President Obama unveiled his plan to help stabilize the housing market and keep millions of borrowers in their homes.
The Homeowner Affordability and Stability Plan includes two initiatives to help struggling homeowners. One is a refinancing program for homeowners with less than 20% equity in their homes, or who owe more than their home is worth. The second program attempts to lower monthly payments for homeowners at risk of losing their home. In addition, the plan includes a third initiative to support low mortgage rates by strengthening confidence in Fannie Mae and Freddie Mac.
Many of the plan's details are still being worked out and will not be announced until March 4, here is an overview of the plan's main components.
Refinancing Initiative Under current rules, those families who own less than 20% equity in their homes have a difficult time refinancing and taking advantage of the historically low interest rates. Therefore, the refinancing initiative in the new plan provides refinancing help for homeowners with less than 20% equity in their homes or who owe more than their home is worth. This initiative is open to homeowners who have conforming loans which are guaranteed by Fannie Mae and Freddie Mac, and who owe up to 5% more than their home is worth.
According to the plan, "credit-worthy" or "responsible" homeowners can refinance their mortgage into a 30- or 15-year, fixed-rate loan based on current market rates. The refinanced loan, however, cannot include prepayment penalties or balloon payments. For many families, this low-cost refinancing may help reduce their mortgage payments by up to thousands of dollars per year.
As with the rest of the plan, details about this initiative will be released at a future date-including what, if any, credit score requirements will be included.
Stability Initiative This initiative aims at providing help to individual families as well as entire neighborhoods by helping reduce foreclosures and stabilize home prices. It is intended to help homeowners who are struggling to afford their mortgage payments, but cannot sell their homes because prices have fallen significantly.
The goal of this initiative is simple: "reduce the amount homeowners owe per month to sustainable levels." To accomplish this, lenders are encouraged to lower homeowners' payments to 31 percent of their income by lowering their interest rate to as low as 2% or by extending the terms of the loan. In addition, lenders can also lower the principal owed by the borrower, with Treasury sharing in the costs.
Homeowners who are current on their mortgages but are struggling can still apply for this program. As such, this is one of the few programs designed to help homeowners who may face delinquency soon, but are current at the moment.
Since the focus of this initiative is on helping families and neighborhoods, investment properties do not qualify. This initiative also includes a number of additional elements and incentives that benefit homeowners and lenders alike, including:
Incentives to Help Borrowers Stay Current: To provide an extra incentive for borrowers to keep paying on time, the initiative will provide a monthly balance reduction payment that goes straight towards reducing the principal balance of the mortgage loan. As long as a borrower stays current on his or her loan, he or she can get up to $1,000 each year for five years.
Reaching Borrowers Early: To keep lenders focused on reaching borrowers who are trying their best to stay current on their mortgages, an incentive payment of $500 will be paid to servicers, and an incentive payment of $1,500 will be paid to mortgage holders, if they modify at-risk loans before the borrower falls behind.
Supporting Low Mortgage Rates As part of the Homeowner Affordability and Stability Plan, the Treasury Department is increasing its funding commitment to Fannie Mae and Freddie Mac to ensure the strength and security of the mortgage market and to help maintain mortgage affordability. This portion of the plan will use using funds already authorized in 2008 by Congress for this purpose.
The increased funding will enable Fannie Mae and Freddie Mac to carry out ambitious efforts to ensure mortgage affordability for responsible homeowners, and provide forward-looking confidence in the mortgage market.
I will continue monitoring the plan as new information becomes available. If you have any questions or would like to discuss how this may specifically impact you, I'd be happy to sit down with you. Just call or email me to set up an appointment.
A great article came my way through email this afternoon. It described exactly what’s going on in the market today with our interest rates and why we might or might not see 4%. The Federal Reserve recently said that it plans to continue purchasing large quantities of Mortgage Backed Securities to provide support to the mortgage and housing markets, and "it stands ready to expand the quantity of such purchases and the duration of the purchase program as conditions warrant".
The statement is true, the concern is as always, the media will take their own spin on the words; telling the customers their own version. Something along the lines as: "Good news, the Fed's words on continuing their purchasing program mean that rates will continue to drop lower, and remain low into the Summer" Some people hearing this will delay and try to wait it out until a “lower rate” comes around. Bad move!
