If you’re unemployed and in danger of going into default on your mortgage the nation’s Government Sponsored Enterprises (GSE’s), Fannie Mae & Freddie Mac, are making some important changes to their foreclosure and forbearance (when the bank suspends collection of payments for a period of time, kind of like a timeout on making payments) policies.
The new rules will direct mortgage servicers (who you make your payment to) go through a forbearance process when the homeowner has lost their job before moving into foreclosure territory. Under the new rules these services have automatic authority to grant homeowners on unemployment a full six months forbearance and can go to the GSE’s for approval of another six months if the homeowner’s unemployment income lasts for longer than six months.
That’s adding up to a year to get back on track before any sort of foreclosure process begins!
There are some exceptions to the new rules however. The house must be a primary residence, not an investment or second home. And the mortgage must be backed by one of the GSE’s themselves, not FHA or VA, and not a private/portfolio loan held by the bank themselves.
That covers the basics. But, of course, there are some more details that might affect you. If you have any questions, please ask! I’m always here to help…
Interest rates on homes continue their downward trend. GSE Freddie Mac reported that the average 30-year fixed-mortgage rate sank to 3.91% last week, setting an all-time record low. 15-year fixed rates settled in at a historic low at 3.21%.
To put the declines into perspective, today’s homebuyers are paying over $1,200 less per year on a $200,000, 30-year fixed-rate loan than they would have just a year ago today!
The Office of the Special Inspector General for the Troubled Asset Relief Program is waging a strong battle against mortgage and foreclosure rescue scammers that advertise online. The agency recently announced that it halted 85 online scams that promised to help homeowners pursue mortgage loan modifications.
Some scammers disguise themselves as government agencies by using government seals or adopting names that are similar to those of a government agency, the agency revealed. The agency also noted that scammers often ask homeowners for an upfront fee to help them pursue a modification through HAMP.
This is the kind of thing we REALLY need to stop and give those that are guilty the maximum sentence. Preying on those already in a hard place is the lowest of the low.
The gov recently announced some great changes to the Home Affordable Refinancing Program (HARP). The updates to the program are aimed at those who have spent the years since the recession began keeping up with their mortgage payments as others walked away (read why ”walking away” is a misnomer here and here) from their houses even though they can make the payments. The idea here is to help millions more homeowners save some money on their house payments by helping them take advantage of today’s historically low interest rates, even if they don’t have any equity to qualify for a standard conventional mortgage.
Eligibility:
1. Your loan must be guaranteed by Fannie Mae or Freddie Mac.
2. Your loan must have been acquired by Fannie or Freddie before April 1, 2009.
3. You haven’t already refinanced under HARP (or if you have it was between March and May of 2009).
4. Your Loan-To-Value ratio must be higher than 80%. This just means you have less than 20% equity. If you have 20% equity or more a standard conventional refinance is what you need.
5. You haven’t been late with a mortgage payment in the last six months. In the last year, you haven’t been 30 days late more than once. Because the program will last through Dec. 31, 2013, there’s still time for borrowers to get on track.
6. There must be a tangible benefit. You must end up with a lower payment or trade in an ARM (adjustable) for a fixed rate mortgage.
What about my home’s appraised value?
The biggest challenge to getting a HARP loan up until this point was, even though appraisal guidelines were relaxed, you still had to be close to having some equity. You could be underwater but not that much. The good news is some mortgage holders will be eligible no matter how much they owe or how much the house is worth when Fannie and Freddie rolls out the Property Inspection Waiver. For others, there is still a Loan-To-Value ceiling.
If you have a fixed-rate mortgage with a term of up to 30 years, there’s no maximum LTV ratio, meaning there’s no maximum amount you can owe on your home if you qualify for the Property Inspection Waiver.
If you have a fixed-rate loan but the term is over 30 years (very rare), you can only owe 105% of what the house is worth.
