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Greg Cowart - Mortgage Broker or Lender at The Securus Group
Greg Cowart - Roseville Loan Guy

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New High LTV Refinance Announced, HARP extended

The FHFA (Federal Housing Finance Authority, parent of Fannie Mae and Freddie Mac) recently announced a new streamlined refinance program for homeowners without a lot of equity, as well as an extension to the HARP program.

These are related announcements as HARP is the current solution offered to certain homeowners that would like to refinance but otherwise couldn’t due to a lack of 20% equity, and the new program will replace HARP after HARP’s newly extended end date of Sept 30th, 2017. I’ve talked about HARP plenty here over the years, so you probably already know all about it, what’s more important here is the post HARP world we’re about to be living in on October 1st…

The new program will be providing a sustainable refinance opportunity for borrowers without much equity that have demonstrated responsibility by remaining current on their mortgage payments. It makes sense for both American homeowners and the FHFA, as it will help people lower their mortgage payments which ultimately reduces the risk that they will be late or default on their mortgage.

To qualify for the new program homeowners must not have missed (been over 30 days late on) any mortgage payments in the previous 6 months, must not have missed more than one payment in the previous 12 months, must have a source of income, and the refinance must result in a benefit (such as a reduction in their mortgage payment). The new refinance does not require a minimum credit score, no maximum debt to income ratio, and an appraisal will often not be required.

When the final details have been announced you’ll find them here! Until next time…

– Greg

(916) 330-4652

This is big, FHA LOWERS MI!!!

In an unexpected announcement HUD Secretary Julián Castro has announced that FHA’s Mutual Mortgage Insurance Fund (MMIF) has more than fully recovered from the trouble it was in due to the Great Recession of 07-2011. This is going to allow them to reduce FHA MI rates by a full .25% and the new rates go into effect on January 27th, 2017.

Anyone getting an FHA forward mortgage on or after January 27th will see their mortgage insurance premium reduced by .25 of what it would be today. This is effectively reducing FHA mortgage rates by .25%, as the net effect on the mortgage payment is effectively the same!

If anyone has been thinking about buying, or considering a refinance, there has not been a better
time to utilize FHA in the last decade. Since the loans are fully guaranteed (by the funds in the MMIF) FHA rates tend to have lower interest rates than Conventional loans do. When combined with what has been a .85% MI factor on most FHA loans (30 year fixed, LTV of 95% or above) for the last couple years (it was even higher before that) Conventional would beat FHA out in quite a few scenarios. That number of scenarios is now lower and FHA is going to be even more competitive.

This is a big thing for a lot of people. It’s going to reduce monthly payments for a lot of people that otherwise would not have been able to buy, which will help support the local housing market, and it will also help reduce people’s monthly mortgage payments if they refinance, which puts money back into their pockets (and ultimately back into the local economy).

Electronic Mortgages the wave of the future?

Today, in our industry, we already do pretty much everything electronically. Pretty much…

But there is a lot of paperwork that still has to be received from the borrower, not to mention signing what seems like hundreds of pages at closing. Due to recent statements by Fannie Mae and Freddie Mac, as well as some new “eNotary” features on the horizon, that could all be changing.

fannie-mae-freddie-mac-roseville-mortgageThe first and most important part of this is the suite of new tools GSE’s Fannie Mae and Freddie Mac are soon to be rolling out to lenders. These tools include things like automated appraisals on certain loans, automatic income verification for most W2 borrowers, and automated asset verification. When applicable these new tools will allow less documentation to have to be faxed/e-mailed to the lender, as well as less time to close, and savings to both the lender and the borrower (especially when the automated appraisal applies).

With these tools Fannie and Freddie are offering some relief from “reps and warrants”, which will create more certainty on the part of the lender and MBS (Mortgage Backed Securities) investors. This should reduce costs for lenders, reduce risk for MBS investors, and (theoretically anyways) should result in shorter loan processing times, lower cost mortgages, and possibly even lower interest rates than otherwise would be able to be offered if these reforms were not implemented.