So why is the Fed buying these Bonds? Well if you think about it, it's very smart of the Fed...and maybe even a little sneaky...because 5.5% Bonds actually represent outstanding mortgages with rates of 6 - 6.50%, which are precisely the loans being refinanced at today's great interest rates.
Stay with me here...
With rates at present low levels, many of the mortgages in these FNMA 5.5% pools being bought up by the Fed will be refinanced and paid, thus giving the Fed a quick recoup on some of their investment. And this is likely a big reason why the Fed said they could continue this purchasing program beyond June, if necessary. Bottom line, the Fed buying these higher rate coupons will not necessarily help rates to move lower, as their actions do not impact the loans being originated at today's low rates.
Here's the most important part.
Sometimes I talk to clients who are in a situation where it makes sense to refinance right now, and save $250 per month for example. But when they hear the media throwing around teases of lower rates ahead, they decide to hold off on making the decision to save the $250 per month right now, in the hopes of gaining another $30 per month in additional savings with a lower rate than where we stand presently. Now clearly, rates could turn higher, and this window of opportunity could pass them by entirely.
The clincher is this:
Even if those clients ultimately are correct in timing the market, and eventually grab that lower rate and save another $30 per month - think of what they have lost by waiting. While they delayed, they lost the savings they could have gained by taking action sooner - or in the example used, $250 - for every single month they waited. So even if they got lucky and obtained the rate they were looking for, it could take years to make up what they lost by waiting.
I don't want anyone to miss an opportunity by either waiting, or not understanding what is at stake. Let's talk further on this - call or email me and let's discuss what this might mean for you.
STAY AWAY FROM FAST CREDIT REPAIR AND LOOK INTO REFINANCING INTO AN FHA LOAN!
If you’re looking to repair your credit due to consumer lates your best option may be through an FHA loan.
Getting an FHA loan will allow you to pay off the bad debt and allow you to build credit back up by paying on your mortgage!
Don’t think you qualify for an FHA loan?
Don’t worry! First contact your local lender who specializes in FHA mortgages and talk with that person about refinancing into an FHA secured loan. FHA has lower qualification standards than a conventional mortgage –so in return it makes it easier to qualify and get you back on track.
Through an FHA loan you are allowed lates on consumer debts and as long as your credit score is 580 or above you can refinance up to 95% Loan to Value without huge penalties to the interest rate!
The pure and simple fact is, rates are not our issue. The issue is the banks, lenders and investors - and their guidelines. As long as the guidelines stay as tight as they are currently low rates don't matter! They're great to hear about and yes they stir up attention and may even cause a few more phone calls but when those people apply - WILL THEY GET APPROVED??
Well if they have perfect credit and money down they will, but add one little negative line item on their credit or have a score below 700 and watch the interest rate raise quickly and their qualification start to dissipate. Now ask yourself how good does lowering the interest rate do us.
Listen - the bottom line is we can mess with the rates all day long, hell we can even lower the 30yr fixed down to 1%, it still won't qualify any more people than qualify at 5% or even at 7%, because at the end of the day - we still have the same guidelines that keep getting tighter every day. So until our investors loosen up the guidelines and allow more people to qualify, expect delays and fall outs.
Oh! And let's not forget appraisals. Through in a low appraisal on top of the above - good times!
Sorry not trying to be a Scrooge but let's ALL wake up and smell the over compensating factors of our investors shall we.
Kudos to our Government for stepping in and at the very least doing their best at helping the crisis that we're in. But at some point they need to step back and let the people that are in charge of setting the guidelines for loans, not just mortgages but auto, credit, student and all the other loans that require a "qualification" - it's their turn NOW and they need to do their thing to loosen the guidelines. Because at the end of the day will you be able to qualify for that low rate.?
The terms annual percentage rate (APR), nominal APR, and effective APR[1] describe the interest rate for a whole year (annualized), rather than just a monthly fee/rate, as applied on a loan, mortgage, credit card, etc. Those terms have formal, legal definitions in some countries or legal jurisdictions, but in general: [1]
The nominal APR is the simple-interest rate (for a year).
