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If eligible, you now have additional refinancing options to help keep your home afloat.
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74 Comments on More options for the underwater homeowner: FHA Short Refinance to homeowners
I do not want to be the bad banana in the bunch. I will wait and see how it plays out. Often these programs have so many hops they are more about trying to make it look like the government is really doing something than any actual help.
I believe the caveat here is that the lender must "agree" to reduce the balance by 10%. Having worked on many short sales I am dubious at best about a lender waiving 10% of the principle when the account is current. I have to kind of go along with Gene on this one...not being negative because some lenders will go along with this but the majority we'll have to wait and see.
Great info . This for posting it for all of us.
Good post, with caveat that lenders have to get on board.
For those trying to figure out the way it would work, the most feasible scenario would be one where there is a second mortgage (which would have to be subordinated) - so it could work like this:
$230,000 first Mortgage, $30,000 2nd mortgage, using the program, get the first lienholder to write off $24,000, and the 2nd to agree to subordination, IF the property is worth $210,000 -- then the program works. You meet all the various conditions. In this example they begin $50,000 underwater, and end up about $26,000 under. Not the very best of solutions, but something that might get them to stay in the house and keep making the payments. Of course, the big issue is what was their initial interest rate (and was it locked), and what is the new interest rate, because there are lots of ways the payments could go up -- causing a worse situation for the borrower, even with $24,000 less owing.
Thanks for the information. It is so good for me to be looking everyday on Activerain...I have been able to gather so much information.
Aaron - oh that is sad sad thing - and somehow it makes sense to me. We've all scratched our heads a million times this past few years and thought......what the heck?????
Karen, yes they are survivors. There are many of them out there trying to make this whole mess work. Some are able to hold on - right now we're working with quite a few that have held on as long as they can and just have nothing else to make ends meet. And these are all very responsible people and done all the 'right' stuff all their lives.
Hey Karen - thanks so much for your feedback! Much appreciated! It is all about relationships - I've alwasy seen that as a key factor in this industry. And of corse that is backed up with expertise and knowledge.
Dave - I totally hear what you're saying and I may go back and re-phrase the post. It clearly, on my end a judegement call. Thanks for pointing this out.
janeanne - you're welcome!
Kate - agreed. Responsible isn't the word cause many folks are responsible but lost their job etc etc and clearly deserve a break too.
Chris - good points, thanks for adding to the conversation.
William - let's hope it helps some folks. We all know there are lots of programs out there that did diddly squat to help out.
Joe - that is the kicker, will lenders embrace it or not?
Fernando - I hear you - see the remark above - didly squat.
Lisa - let's hope.......
Missy - exactly - time will tell - again.
Michael - let's hope.......
Bill I would think the lenders would see this as an opportunity to 'save' the situration rather than letting it go to foreclosure at some point like mass amounts of them did in 08,09. It might be a solution for some folks IF the lenders get on board.
Tina - totatally agreed. We are neck deep in the same situations. Again - as I said this may help a niche of folks - and/or it's is just another quick fix.
Although the cover information indicates they want to help 3-4million homeowners, the mortgagee letter, says they are only looking at helping 500,000 to 1.5 million.
Anna,
The word "responsible" is right on the FHA website that you linked to, so you weren't passing judgment on borrowers, FHA was. You were just the messenger. Straight from FHA's site:
"Effort designed to encourage principal write-downs for responsible borrowers
WASHINGTON - In an effort to help responsible homeowners..."
I don't see a motivation for lenders to take at least a 10% hit on the mortgage for a borrower who is making payments on a timely basis. That would take quite some persuasion...
Anna, in theory has a lot of potential (so do HAMP and HAFA) but the success will only be determined by the lenders willingness to take at least a 10% principal reduction (thank Eileen).
They have been reluctant to do so up to this point, so we shall see.
I don't know about all the other states, but in the state of Indiana, a REALTOR(r) cannot help someone modify. As a matter of fact, we could loose our license just for making a phone call to check on the progress of a modification. Here Modifiers have to be licensed, and a REALTOR(r)'s job is to buy and sell real estate, not to help modify loans. Before trying to help clients do the mod job, check your state laws. Telling your clients about it is not the same as helping them doing it...
Anna thanks for the info and I'll re-blog for folks in the Hendersonville and Western NC area to be aware of.
Obviously the boundries, etc won't work for many for many different reasons. But if this program can help any and lenders cooperate it is worth a try. I feel for all who have fought hard to hold on to their homes and lost the battle but perhaps this can issue some hope to prevent other responsible home owners from the same fate. I suspect many whose loans were zero or low downs will still be walking away and adding to a problem for years to come for the housing market as they will have to rent and not be in a position to purchase.
Sue of Robin and Sue
thanks for the great info. Sounds like a lot of distressed home owners would qualify for this program!
I don't think anyone should get too excited over this... Like the other government programs of late, if the program is voluntary on the part of the banks, I doubt that too many will be helped.
Why should they? If you're able to keep your payments current, why should the bank decide to forgive a portion of your outstanding balance? They're in business to make money, not to be charitable.
This is just another tool to use with the right application, so when appropriate, use it.
Great conversation. Clearly there is a great deal of unrest on all these government programs - remember - this post was strickly a 'reporting' out of information as to what's the 'latest' fix out there.I appreciate all of your comments. I normally prefer to address each of you but this last few days is very busy between clients and a risk management conference. Gee - that's whole other subject of which I can't wait to write about. It's huge - as so much has changed the last few years.
Only time will tell how successful this program will actually be. Getting the current lender to write off 10% of the current balance will eliminate many homeowners.
Excellent information! I've got to re-blog this to help my readers in my area! Thank you so much for sharing this!
Rodney -agreed
Maya - you're welcome. Hope it finds its way to someone who can benefit from this program
From my understanding of this program, it makes sense for the current lenders because of the incentives to reduce the debt. But we don't have any lenders or investors that will take these loans NEW refinanced loans in the secondary market. Do you know of any?
Phil Stevenson Reverse Mortgage Expert
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