The automated appraisal will not apply to everyone, nor will the automated income verification (it will not work for self-employed people, for example), but it should result in some documentation relief for most applying for a Conventional mortgage. FHA has no comment. 🙂

The “eNotary” thing is a little further out, beta programs are just beginning, but with the new rules the Fannie and Freddie tools they’re also going to be allowing a fully digital closings, where a notary creates an electronic signature and stamp and all the borrower has to do is click a screen, rather than sign over and over and over again.

Everything will be rolling out in the near future. Of course I will be keeping everyone updated as to the news. This is a VERY big deal when it comes to both the real estate and mortgage industry as it will undoubtedly result in faster loan closings on both purchase and refinance loans, and decreased costs to buyers/homeowners.

Major changes make what was once impossible possible

Towards the end of 2013 Fannie Mae quietly released an update to their Desktop Underwriter (DU) underwriting system, the system used to underwrite the vast majority of Conventional mortgages nationwide.

Much of the update is inconsequential, it mostly had to do with updating the software to comply with the new QM (Qualified Mortgage) rules that went into effect on Jan 10th, as well as some minor changes to the way DU underwrote HARP refinances, but one big change may positively affect a lot of people. Definitely a lot of people I have talked to over the last couple years.

One of the good things about current conventional guidelines is they allow qualified borrowers to buy or refinance in as little as two years after a short sale so long as they have a 20% down payment or 20% equity in the case of a refinance.

Fannie Mae Roseville Short Sale

Many people suffered the effects of the Great Recession from 2008 – 2011, losing their primary residence or maybe a 2nd home or investment property, and today qualify under Fannie Mae’s guidelines for getting a new mortgage. The issue has been DU has not been able to differentiate between a short sale and a foreclosure when it reads credit reports and it made it so A LOT of people could still not qualify because of the issue with the software.

Yes, a glitch was making it so people could not buy a home or take advantage of recent low rates. 

Fannie Mae has been aware of this issue for a while but never did anything to fix it. Versions of DU were announced and announced and there was no update to fix this issue. Creative lenders (like me) created a workaround with our credit report providers to help DU read the data is was getting wrong accurately but Fannie Mae asked the credit report providers to stop doing this. At the end of the day well-qualified people could not get their loan even though they met all the guidelines.

That is until Fannie FINALLY did something about it with the release of Desktop Underwriter 9.1. Now the software is able to correctly read the credit report and determine if the loan was foreclosed on or was a short sale. Big difference.

If you or someone you know had issues qualifying to buy a home or refinance in the last couple of years with this glitch please give me a call (916.412.3313). It may (probably should) just work this time around! If you want to buy a home or refinance to a lower rate and payment and you had a short sale as recently as January 2012 you may already be able to qualify!

HARP myths debunked…

Tracy Mooney, Senior Vice President of Freddie Mac put out an insight on the mortgage giant’s blog today discussing some common misconceptions about the HARP program. Here is the link, check it out for the top 9 myths about HARP (such as myriad of ideas people have as to why they do not qualify for the program, when in fact they do)….


HARP Refinance Program Extended Through 2015!

Edward DeMarco, director of the Federal Housing Finance Agency (FHFA), has stated the extremely popular HARP refinance program has been extended through 2015. This is good news as it will allow even homeowners to benefit from lower rates and payments.

HARP Refinance Roseville

Before this the program was set to expire at the end of this year.

We’ve talked about the HARP program before (here, here, and here). HARP allows some people with loans owned or guaranteed by Fannie Mae and Freddie Mac to refinance to today’s low rates even if they have little or no equity. Most of the time an appraisal isn’t even required. At first it didn’t help too many people but was expanded in 2012 as “HARP 2.0” to open it up to millions more homeowners and has now helped about 2.5 million people refinance that otherwise wouldn’t have been able to.

And, while the number of people underwater on their homes in the Sacramento area is going down every day, there are still many missing out on lower rates and payments because they think they will not qualify because they have little/no equity, or owe more than their homes are worth.

The program’s extension to 2015 also seems to take advantage of the Fed’s promise to keep interest rates low until at least mid-2015. Some experts estimate there is still somewhere between $2-2.5 TRILLION in mortgages out there that have not utilized HARP 2.0 yet that could benefit from the programs expanded guidelines that will allow them to access today’s lower rates and payments.

