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Making Home Affordable Financing expanded to 125%

I actually support this because it does not bail out the people that borrowed 100% of the price of a home.

U.S. HUD Secretary Shaun Donovan today announced an expansion of the Obama Administration's Home Affordable Refinance Program to include participation by borrowers who are current but up to 125 percent underwater on their mortgage. The previous limit was 105%. Borrowers whose mortgages are currently owned or guaranteed by Fannie Mae and Freddie Mac will now be allowed to refinance those loans according to the terms of the Home Affordable Refinance program established earlier this year, on Febraury 18, 2009.

For example if the property is worth $200,000, the borrower must owe $250,000 or less, where previously the borrower must have owed $210,000 or less.

Read more about this HUD press release, HUD No. 09-104

Also this article at Inman provides some good information. Home Affordable refi program expanded

Posted by Tim Bradford on 07/01/2009 05:36 PM

Comments (4)

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4 Comments on Making Home Affordable Financing expanded to 125%

JUL

Tim - I think this is a long overdue policy change but I think it still just postpones the inevitable. People that need to move will still be upside down with lower payments, it'll save some though so I'm ok with it.

John, Thank you for your comment.

I have encounterred a number of people that want to retain their current home.

One Group knows they owe more than the home is worth and reconize it as a fact of life. They only wish that they could refinance to lower their payments and make things more affordable.

The Second Group are those that want the amount they owe reduced, their rate and payment reduced and still want to own the home.

Allowing this for good responsible borrowers is a good move. For those people that have to move there are also options. Many lenders will consider short payoffs when presented to the options. That is a business decision that they have to make,

I would like to see this expanded to Non Freddie and Fannie loans, letting and encouraging those responible homeowners that are making their payments to continue doing so. Giving up a little interest is much better than accepting a short payoff or even a foreclosure. I am not suggesting below market rates, just fair market rates. Just my .02

Tim - good info! Just curious - how do they calculate PMI on these loans?

JUL

Svetlana, Using the logic and principle that is used under the 105% Rules, the PMI on the original loan stays in effect on the new loan. So whatever the PMI was on the old loan would transfer to the new loan. By example, if your original loan did not have PMI because you were below an 80% LTV then you would not have PMI on the New Loan. If your original loan had PMI based upon a 90% LTV then what ever PMI factor was in effect would continue. Presently, the only option to do one of these loans is to stay with your current lender because they can transfer the PMI. Also, a new lender would not want to accept the loan because of the LTV.

Some Independent loan officer do not like this because we have no opportunity to write these loans, but in honesty I still support this because allowing the current lender to do the loan reduces the closing costs because they are generally just doing a modification instead of a new loan.

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