The effective APR is the fee+compound interest rate (calculated across a year).[1]
The nominal APR is calculated as: the rate, for a payment period, multiplied by the number of payment periods in a year.[1] However, the exact legal definition of "effective APR" can vary greatly in each jurisdiction, depending on the type of fees included, such as participation fees, loan origination fees, monthly service charges, or late fees. The effective APR has been called the "mathematically-true" interest rate for each year.[2][3] The computation for the effective APR, as the fee+compound interest rate, can also vary depending on whether the up-front fees, such as origination or participation fees, are added to the entire amount, or treated as a short-term loan due in the first payment. When start-up fees are paid as first payment(s), the balance due might accrue more interest, as being delayed by the extra payment period(s).[4]
In some areas, the annual percentage rate (APR) is the simplified counterpart to the effective interest rate that the borrower will pay on a loan. When not using the term "effective APR", the use of "APR" is an early term for nominal APR. In many countries and jurisdictions, lenders (such as banks) are required to disclose the "cost" of borrowing in some standardized way as a form of consumer protection. APR is intended to make it easier to compare lenders and loan options. The APR is likely to differ from the "note rate" or "headline rate" advertised by the lender, due to the addition of other fees that may need to be included in the APR. APRs can be found by asking the lender or by reading the appropriate section in the contract.
In the U.S. and the UK, lenders are required to disclose the APR before the loan (or credit application) is finalized (although the definition of "APR" is not the same in these two countries - see below). Credit card companies can advertise monthly interest rates, but they are required to clearly state the annual percentage rate before an agreement is signed. APR is a term used with regard to deposit accounts as well. However, when dealing with deposit accounts, the annual percentage yield (APY) or annual equivalent rate (AER) is quoted to consumers for comparison purposes.
Something that has been bugging me lately is appraisals. It would seem to me that in times like the one we're in now we would underwrite and determine "value" a different way. We've always use comps to determine "values" but when neighbor B and neighbor D looses their home to a short sale or foreclosure the only comps are those and therefore is an unfair assessment when determining value. Which in return is killing our deals!
Why not go on the cost approach in times like these - the actual true cost (material, labor and etc.) of replacing the home + land. It would make more since to the areas that are getting hit hard with short sales.
If you're like me you've found the internet to be a great place to network! But what if you found that one of your strongest networking tools is NOW infected??
Facebook users beware - VIRUS ATTACKS!
Facebook Worm Comes From Infected Friends
The Koobface worm has surfaced in a new form and is again menacing Facebook users with spammed links to malicious Web sites.
Did you know that you can purchase a home that has been damaged and recieve up to $35,000 addtional for repairs!??
Through FHA - a program called 203K Rehab Loan will allow you to purchase a home that is in foreclosure and has been damaged, whether it's minor or serious. It will allow you to borrow up to $35,000 in additional funds to repair the damaged home. Here's how it works, directly from HUD.
Eligible Property
"The Federal Housing Administration (FHA), which is part of the Department of Housing and Urban Development (HUD), administers various single family mortgage insurance programs. These programs operate through FHA-approved lending institutions which submit applications to have the property appraised and have the buyer's credit approved. These lenders fund the mortgage loans which the Department insures. HUD does not make direct loans to help people buy homes. The Section 203(k) program is the Department's primary program for the rehabilitation and repair of single family properties. As such, it is an important tool for community and neighborhood revitalization and for expanding homeownership opportunities. Since these are the primary goals of HUD, the Department believes that Section 203(k) is an important program and we intend to continue to strongly support the program and the lenders that participate in it. Many lenders have successfully used the Section 203(k) program in partnership with state and local housing agencies and nonprofit organizations to rehabilitate properties. These lenders, along with state and local government agencies, have found ways to combine Section 203(k) with other financial resources, such as HUD's HOME, HOPE, and Community Development Block Grant Programs, to assist borrowers. Several state housing finance agencies have designed programs, specifically for use with Section 203(k) and some lenders have also used the expertise of local housing agencies and nonprofit organizations to help manage the rehabilitation processing. The Department also believes that the Section 203(k) program is an excellent means for lenders to demonstrate their commitment to lending in lower income communities and to help meet their responsibilities under the Community Reinvestment Act (CRA). HUD is committed to increasing homeownership opportunities for families in these communities and Section 203(k) is an excellent product for use with CRA-type lending programs. If you have questions about the 203(k) program or are interested in getting a 203(k) insured mortgage loan, we suggest that you get in touch with an FHA-approved lender in your area or the Homeownership Center in your area.Introduction Section 10 1 (c) (1) of the Housing and Community Development Amendments of 1978 (Public Law 95557) amends Section 203(k) of the National Housing Act (NHA). The objective of the revision is to enable HUD to promote and facilitate the restoration and preservation of the Nation's existing housing stock. The provisions of Section 203(k) are located in Chapter II of Title 24 of the Code of Federal Regulations under Section 203.50 and Sections 203.440 through 203.494. Program instructions are in HUD Handbook 4240-4. HUD Handbooks may be ordered online from The HUD Compendium or from HUDCLIPS. 