I have been doing these since the beginning and one of the great things about our banking platform is we don’t have all the underwriting “overlays” that many (if not most) other mortgage companies and banks have that make it hard to qualify for a HARP refinance. Many people find me after trying with thier current lender and calling around to other places with no luck. We usually get these done in short order even though others couldn’t because they add extra rules over the top of Fannie Mae’s guidelines that prohibit a lot of people from refinancing.

Please give me a call or e-mail if you have any questions about HARP or any of our other streamlined refinance programs.

Greg Cowart

Senior Mortgage Planner – 17 Years Experience
Partners Mortgage

Bill in congress attempts to open up refinancing for more worthy homeowners (will it work)?

The ‘Responsible Homeowner Refinancing Act of 2013’ has been (re)introduced in the US Senate. This bill’s aim is to help homeowners that are not otherwise eligible to refinance through another program (such as HARP or Home Affordable Refinance Program) to take advantage of today’s historically low rates.

Originally introduced last year by Robert Menendez (D-NJ) and Barbara Boxer (D-CA) the bill did not have the support needed to move forward. If passed this time around it would direct Fannie Mae and Freddie Mac to require the same streamlined underwriting allowed under HARP for “same servicer” loans (refinancing with your current lender) to all lenders, leveling the playing field for all lenders.

Fannie Mae Roseville Short SaleThe bill, if passed, will also extend HARP benefits to those that have 20% equity in their homes. Opening up a world of refinancing that had currently only be open to those with little to no equity (or negative equity). Currently homeowners that take advantage of the HARP program average about $2,500 in savings annually. This bill would also limit Fannie and Freddie from charging up-front fees to refinance any loan they currently guarantee. Lowering borrowing costs to deserving homeowners even further.

HARP loans currently use proprietary Automated Valuation Models, or AVMs, to determine home values without the need for slow and costly manual appraisals. However, borrowers who happen to live in communities without a significant number of recent home sales often cannot use these models and are forced instead to pay hundreds of dollars for a manual appraisal for a HARP refinance. This bill requires the Fannie and Freddie to develop additional streamlined alternatives to manual appraisals, eliminating a significant barrier and reducing cost and time for both homeowners and lenders.

HARP already requires the borrower has been current on their mortgage for at least 6 months, and has only been late (no more than 30 days) on a total of one payment for the 6 months before that, so there is no reason to require proof of employment or income for these loans. Especially since Fannie/Freddie already guarantees these loans, and lowering the monthly payment for these homeowners actually reduces the risk to Fannie/Freddie and the taxpayer. This bill eliminates employment and income verification requirements, further streamlining the refinancing process and removing unnecessary costs and hassle for lenders and borrowers alike.

The bill would also extend the expiration of HARP for an extra year, moving the date from 12.31.13 to 12.31.14.

The Congressional Budget office has analyzed the bill and determined that the bill more than pays for itself by reducing default rates on loans Fannie Mae and Freddie Mac already guarantee. As it does not add loans to the books, or allow homeowners to take cash out, there is literally no risk to the taxpayer. On top of that it would add billions of dollars of spendable/savable dollars into the US economy. Money that is currently going towards mortgage interest. It is a win-win.

According to the CBO, the bill pays for itself through reduced default rates on GSE loans, which saves taxpayers money.

~ Greg Cowart

Mortgage Consultant – 16 Years Experience

FHA Streamline Refinances become a lot more viable…

The Obama administration released new program guidelines in April which, once implemented, will help people with federal insured mortgages – that are NOT eligible for a HARP 2.0 refinance because their loans is not backed by Fannie Mae or Freddie Mac – refinance into a lower rate/payment loan. The white house is estimating between 2 and 3 million homeowners could benefit from the program, reducing mortgage payments for the average FHA borrower by $1,000 a year (in California I see the savings being even more).

Homeowners would be able to refinance into a new FHA loan at today’s current rates without paying the current rate for FHA Mortgage Insurance. The UFMIP (Up Front Mortgage Insurance Premium) would be 0.1% of the loan amount (compared to 1.75% on a standard FHA loan) and an annual fee of 0.55% (compared to 1.25% currently). A HUGE savings from a standard FHA refinance, fees that make FHA refinancing not make sense today.

