Obama Plan ............... New Refinancing Program.

By
Mortgage and Lending with George Souto NMLS #65149 FHA, CHFA, VA Mortgages NMLS #65149

Yesterday I wrote the first of two parts on the Homeowner Affordability & Stability plan that was released by the Obama administration on Wed March 4th. Which contained two major parts they hoped would have an impact on assisting homeowners with troubled mortgage. The first part of the plan which I blogged about yesterday is a modification program that Servicers will offer to borrowers with high debt-to-income ratios or who are at risk of foreclosure. The second part of the plan which I am blogging about today, a refinance program for existing Fannie Mae or Freddie Mac loans.

As I stated yesterday our Executive Vice President at McCue Mortgage, Kim Neilson and others are still assessing the details of the Homeowner Affordability & Stability plan to determine our next steps, but in the mean time we are trying to provide a summary of its major points so that it might help other to better understandable it.  So here we go:

The second part of the plan is a refinance program for existing Fannie Mae or Freddie Mac loans. Fannie Mae is offering two different programs:

  1. The Refi Plus Program that requires the servicer of the loan to be the originating lender.
  2. The DU Refi Plus Program (DU is the Automated Underwriting System for Fannie Mae) that allows any lender using DU to originate the loan as long as the existing loan is a Fannie Mae loan.

Freddie Mac requires the servicer of the loan to be the originating lender. Some specifics of the program are:

  • Existing mortgage must currently be a Fannie or Freddie loan.
  • Existing loan may not be considered ineligible (must get an Approved/Eligible from DU). Ineligible loans include existing mortgage loans that received a DU Expanded approval (EA).
  • Maximum LTV for 1-2 unit properties is 105% and require an appraisal.
  • Maximum LTV for 3-4 unit properties is 80% and also require an appraisal.
  • No maximum CLTV.
  • Existing mortgage must be current and have acceptable mortgage payment history. No minimum FICO score is required although borrower must meet bankruptcy and foreclosure requirements. In addition, borrower must demonstrate credit worthiness.
  • Rate and term refinance only (No Cash Out) - purchase money seconds MAY Not be included.
  • Loan level price adjustments (points) will apply (determined by credit score on credit report)
  • MI required (same coverage factor of existing loan) for mortgage loans that had original LTV’s greater than 80%.
  • DU Refi Plus must receive Approve/Eligible and will not be available until April 4. Income and employment verification is required.
  • Refi Plus is a manual underwrite and requires verbal verification of employment. Lender must determine that the borrower has a reasonable ability to repay the mortgage based on current information provided by borrower.

There it is in a nut shell.  I actually have higher expectations for this part of the plan then I do for the Loan Modification part. This part of the plan stands a chance to actually help those who have good credit and have little to no equity in their property.  But I do not see it doing anything for those who are in areas that property values have taken a noticeable hit, and 105% LTV is not going to do anything for them.  Also this does offer a second option to FHA which will allow a borrower to go to a 96.5% LTV on a No Cash Out Refi.

While I think that this plan might actually help a few people, but it will be a source of false hope for many more.  As I ended my last post, the purpose for providing this information is so that those who read it may have a better understanding of the "Homeowner Affordability & Stability Plan", and help them come to their own conclusion.

 

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Info about the author:

George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com

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Re-Blogged 3 times:

Re-Blogged By Re-Blogged At
  1. Fred Chamberlin 03/11/2009 12:47 PM
  2. Norma Brandsberg 03/12/2009 03:26 AM
  3. JoAnne Mercer 03/13/2009 04:07 AM
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George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
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Bill I think that we will be able to use it more here in the Northeast than many other parts of the country.  Even though we have also seen a decrease in prices, many communities especially here in Connecticut have managed to hold their own.

Also thank you about informing me about Craig has been doing.  That is not something that should be encouraged so I am deleting his comment.

Mar 11, 2009 03:09 PM #14
Rainer
40,210
Sean Wheelan
Qivana - Warwick, RI

George,

   You summed it up best right here: " but it will be a source of false hope for many more ". I don't see this plan helping anyone. When you apply the Loan Level Price Adjustments the rates are prohibitive. For example, a borrower with a 620 would need to pay 2.25 points just to get to a par rate, meaning a bank or a broker would still need to charge a point or more to be profitable.

   Click here for the Fannie Mae LLPA from the FNMA Selling Guide for more details.

   Am I missing something or is this is just another example of a whole lot of nothing? People want low rates and that simply aren't getting them!

-Sean

Mar 11, 2009 10:55 PM #15
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Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

George.  I understand that completely.  However, was the consumer advised of the risks of taking that mortgage when it was sold to them????  Or, are they now paying over and over for having a risky mortgage instrument. 

First they are sold a risky instrument and now they are denied any relief because their mortgage was risky. 

OF COURSE IT WAS RISKY.  That's why they need relief now. 

Mar 11, 2009 11:34 PM #16
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George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
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Sean, it is more nothing than something, for reasons like you first made.  It sounds good until you start digging into it, that is why I said it might help those with good credit, but as those credit scores start to drop the cost starts to go up and making this less of an option.

Lenn, if they did the loan with me they did.  But you also need to under stand the people who got EA loans were those that were just on step above subprime.  These were 30 year fixed loans with a high interest rate (about a point) for people with low credit scores, high ratios, and usually high LTV's.  These were people who JUST HAD TO HAVE THE HOUSE and would not wait to clean up their credit and get themselves in a position to be able to do a regular loan.  The rules allowed them to have it now, they wanted it now, so no matter what you said all they heard was what they wanted to here THEY COULD GET THE LOAN.  Even those that could not qualify for an EA or even a suprime loan kept on looking and looking because NO was not an option, they wanted the house and they were going to get it one way or another.  Well they got it. I bet you could find hundreds of Loan Officers that would tell you the same story.  I know that there are many that want to make the homeowner the innocent ones in this, but they are far from it.

