Archive for Foreclosure Prevention
Emergency Homeowner Loan Program
Posted by: | CommentsThe U.S. Department of Housing and Urban Development just confirmed that they will be launching a new $1 billon mortgage relief program called the Emergency Homeowners Loan Program. The Obama administration has extended several mortgage bail-out programs for distressed homeowners like the Home Affordable Refinance Program, but very few borrowers were able to qualify for this relief measure that enabled homeowners that had mortgages owned by Fannie Mae or Freddie Mac the ability to refinance their under-water loans up to 125% loan to value.
Bill Apgar, HUD Senior Advisor for Mortgage Finance said today, “HUD’s new Emergency Homeowner Loan Program will build on Treasury’s Hardest Hit initiative by targeting assistance to struggling unemployed homeowners in other hard hit areas to help them avoid preventable foreclosures.” Apgar continued, “Together, these initiatives represent a combined $3 billion investment that will ultimately impact a broad group of struggling borrowers across the country and in doing so further contribute to the Administration’s efforts to stabilize housing markets and communities across the country.”
Emergency Homeowner Loan Program to Help Refinancing Under-Water Mortgages
The Obama Administration today announced additional support to help homeowners struggling with unemployment through two targeted foreclosure-prevention programs. Through the existing Housing Finance Agency (HFA) Innovation Fund for the Hardest Hit Housing Markets, the U.S. Department of the Treasury will make $2 billion of additional assistance available for FHA programs for homeowners unable to qualify for mortgage refinancing as well as struggling to make their home loan payments due to unemployment.
The Emergency Homeowner Loan Program will offer loan relief and assistance for up to 24 months to homeowners to struggling homeowners who are at risk of foreclosure. This finance relief program is targeting homeowners who have experienced a significant reduction in income due to involuntary unemployment, underemployment, or a medical condition. “We remain committed to helping struggling homeowners, and this program will provide additional assistance to states hit hardest by unemployment,” said Assistant Secretary for Financial Stability Herb Allison. “This is part of the Administration’s comprehensive housing policy that has helped to stabilize a fragile housing market and allows responsible homeowners the chance to reduce their monthly mortgage payments to affordable levels.”
HUD extended the homeowner assistance and the mortgage relief will be in the form of a deferred payment also known as a bridge loan which can be used to help get a mortgage, taxes and insurance payment current. HUD has stated that the Emergency Homeowner Loan can assist struggling borrowers for up to 24 months. The loan relief funds will be provided under the Emergency Homeowners Loan Program and will be set aside for the individual states and Puerto Rico based on each states proportional share of national unemployment measures as applied to homeowners.
Eligibility: To be eligible for the program a household must have had an income, prior to the event which caused the delinquency, equal to or less than 120% of the Area Median Income and a post-event decrease in income of at least 15%. The homeowners must be at least 3 months delinquent on home loan payments on their principal home and have either received a foreclosure notice or be able to self-certify to the likelihood that they will default on their mortgage due to the delinquency.
President Obama first announced the Hardest Hit Fund in February 2010 to allow states hit hard by the economic downturn flexibility in determining how to design and implement programs to meet the local challenges homeowners in their state are facing. Under the additional assistance announced today, states eligible to receive support have all experienced an unemployment rate at or above the national average over the past 12 months. Each state will use the funds for targeted unemployment programs that provide temporary assistance to eligible homeowners to help them pay their mortgage loan while they seek re-employment, additional employment or undertake job training. States that do not currently have Hardest Hit Fund unemployment programs must submit proposals to Treasury by September 1, 2010 that, within established loan guidelines, meet the distinct needs of their state.
Mortgage Loan-Modification Plan Revised for Home Equity Loan Relief
Posted by: | CommentsMany mortgage servicing companies have refused to modify second mortgages and many homeowners have defaulted on their home equity line of credit because their variable rate payments rose beyond their affordability. In a recent article Ruth Simon considers the implications for a new loan modification designed for second mortgage loans. The Obama administration announced new home loan guidelines for its foreclosure-prevention program aimed at offering mortgage relief for borrowers who have a high interest rate equity loan that they have been unable to refinance because of lack of equity or late payments since their second mortgage rate rose after becoming adjustable. Thousands of homeowners tried to qualify for mortgage refinancing that would roll their 1st and 2nd mortgages together into one affordable home loan payment.