According to the administration, lowering refinancing fees “should be broadly positive for housing and the economy by reducing foreclosures and freeing up income for consumers to spend on other goods and services.” And I agree with them!

This FHA refinance fee reduction is the latest in a long line of administration initiatives intended to jump start the housing market and, by extension, the economy. Some have worked quite well, others haven’t done all that much… The idea is that by reducing mortgage payments, both with the HARP program and the new FHA Streamline fees, it frees up money that can now be spent on other things elsewhere in the economy (the “velocity of money” is a real force and the more money people spend on consumer goods the more the economy recovers, and the cycle continues).

HARP 2.0: The Facts!

With more than 11 million homeowners underwater on their mortgages, 2008’s HARP (Home Affordable Refinance Program) mortgage has been updated to allow more homeowners to refinance their mortgages, taking advantage of today’s historically low interest rates. AKA: HARP 2.0…

The first edition of HARP was a great idea, in theory anyways. If the banks, lenders, and servicers implemented the program exactly as it was written it would have helped many millions of homeowners refinance to lower interest rates, lowering their payments, and even probably had a positive effect on the national housing market and overall economy as less of those homeowners would have lost their homes and had more money in their pockets to spend.

But that’s not how it happened, the banks and servicers applied their own “overlays” to the program’s guidelines, making it hard for many underwater homeowners to qualify. Because of this only about 800,000 homeowners were able to take advantage and lower their rate/payment.

In comes HARP 2.0, with easier guidelines for borrowers to qualify, now unlimited Loan-To-Value ratios are allowed, as well as “Representation & Warrants” requirement waivers, relieving lenders of almost all Reps & Warrants of the original loan, making it much more likely that they participate. The Federal Housing Finance Agency estimates that at least another 1 million homeowners will benefit from a HARP 2.0 refinance before expiration of the program at the end of 2013.

Here are some important facts!

  1. The current loan must be backed by Fannie Mae or Freddie Mac. You may not know your loan is backed by either of these entities because you make your payment to someone else (Bank of America or Wells Fargo for example) but in reality they are probably just the servicer of your loan and the security was at some point sold to Fannie/Freddie. I can quickly help you do this search to find out.
  2. The current mortgage must have been originated before May 31st, 2009.
  3. HARP loans are available for all occupancy types (primary residence, second home, and investment properties).
  4. The mortgage must have not had a 30 day late payment in the past 6 months, and must have had no more than one 30 day late payment in the last year.
  5. The current Loan-To-Value ratio must be over 80% (otherwise you may already qualify for a non-HARP refinance)
  6. Except for a small exception for some of the earliest HARP refinances in March-May of 2009, those that have previously refinanced under the HARP program will not qualify.
  7. Both Fannie and Freddie’s guidelines are nearly the same but Fannie Mae’s are actually a little bit more liberal (which is a good thing as they hold many more HARP-eligible loans than Freddie Mac does).
  8. Loan-Level-Price-Adjustments (LLPA’s), fees added on that can increase closing costs, the interest rate, or both (depending on how your lender structured your scenario) have been drastically reduced for HARP 2.0 loans. This was one of the issues with HARP the first time around, LLPA’s would make it very tough to refinance as they would add up to a point that HARP borrowers were no longer eligible for the lowest rates. Under the new program it’s feasible for a HARP borrower to get a lower rate than an non-HARP borrower because of the LLPA cap.
  9. Property Inspection Waivers (PIW’s) are the big one here. Under the new rules lenders will be issuing PIW’s allowing the HARP borrower to not have to have an appraisal at all. Not only making a lot of these refinances possible, but saving consumers a few hundred more dollars in the process! PIW’s will not be issued on all refinances, but they will be on many (I can tell you before you shell out $400 for an appraisal if your loan was issued a PIW).

This is great news for homeowners who have made it a point to keep up with their payments! With the updated guidelines rolling out in March eligible homeowners in this category may be able to take advantage of HAPR 2.0 in the very near future. And even if you did miss a payment this program is available through December 2013. If you can get and stay current for the next 6 months, you may be eligible too.

The ALL-TIME, all time lows are here!

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!