I trust you will find this article useful regarding the Federal Plan to help some subprime borrowers announced yesterday by President Bush. This will help you answer the questions that will come your way. It's a great opportunity to attract some Refi business in December and January.
A few Refi facts that borrowers may not know:
FHA cash out refi to 95%
Rate & Term Refi's with Flex 100 or My Community/Home Possible to 100% LTV
Expanded Approval Rate & Term Refi's to high LTV's
Our Lender Paid MI can be a great option for some.
Who Qualifies for Help,
And What Qualifies as Subprime?
The mortgage plan outlined by the Bush administration should help some borrowers with subprime adjustable-rate mortgages. But other borrowers who are having trouble making their payments won't qualify for the "fast-track" interest-rate freeze outlined yesterday. Here's a look at the agreement:
Which mortgages does the plan cover?
The agreement covers only a subset of borrowers. These are borrowers who took out subprime ARMs that were originated between Jan. 1, 2005, and July 31, 2007, and whose interest rates will reset for the first time between Jan. 1, 2008, and July 31, 2010. It applies only to loans that have been packaged into securities and not those that are held by banks on their own books. Homeowners should call their servicer to determine if their mortgage is covered by the plan. It doesn't apply to borrowers with subprime ARMs that have already faced their first rate reset. It also doesn't cover loans that are seriously delinquent, fixed-rate mortgages or ARMs issued to borrowers with good credit.
How do I know if I have a subprime mortgage?
The agreement doesn't provide a specific definition of subprime ARMs because it isn't always clear. Typically, subprime ARMs carry a fixed interest rate for the first two or three years, then adjust annually. Borrowers who aren't sure whether or not they have a subprime ARM can ask the company that collects their loan payments.
What are mortgage companies doing for these borrowers?
Mortgage companies are setting up guidelines for who may qualify for a fast-track program that would freeze the interest rate at the introductory rate for five years. Some borrowers who don't qualify for fast-track may be eligible to refinance into a new mortgage, based on their credit score and the amount of equity in their home. Mortgage companies have been encouraged to "take all reasonable steps" to facilitate a refinancing.
Who qualifies for the rate freeze?
To qualify, borrowers must live in their home and face a payment increase of more than 10% when the rate on their ARM resets for the first time. The program is designed to help borrowers who aren't good candidates for refinancing because of a poor credit score, have little or no equity in their homes or a history of late payments. To qualify for the fast-track program, borrowers must have a credit score of less than 660 and it can't have improved by more than 10% since the mortgage was originated.
What if I've missed a mortgage payment?
Missing one mortgage payment won't automatically disqualify borrowers from the program. Borrowers can't have more than 60 days late more than once in the last 12 months.
What if I can't qualify for the fast-track freeze?
Some borrowers may be able to refinance into Federal Housing Administration loans or other mortgage programs. Borrowers who don't qualify for a refinance or who don't meet the criteria for the fast-track program will be dealt with on a case-by-case basis by their mortgage-servicing company. In some cases, these borrowers may be able to obtain a lower rate or a reduction in the amount owed. Other options include a short sale, in which the house is sold for less than the amount owed with the lender forgiving the balance, or foreclosure.
Whom should I call if I have questions?
Borrowers are encouraged to contact the mortgage-servicing company that collects their loan payments. They can also call 1-888-995-HOPE, which provides counseling to homeowners with mortgage problems.
You can also call Kris Krajecki at 630-347-6321.