The new mortgage loan modification program looked to address a critical component in its efforts to stem the foreclosure crisis. According to Credit Suisse Group nearly 50% of delinquent borrowers have a home equity loan. Many mortgage executives complained to the administration a few months ago because their $75 billion mortgage bailout program had no plans to re-work equity loans in 2nd position. Investors, who include pension funds, insurance companies and hedge funds, say that rewriting the first mortgage without touching the second violates their rights, because second mortgages are supposed to be repaid second. Critics also pointed out that Obama’s first plan had a conflict of interest, because many mortgage loans are serviced by big banks that also hold home equity loans.
Under the revised home equity loan relief plan, mortgage-servicing companies that participate in the loan modification program for second mortgage liens must automatically renegotiate the2nd mortgage when the 1st mortgage was reworked. The US government will share in the cost of reducing the interest rate on second mortgages for five years. As an alternative, it will pay holders of home equity loans to relieve their unpaid debt.
Mortgage-servicing companies that modify second mortgages will receive an upfront payment of $500 and additional payments of $250 a year for up to three years for successful modifications of home-equity loans and other second mortgages. Homeowners who do not fall delinquent on the modified equity loan would receive payments of $250 a year for up to five years that would be used to pay down the balance of their first mortgage. The revised plan also encourages the use of the federal Hope for Homeowners program, which allows borrowers to refinance into a more affordable, government-backed loan, provided the investor who holds the mortgage agrees to a principal write-down.
Mortgage Refinancing Modifications and Obama Home Loans
Posted by: | CommentsFormer Ditech executive, Jeff Morris, says “When the average borrower with a jumbo mortgage can qualify to refinance at a competitive interest rate, I’ll know we have turned the corner.” Morris continued, it’s a mess out there…Many homeowner think that Obama is going to give them 2% fixed rate even if they are 120 days late on their mortgage.” FHA mortgage rates have been low, but not that many borrowers qualify because the credit crunch is still preventing mortgage refinancing and new home loans for many 1st time home buyers. Mortgage loan modification requests are piling up higher than refinance applications.
According to Lawrence Yun, chief economist of the Realtors’ group, the number of home foreclosures may rise to 2.5 million this year and that would be the highest since keeping records of home loan defaults. “The foreclosure wave we’ve been through is not over,” said Susan Wachter, a real estate professor at the University of Pennsylvania’s Wharton School in Philadelphia. “That’s why we don’t see a bottom in housing yet.”
According to Seattle-based real estate data service Zillow.com. About 20.4 million of the 93 million houses, condos and co- ops in the U.S. were worth less than their loans as of March 31st. After the Federal Reserve pledged to acquire as much as $1.25 trillion in mortgage-backed securities to free up money for mortgage loans, mortgage interest rates fell to a record low of 4.78 percent twice in April. Rates began climbing last month on investor concern federal spending will fuel inflation.�
More Mortgage Loans May Qualify for Refinancing
Posted by: | CommentsThe Government released a statement that more homeowners with high LTV mortgage loans could soon be eligible for refinancing under the Obama administration’s plan to stem foreclosures. According to a Bloomberg, the government is thinking about how to expand the existing foreclosure prevention initiatives to help homeowners who are more deeply underwater on their mortgages than the current program allows. Millions of homeowners have lost their home equity with the housing crisis hindering loan to value levels significantly.
Right now, homeowners with mortgage loans guaranteed by FHA, Freddie Mac or Fannie Mae – and who meet various other criteria – can qualify for the government’s Making Home Affordable plan as long as their loan is equal to 105 % or less of their property’s value. The program has already helped tens of thousands of borrowers refinance into new home loans with reduced monthly mortgage payments. And now, even more people could qualify. “We’re actively considering how to structure a refinance program that makes sense over 105%,” James Lockhart, directory of the Federal Housing Finance Agency, told Bloomberg.
Recently, rising mortgage rates have become a potential roadblock to the program’s success, he added. The most recent figures from the Mortgage Bankers Association show that refinancing activity fell by nearly one-quarter (23 %) in the week ended June 12. The proportion of mortgage applications to refinance home loans declined to 54.1 % from 59.4 % one week earlier. Despite the fact that average rate for a 30-year, fixed rate mortgage decreased slightly to 5.5 %, it could not match the record-low rates seen in April. “Higher mortgage rates will keep re-fi activity under pressure,” economist Tom Porcelli of RBC Capital Markets told Bloomberg.