Do you have an adjustable rate loan? As long as you didn’t sign up to pay on it for more than 40 years, or fewer than 5, you can owe 105% of what your house is worth.
Have a recent bankruptcy or foreclosure?
The standard waiting period has been removed for folks who have those blemishes on their credit histories. You still have to qualify for the loan but a recent foreclosure or BK won’t automatically disqualify you for a refinance.
When can I apply?
The program begins on December 1st however many of the changes that will help a lot of people won’t roll out until next year. Of course I’ll keep everyone updated on the program as it rolls out, this is about to help A LOT of people save thousands on their mortgage payments and also give a little boost to Sacramento area real estate values as it saves some people from losing their home.
This month the FHA has reported to Congress that the MMI Fund (Mutual Mortgage Insurance Fund), the backbone of its mortgage programs and what makes FHA mortgages possible, is going to return to its mandated capital reserve level faster than previously expected.
Currently the MMI Fund’s capital reserve ratio is 0.24% but that it would return to its mandated sooner than actuaries last predicted. “As was the case last year, the new actuarial study shows that FHA is expected to sustain significant losses from loans insured prior to 2009, and thus its capital reserve remains below the congressionally mandated threshold of 2% of total insurance-in-force,” an FHA official said. “However, the actuaries’ report concludes that, barring a further significant downturn in home prices, the MMI Fund will start to rebuild capital in 2012, and return to a level of 2% by 2014; outpacing last year’s prediction.”
“In the midst of a tough housing market the FHA MMI Fund continues to be actuarial sound.
“Because of the Obama administration’s strategy to protect the FHA Fund – tightening of risk controls, increased premiums to stabilize near-term finances and expanded loss mitigation assistance to avoid unnecessary claims – this past year’s endorsements had the highest credit quality ever recorded and will yield historically high levels of net receipts in the years ahead.”
The availability of FHA loans is a high part of our housing market and economy, both nationally and locally, and the health of the MMI Fund is also an important part of the housing market and greater economy. This is good news for both of those thing as well and, while we won’t see a more normal real estate market or economy for a while still, more and more news like this tells us the tide is turning!
~Greg
P.S. The FHA has never received any sort of taxpayer bailout! The MMI Fund keeps it solvent and without the need for any sort of congressional assistance. Truly an American success story…
The Keep Your Home California program has increased benefits and expanded eligibility in order to help more homeowners having trouble making their mortgage payments keep their homes.
The program has not only relaxed some restrictions on who qualifies but has extended the length of time currently unemployed homeowners can receive assistance on their home loans to 9 months, from 6 (the program is intended to help people stay in their homes if they are temporarily unemployed by subsidizing some or all of their monthly payment for a period of months).
Claudia Cappio, Executive director of the California Housing Finance Agency said, “this expanded eligibility will allow more families to qualify and receive greater assistance.”
Program officials have also increased the cap on the mortgage reinstatement program from $15,000 to $20,000. The reinstatement program provides a one time assistance grant for homeowners that have fallen behind their payments due to financial hardship.
According to the agency Keep Your Home California has already helped more than 7,000 homeowners statewide and has provided more than $128 million in benefits since launching in February. The funds come from $2 billion in 2008 Federal Stimulus money and the state has until 2017 to use it for this purpose or the remainder is returned.
Roseville’s project of retrofitting 16,000 homes with water meters has finally come to an end. Mayor Roccucci installed the final meter at a celebratory event calling the ten year project completed. “Becoming a fully metered city helps define Roseville and the region as leaders in water use efficiency in this state,” said the mayor in a written statement.
The administration is now considering a new refinance program that would provide millions of homeowners with new, lower interest, lower payment mortgages…
The initiative would reportedly allow borrowers with loans backed by Fannie Mae and Freddie Mac to refinance at today’s rates, even if they are in negative equity or have bad marks on their credit. Two Columbia business professors say such a move would save homeowners an average of $350 a month and pump an extra $118 billion into the economy, the report stated.