Mar 12, 2009 12:37 AM #17
Rainmaker
575,397
Terry & Bonnie Westbrook
Westbrook Realty Broker-Owner - Grand Rapids, MI
Westbrook Realty - Grand Rapids Forest Hills MI Re

I have had several questions about the program thanks for the analysis.

Mar 12, 2009 02:39 AM #18
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George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
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Terry, glad this was able to able to provide the answers.

Mar 12, 2009 02:54 AM #19
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Christine Donovan
Donovan Blatt Realty - Costa Mesa, CA
Broker/Attorney 714-319-9751 DRE01267479 - Costa M

I appreciate the simplified review.  I've been looking through a lot of information on this for the past week to make sure I was clear.

Mar 12, 2009 03:10 AM #20
Rainer
18,688
Michael Loeb
TGC Financial - Port St Lucie, FL

Under the plan the current mortgages must be Fannie or Freddie loans.  This means that those who this bill will help were at one point "conforming" borrowers.  This does nothing for the sub-prime borrowers who got their loans through the 100's of lenders no longer in business (Option 1, Argent, Freemont, Descion One, the list goes on...).  They're the ones with ARMs that had 5 and 7 point margins attached to them, so now that LIBOR is at 2.25 they're still paying a rate of 9.  Criminal, that brokers sold loans with margins that high. 

What this plan does is help those people who are currently paying off mortgages guaranteed by the GSEs (Government Sponsored Entities).  The same GSEs who were told by the government to loosen their guidelines to get more people into homes with mortgages backed by the GSEs.   Looks like a bit of CYA to me.

That mortgages have to be current doesn't address the fact that people who need help are behind.

Expect to tell a lot of people who walk into your offices looking for help, "sorry... you don't qualify". 

The Titanic had more room on their lifeboats than this plan has.

 

Mar 12, 2009 03:22 AM #21
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George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
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Christine glad this helped to simplify it for you.

Michael your assesment of the situation is accurate, and that has been the problem write along with all of these programs, very few borrowers are able to qualify for them.  This one might help a few more but it is not what it was made out to be, and Loan Officers like miyself are the ones that are having to deal with the angry people who think that this will help them.  We end up being the bad guys while the bad guys that put it together go around taking the bows.

Mar 12, 2009 06:28 AM #22
Rainmaker
178,677
DeAndrea "Dee Dee" Jones
Home Buyers Marketing II, Inc. - Manassas Park, VA
The NorthernVARealEstateLady & DMVRealEstateChick

So many changes it is hard to keep up.  Good thing I work with great loan officers that keep up to date.

Mar 12, 2009 07:58 AM #23
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Ralph Haseltine
Carol Stream, IL

A lot to digest so thanks for breaking it down into a more simple format. I have to agree with a lot of the posts though...I'm not sure how many people that it will actually help or what true effect it will have on the market as a whole. Thanks again, Ralph

Mar 12, 2009 11:44 AM #24
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George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
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DeAndrea, these days it seems like a full time time to keep up with the changes.

Ralph we should know the answer to that very soon, just like we did with the other programs, and unfortunately it will probably not perform much better.

Mar 12, 2009 02:39 PM #25
Rainer
15,530
David Coffman
Exit Realty 1st Choice - Tucson, AZ

As normal... Political "LIP SERVICE". Thanks for the post. I like you, think that the number of people this will help is much lower than the current administration will admit.

Mar 15, 2009 09:28 AM #26
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George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
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David I hope that we are wrong, but I would be surprised if we are.

Mar 16, 2009 01:35 PM #27
Rainmaker
423,040
Philip Turner
MCCUE MORTGAGE COMPANY - New London, CT
Mortgage Banker Since 1980

Have you heard from anyone who may be helped by this program?  I have had numerous phone calls and e-mails but have yet to find anyone who fits the guidelines as presented thus far.

Mar 17, 2009 12:34 PM #28
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George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
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Phil I have not had a lot of calls yet, but the few that have called are not even close to qualifying.

Mar 17, 2009 02:21 PM #29
Anonymous
Eric

George..... For the new Obama refinance program for borrowers with a LTV of 105% or less, do you think the Obama administration will come out and help borrowers refinance if their loan isn't backed by Fannie Mae or Freddie Mac.  I would qualify on all fronts for this Du Refi Plus refinance program, except my current loan isn't a GSE (Fannie or Freddie), so now I am still stuck without a refinance option.  Please let me know your thoughts on if other programs might be coming down the pipe. Thanks.

May 08, 2009 04:40 PM #30
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George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
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Eric, I have not heard of anything that they are planning to do, but depending on where you are there might be a local program to help you.  We have one here in Connecticut, so if you are in Connecticut we can talk about it, if not you should contact a local Loan Officer and ask him/her if your State has one as well.

May 09, 2009 02:14 AM #31
Anonymous
Ann

We purchased in 07 for 685,000.00 put 265,000.00 down. We are trying to re-fi since we lost so much of our own money/security security. A few hundred a mo with lower rate would help how we feel. They are telling me under this Obama re-fi plus we now need to impound taxes and ins. Is that true?

We did conventional 30 year put 265,000.00 down and I am so frustrated we live in the small house and lost our security.

Chase (Our existing mortgage holder) has taken since 1/30/09 to complete the re-fi. We are supposed to close today, but I now trust no one.

hat do you know?

 

Jul 21, 2009 01:59 AM #32
Rainer
71,384
Patt M. Judd
First Realty Company - Cookeville, TN
Realtor - Your Cookeville Connection

I think i spoke out of turn ,i trhink the new health care plan is in trouble.

Mar 10, 2010 07:30 AM #33
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