New Affordable Mortgage Refinance Program
Posted by: | CommentsAn important part of Fannie Mae’s role in the Making Home AffordableSM Program is Home Affordable Refinance, available for mortgage refinance transactions of existing Fannie Mae loans only. The goal of the mortgage refinance effort, as announced by the President, is “to provide access to low-cost refinancing for responsible homeowners suffering from falling home prices.” The expectation is that mortgage refinancing a Fannie Mae loan will put responsible borrowers in a better position by reducing their monthly principal and interest payments or moving them from a more risky home loan structure (such as interest-only or short-term ARM) to a more stable product.
Home Affordable Refinance provides two Refi Plus™ options for Fannie Mae lenders to provide Fannie Mae to Fannie Mae refinance solutions to eligible borrowers: 1) Refi Plus, which requires manual underwriting, and 2) DU Refi Plus™ for mortgage loans underwritten through Desktop Underwriter® (DU®). FHA home loans continue to be the most popular method for refinancing adjustable rate mortgages into fixed rate loans.
Federal Plan Boosting Refinancing and Mortgage Loan Modifications
Posted by: | CommentsUnder the federal plan, homeowners will be eligible to refinance through Fannie Mae or Freddie Mac as long as their mortgage loan does not exceed 105 % of the current value of their property. A recent analysis from DataQuick shows that more than one-quarter of all homes in the San Diego region are worth less than the borrowers owe on their home loans. In most cases, inland communities in San Diego were hit hard by foreclosures over the last few montha. DataQuick also reported that the ZIP code with the most foreclosures in the county in January was south Chula Vista’s 91911 with 66, which is a 32% increase from the previous year.
Obama Outlines Mortgage Foreclosure Rescue Plan
California posted the nation’s second-highest state foreclosure rate in January, with one in every 173 housing units receiving a foreclosure filing during the month. Such filings were reported on 76,761 California properties, the most of any state despite a 14% decrease from the previous month. The state’s foreclosure activity in January rose 34% from the previous year. Governor Arnold Schwarzenegger recently signed into law a bill that requires loan servicing companies who haven’t already set up mortgage loan modification plans in California to hold off on home foreclosures for at least ninety days.
Prime Credit Borrowers Add Fuel to the Mortgage Refinance Crisis
Posted by: | CommentsThe private sector has begun to default on home loans and add fuel to the mortgage crisis with the first broad-based, systemic attempt to prevent foreclosure. Both Bank of America (BAC) and JPMorgan (JPM) are attempting to help hundreds of thousands of troubled homeowners with massive loan modification efforts.
Regulators and bank executives are operating under the assumption that reducing foreclosures will slow record drops in home prices. In turn, this will help stabilize the financial system – and, by extension, the economy as a whole. Most foreclosures are concentrated in communities that built large developments, using cheap financing to help fuel speculation and massive over-valuation. These areas, especially those where homes were purchased by lower income buyers, are being decimated by delinquencies and repossessions.
What main mortgage insiders are concerned about is the crisis broadening: More and more delinquencies are being reported in the prime mortgage loan market where borrowers with good credit scores have begun to miss home loan payments with alarming frequency. The most recent mortgage delinquency data suggested that defaults on subprime mortgage loans are occurring at measured pace than in recent months, good credit homeowners are beginning to show more and more delinquencies
“The increase in prime ARMs foreclosure starts was greater than the combined increase in fixed-rate and ARM subprime loans. Thus the foreclosure start numbers will likely be increasingly focused on by refinancing ARM loans with fixed rate home mortgages.” There is still a wide misconception that only “subprime” people maxed out credit cards, took out loans they couldn’t afford, and were generally reckless with their personal finances. As the economic slowdown swirls outward into the broader economy, cracks are starting to form in established neighborhoods that have thus far experienced minimal home price depreciation. FHA home loans continue to dominate the origination for purchase and refinance
As mortgage refinance underwriting requirements have tightened in recent months, home buying has slowed in these more well-to-do areas. This trend is being masked by spikes in the distressed sales driving broad housing market indicators. As layoffs continue, borrowers in these regions will be forced to sell for the first time in years. The illiquidity in these markets means it will take just a few such sales to readjust prices dramatically downward. Homeowners that don’t sell by choice, particularly if they’ve accumulated equity in their homes, are apt to be less picky about their price.
