Refi Plan: 580 FICOs Okay, So Are 140% LTVs

President Obama is urging Congress to pass a bank tax, funneling the money over to the Federal Housing Administration which will then refinance non-GSE borrowers who are under water on their loans.

Wednesday morning the White House released certain details of its latest refi plan, opening up the initiative to borrowers with a minimum credit score of 580 and loan-to-value ratio of up to 140%. But there is one catch: these mortgagors must be current on their existing loan.

For loans with LTVs above 140%, lenders would have to write down the principal before refinancing, according to a White House fact sheet released to the media.

This plan will “help millions of responsible homeowners who make their payments on time but find themselves trapped under falling values or wrapped in red tape,” President Obama said at a rally in Falls Church, Va., Wednesday morning.

The White House estimates FHA will need $5 billion to $10 billion to fund this new refi program for private mortgages and create a separate mortgage insurance fund.

“This will help the FHA better track and manage the risk involved and ensure that it has no effect on the operation of the existing [FHA] Mutual Mortgage Insurance Fund,” a White House fact sheet says.

To get the program off the ground, Congress will have to pass legislation that authorizes FHA to refinance higher LTV loans along with the proposed bank tax to fund the program.

The President calls the tax the “Financial Crisis Responsibility Fee,” noting that it will be imposed on the “largest institutions based on their size and the riskiness of their activities.”

Washington insiders consider the bank tax a “non-starter” in the Republican-controlled House of Representatives.

Enhanced by Zemanta

HAMP Modifications May Get a Boost

 | Comments Off on HAMP Modifications May Get a Boost

Mortgage servicers continue to modify 25,000 loans a month under the government’s HAMP program, but that pace could pick up later this summer as new changes to the effort kick in.

To date, servicers have completed roughly 930,000 modifications under the Home Affordable Modification Program with 760,000 homeowners still current on those loans.

Recently unveiled changes could open the door for 1.5 million struggling homeowners (and real estate investors) to be eligible for a HAMP modification, according to analysts at Keefe, Bruyette & Woods.

The Treasury is working on guidance to allow modifications of single-family loans on rental properties for the first time.

The new guidance will relax HAMP’s debt-to-income cutoff, reflecting borrower obligations to make payments on second liens and medical bills. HAMP currently excludes borrowers with mortgage payments that are less than 31% of their income.

Treasury also is increasing incentive payments to investors, including Fannie Mae and Freddie Mac — when they agree to reduce the principal amount on a delinquent loans.

KBW managing director Bose George is skeptical the GSE regulator will allow principal reductions on Fannie/Freddie loans. However, principal reductions would make more underwater borrowers eligible for a HAMP modification.

Treasury wants to issue the new HAMP guidelines this month, but stronger modification results might not be seen until August or September.

“Treasury expects that homeowners may be evaluated under the new program beginning in May for trials starting June 1,” the department said in releasing its December report on HAMP activities Monday.

The new HAMP report shows 79,300 borrowers are currently in payment trials. In December, 23,300 borrowers completed the three-month trials and were granted a permanent modification. In November, servicers completed 26,900 permanent HAMP modifications

Enhanced by Zemanta

THE 30 YEAR FIXED RATE MORTGAGE FALLACY

 | Comments Off on THE 30 YEAR FIXED RATE MORTGAGE FALLACY

If you don’t want the lowest interest rate for as long as you own your home don’t bother reading this.

Everyone (except me) is telling you to just take a 30 year fixed mortgage.

 I’m saying that may be true for a lot of people, but is not true for the majority.

Q1. Are interest rates on 30 year fixed mortgages at all time lows? YES

Does this mean that everyone buying or refinancing should get a 30 year fixed mortgage? NO

Q2. Are interest rates on 5 and 7 year fixed rate ARM’s also at all time lows?  YES

Q3. Is the interest rate the same on all types’ of loans? NO

The rates on both 5 and 7 year ARM’s are substantially lower than the 30 year.

Q4. Is the difference worth bothering about? YES

Take a $300,000 30 year fixed mortgage at 4.0%. Payment is $1,432/m

Take a $300,000 7 year fixed ARM at 3.75%. Payment is $1,389/m. Savings after 7 years $3,162.

Take a $300,000 5 year fixed ARM at 3.5%. Payment is $1,347/m. Savings after 5 years $5,100.

Q5. If Bob and Alice are buying their first home and plan to start a family after 3 years is, it likely that the nice little 2 bed, 2 storey townhouse they get will suit them for the next 30 years? NO

Q6. Would it be smart for them to take a 5 or 7 year ARM and save thousands of dollars which will be useful when they inevitable move up to the detached house with a garden when the children come along. YES

The golden rule of mortgage selection is that one size does not fit all.

Your mortgage should be the one best suited for you at this time in your life and considering your future plans and expectations.

IF YOUR LOAN AGENT DOES NOT ASK YOU HOW LONG YOU EXPECT TO BE LIVING IN THE PROPERTY THEN THEY CANNOT ADVISE YOU WHAT WILL BE THE BEST LOAN FOR YOU.

Enhanced by Zemanta

REFINANCE BLUNDERS

 | Comments Off on REFINANCE BLUNDERS

TURNING 26 YEARS INTO 30 YEARS.

It’s not always a good idea to refinance a mortgage simply to lower the Monthly Payment.