This would be wonderful for Sacramento area homeowners that can’t currently qualify a refinance at today’s low rates, and in turn have a positive effect on the local economy as people have more money to spend every month. There really is no negative. Since this would apply to mortgages already backed by Fannie Mae and Freddie Mac there is no additional risk to the government. In fact it will reduce risk to Fannie Mae and Freddie Mac by making it so homeowners can more easily make their monthly mortgage payment. Let’s see how this all plays out in today’s Washington…
A few weeks ago Bank of America agreed to participate in a state-run program to reduce mortgage balances for struggling homeowners in California. This announcement makes them the 7th to do so and also the biggest mortgage lender to be part of the aid program.
BofA’s participation was almost necessary for the $2 billion program, called ‘Keep Your Home California’, which originally rolled out in February but was not able to reach many homeowners with the small lenders that were participating at the time.
Keep Your Home California provides a number of forms of help to homeowners, from interest rate modification all the way up to reducing the actual principal balance of the mortgage. The principal-reduction program requires the lenders to match the program’s assistance dollar for dollar. Meaning if the Keep Your Home California program were to offer $20,000 in assistance, the lender/servicer (BofA in this case) would also have to contribute $20,000, reducing the mortgage balance by $40,000 in total.
California Housing Finance Agency’s (CalHFA) program manager,Diane Richardson, said $94 million worth of aid has been committed to over 5,000 homeowners so far. Of those, about 10% have received some amount of principal reduction.
While the Congress tries to find a solution to the debt ceiling mess, even though it has nothing to do with the debt ceiling what-so-ever, higher ups in Washington are trying to bring the mortgage interest deduction into the conversation. Opinions differ from those that want to get rid of it entirely, to those that want to make adjustments, and those that simply say leave it alone.
As of today any homeowner is able to deduct the amount of interest they pay on their mortgages from their taxable income. The deduction is very valuable for many, and can even bring down your income tax bracket, significantly lowering the amount of tax you owe. This deduction is limited to the first $1,000,000 on the home. Home equity line of credit (HELOC) interest also qualifies, but the deduction for those are limited to $100,000 over the first mortgage’s deduction (and the two combined are still limited to the first $1million of the home’s debt).
Proposals include cutting the cap in half, to $500,000 of mortgage debt, for primary residences and possibly eliminating the deduction for second homes. On the other side of the coin are those who believe that the credits should favor investors, rather than primary residents, as that would create more financial incentive for real estate investment.
I think we’ll probably see something more like capping the maximum deduction to interest on the first $500,000 of mortgage debt, as this is the most fair way to the vast majority of Americans to alter the tax credit, as it will not affect them at all. This is most likely and seeing the credit disappear completely is almost guaranteed not to happen.
Either way it seems that some sort of change is coming. The good news is it appears that the credit will still be here for the vast
majority of us. And for those of us with mortgages over $500,000, you’ll still have your credit, only the benefit will probably be cut off on the interest on the first half million of your mortgage debt.
The new rules will direct mortgage servicers (who you make your payment to) go through a forbearance process when the homeowner has lost their job before moving into foreclosure territory. Under the new rules these services have automatic authority to grant homeowners on unemployment a full six months forbearance and can go to the GSE’s for approval of another six months if the homeowner’s unemployment income lasts for longer than six months.
BofA’s participation was almost necessary for the $2 billion program, called ‘Keep Your Home California’, which originally rolled out in February but was not able to reach many homeowners with the small lenders that were participating at the time.
As of today any homeowner is able to deduct the amount of interest they pay on their mortgages from their taxable income. The deduction is very valuable for many, and can even bring down your income tax bracket, significantly lowering the amount of tax you owe. This deduction is limited to the first $1,000,000 on the home. Home equity line of credit (HELOC) interest also qualifies, but the deduction for those are limited to $100,000 over the first mortgage’s deduction (and the two combined are still limited to the first $1million of the home’s debt).