203(k) - How It Is Different Most mortgage financing plans provide only permanent financing. That is, the lender will not usually close the loan and release the mortgage proceeds unless the condition and value of the property provide adequate loan security. When rehabilitation is involved, this means that a lender typically requires the improvements to be finished before a long-term mortgage is made. When a homebuyer wants to purchase a house in need of repair or modernization, the homebuyer usually has to obtain financing first to purchase the dwelling; additional financing to do the rehabilitation construction; and a permanent mortgage when the work is completed to pay off the interim loans with a permanent mortgage. Often the interim financing (the acquisition and construction loans) involves relatively high interest rates and short amortization periods. The Section 203(k) program was designed to address this situation. The borrower can get just one mortgage loan, at a long-term fixed (or adjustable) rate, to finance both the acquisition and the rehabilitation of the property. To provide funds for the rehabilitation, the mortgage amount is based on the projected value of the property with the work completed, taking into account the cost of the work. To minimize the risk to the mortgage lender, the mortgage loan (the maximum allowable amount) is eligible for endorsement by HUD as soon as the mortgage proceeds are disbursed and a rehabilitation escrow account is established. At this point the lender has a fully-insured mortgage loan.Eligible Property To be eligible, the property must be a one- to four-family dwelling that has been completed for at least one year. The number of units on the site must be acceptable according to the provisions of local zoning requirements. All newly constructed units must be attached to the existing dwelling. Cooperative units are not eligible. Homes that have been demolished, or will be razed as part of the rehabilitation work, are eligible provided some of the existing foundation system remains in place. In addition to typical home rehabilitation projects, this program can be used to convert a one-family dwelling to a two-, three-, or four-family dwelling. An existing multi-unit dwelling could be decreased to a one- to four-family unit. An existing house (or modular unit) on another site can be moved onto the mortgaged property; however, release of loan proceeds for the existing structure on the non-mortgaged property is not allowed until the new foundation has been properly inspected and the dwelling has been properly placed and secured to the new foundation. A 203(k) mortgage may be originated on a "mixed use" residential property provided: (1) The property has no greater than 25 percent (for a one story building); 33 percent (for a three story building); and 49 percent (for a two story building) of its floor area used for commercial (storefront) purposes; (2) the commercial use will not affect the health and safety of the occupants of the residential property; and (3) the rehabilitation funds will only be used for the residential functions of the dwelling and areas used to access the residential part of the property."
How the Program Can Be Used
"This program can be used to accomplish rehabilitation and/or improvement of an existing one-to-four unit dwelling in one of three ways:
To purchase a dwelling and the land on which the dwelling is located and rehabilitate it.
To purchase a dwelling on another site, move it onto a new foundation on the mortgaged property and rehabilitate it.
To refinance existing indebtedness and rehabilitate such a dwelling. To purchase a dwelling and the land on which the dwelling is located and rehabilitate it, and to refinance existing indebtedness and rehabilitate such a dwelling, the mortgage must be a first lien on the property and the loan proceeds (other than rehabilitation funds) must be available before the rehabilitation begins. To purchase a dwelling on another site, move it onto a new foundation and rehabilitate it, the mortgage must be a first lien on the property; however, loan proceeds for the moving of the house cannot be made available until the unit is attached to the new foundation."
All Information was recieved directly from HUD on their web page. For more information please feel free to contact me or refer to HUD by going to the link provided http://www.hud.gov/offices/hsg/sfh/203k/203kabou.cfm
Disclaimer: ActiveRain Corp. does not necessarily endorse the real estate agents, loan officers and brokers listed on this site. These real estate profiles, blogs and blog entries are provided here as a courtesy to our visitors to help them make an informed decision when buying or selling a house. ActiveRain Corp. takes no responsibility for the content in these profiles, that are written by the members of this community.
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