Before you refinance a 30 year mortgage which has 26 years to go, and take a new 30 year loan, you must compare the total amount which will be paid over the life of each loan before deciding whether it makes economic sense.

The smartest way to take advantage of lower interest rates would be to calculate the amount you would have to pay each month in order to have the new loan paid off in 26 years, and then make an extra payment each month to achieve that highly desirable result.

If the new lower payment plus the extra to make it a 26 year loan is less than the amount you are currently paying then go for it. If not then you should reconsider other options before proceeding.

I cannot go into details regarding other options within a simple post such as this, but I can assure you they do exist. However the regular Loan Officer is not going to bring them to your attention. 

Enhanced by Zemanta

WHY PAY POINTS?

 | Comments Off on WHY PAY POINTS?

A recent nationwide survey asked a wide age range of Homeowners the following question:

“When is it smart to pay points to get your mortgage”?

Amazingly 83% of the respondents answered NEVER. This displays either an astounding ignorance of basic economics, or a desire to help Banks get richer.

The CORRECT ANSWER should be “When it saves me money with no extra risk“.

Put simply you pay points to get a lower Interest Rate. If you keep the loan for at least 5 years you will be showing a Profit. Every year from then on you add to that profit.

Enhanced by Zemanta

A TALE OF 2 BUYERS

 | Comments Off on A TALE OF 2 BUYERS

BUY IN HASTE, REPENT AT LEISURE.

John and Dave are as close to identical as is possible without actually being twins.

They both work at the same company, make the same money, had saved up the same 20% down payment for  a nice 2bed 2 bath condo in the same favourite complex for up to $250,000.

Problem was that only one unit was for sale back in April. Being good friends they agreed to spin a coin to see who got to buy 1st. John won and bought that one, and Dave waited for the next listing to come up.

That duly came up in late May and Daves offer of the same amount that John had paid was accepted.

They both got their 30 year mortgage for the same amount from the same Broker 6 weeks apart.

What’s interesting here is that for the next 30 years John will pay approximately $75/month more than Dave. This is due entirely to the drop in interst rates during the time between the 2 purchases.

Obviously John will hope to refinance to a lower rate as soon as possible but there is no guarantee that will be possible.

The most interesting part of this story is that due to the continued econonmic chaos it world wide Bond Markets mortgage interest rates are now even lower that Dave got, and are now at 40 year lows.

My message here is to pay more attention to how mortgages really work , and consider whether the 30 year fixed really is the best for you. For 90% of all buyers it is not.

If anyone would like to know how to make this decision just send me an e-mail and I’ll be happy to explain.

Enhanced by Zemanta

CREDIT SCORES and FICO FOR BEGINNERS.

 | Comments Off on CREDIT SCORES and FICO FOR BEGINNERS.

What’s the purpose of Credit Scores (FICO)?

To provide a Lender with an independent opinion on the probability that a possible Borrower will pay a Loan as agreed.

How is the score determined?

By looking at the history of payments on previous debts and developing a numerical SCORE which reflects that history. For example:

A score of 800 or more is EXCELLENT. Lenders compete for your business.

A score between 700 and 799 is GOOD. No major problem getting a Loan.

A score between 640 and 699 is POOR. Will pay higher interest rate for a loan.

A score below 640 is BAD. Very difficult to get a Mortgage at an acceptable rate.

NOTE. These examples relate to Mortgages. Other types of Lenders will have different score standards

What exactly is FICO?

The Credit scoring system developed by the Fair Isaac Co and used by the 3 major Credit Bureaus, EXPERIAN, EQUIFAX, and TRANS UNION. Each of these interprets the data slightly differently so produces a slightly different score.

What is MOST important in producing the score?

35% is Payment History. (Do you pay on-time, any Bankruptcies, foreclosures, debt Judgments etc?)

30% is Amount Owed. (Total amount owed as a percentage of credit available.)

15% is Length of Credit History. (Old debts are better than new debts.)

10% is New Credit. (Too much is a Negative.)

10% is Type of Credit. (Credit Cards, Store Cards, Mortgages etc.)

Where can I learn more?

www.MyFico.com is the Public information site for the Fair Isaac Company.

BEWARE of Credit Repair/fixing SCAMS. Anyone who wants money up front should is probably a SCAM.

FICO FACTS

 | Comments Off on FICO FACTS

Potential home buyers, or anyone thinking of refinancing are finding that their credit scores are vastly more important now than in the boom years. However, they seldom know the effect of even one “minor”  bad credit event.

For example:

Tom has a barely o.k. 68O FICO score but makes a 30 day late mortgage payment. It will take 9 months for his score to get back to that level assuming no more late payments.

Dick has an good 720 Fico and makes a 30 day late payment. It will take 2 ½ years to get back.

Harry has a very good 780 FICO but after a 30 day late pay it will take 3 years for him to get back to that level.

The financial costs of  lower credit range from being unable to get any loan, to paying a higher interest rate and higher fees for anything below 720, finding it virtually impossible to get any loan below 640.

The moral is of course to pay your bills on time at all times.

NOTE: Getting and maintaining good credit is a greatly misunderstood process with mountains of free but inaccurate advice. I can strongly recommend Ken Strey kstrey@creditlinei2.org for pretty much anything related to your credit.

Enhanced by Zemanta