The government's expanded refinance program for underwater homeowners, dubbed HARP 2, looks better than expected for both borrowers and banks.
The Obama administration announced the broad outlines of the plan on Oct. 24. Fannie Mae and Freddie Mac filled in most of the details in guidance bulletins issued late Tuesday.
The new program greatly reduces or eliminates the risk-based fees Fannie and Freddie charge on many loans and virtually eliminates the chance that lenders will have to pay for losses on loans that go into default if they made underwriting mistakes. It also vastly streamlines the underwriting process.
Many borrowers won't qualify for the new program, but those who do could find it much easier and possibly cheaper to refinance than those who don't. Although lenders can begin taking applications Dec. 1, it could take several months before the new loans are made. Fannie Mae said it won't begin buying certain types of refinanced loans until March.
To qualify, your existing loan must have been sold to Fannie Mae or Freddie Mac on or before May 31, 2009. Your loan balance must be more than 80 percent of your home's market value. You can have no late payments on your existing mortgage in the past six months and no more than one late payment in the past 12 months. You are ineligible if you previously refinanced through HARP.
They've eased up on the qualifying factors over the HARP program.
The new program improves on the existing HARP refi program by letting borrowers refinance into a new fixed-rate loan no matter how much they owe. The existing program caps the new loan at 125 percent of the home's market value.
You can also refinance into a new adjustable rate loan that has a fixed rate for at least the first five years, but in this case your new first mortgage cannot exceed 105 percent of the home's value.
The new program greatly reduces or eliminates the fees Fannie and Freddie charge on loans based on risk characteristics such as the borrower's credit score and loan-to-value ratio. On a riskier loan, these fees sometimes exceed 3 percent of the loan balance and make refinancing uneconomical for many borrowers.
Under HARP 2, the fees will be capped at 0.75 percent on most loans and will be zero on fixed-rate loans with a term of 20 years or less.
In most cases, borrowers won't have to pay for a new appraisal (Fannie or Freddie will use their automated in-house appraisals) or have any particular debt-to-income ratio or credit score.
Borrowers who refinance through their existing loan servicer generally won't have to document their income or assets or have a particular credit score or debt-to-income ratio. The lender will only have to verify that one borrower on the loan has a job or other source of income, but not the amount of income.
If they refinance through a new lender, they will have to meet additional underwriting requirements, but not as many as people who are refinancing through traditional routes.
Effects on Second Mortgages.
Borrowers can have a second loan on the house of any amount and still qualify, as long as the holder of the second mortgage resubordinates it to the new loan. Most of the big lenders have agreed to do so, but there is no guarantee they or others will. "It's going to be case by case," says Brad Seibel, director of residential lending with Fremont Bank.
If borrowers have mortgage insurance on the existing loan, they must maintain it, but they should be able to transfer that insurance to the new loan at the old premium rate, according to Freddie Mac. The big mortgage insurers have agreed to allow this, but again there is no guarantee all will.
It's a big plus if they do. Normally refinancers must take out a new policy at today's rates, and rates have gone up significantly in the past few years. The higher cost has discouraged some homeowners from refinancing.
Although the original HARP program let homeowners take out a new loan of up to 125 percent of the home's value, many lenders were unwilling to make them up to that limit because if the borrower defaulted, the lender might have to pay for losses if they made any underwriting errors. And no lender wanted to run that risk on a deeply underwater home.
The new program, in many cases, will virtually eliminate the risk that lenders will have to pay for losses on either the existing or the refinanced loan under HARP 2. This could be a big incentive for lenders to refinance loans, especially ones they already own.
FBR analyst Edward Mills said the details on the liability waiver and the fee reduction were both better than he was expecting.
But there are still many questions about the program, such as what interest rates banks will charge, whether they will impose additional fees or underwriting requirements beyond what Fannie and Freddie require and whether investors will be willing to buy securities backed by these new HARP 2 loans.
Most lenders I spoke to said they are eager to make the new loans, but are still digesting the extremely complex details. (You can read Fannie's guidance at sfg.ly/uFNuOj and Freddie's at sfg.ly/tUqbdp.
Mills says the program will definitely reach the government's target of refinancing 1 million loans, and possibly even 2 million.
There will be losses for some but seemingly only to profits
While borrowers will clearly benefit, the losers will be investors who own the guaranteed loans that are refinanced. They will be repaid, but will have to reinvest their proceeds, probably at a lower rate. These investors include Fannie and Freddie, the U.S. Treasury and the Federal Reserve - in other words, U.S. taxpayers.
The hope is that taxpayers as a whole will benefit if homeowners who lower their monthly payments under the program spend some of their savings (thus boosting the economy) and become more likely to stay in their underwater homes and not default.
Friday, November 25, 2011
Thursday, November 17, 2011
Congress decides in favor of Borrowers
Today, the vote is in to return the FHA loan limits to the previously set amounts which expired on october 1st. Read the complete Wall Street Journal story below:
U.S. lawmakers moved Thursday to increase the maximum size of loans that can be guaranteed by the Federal Housing Administration, even as a top Obama administration official expressed doubt about the need for the change.
A spending bill passed by Congress increases to $729,750 the maximum size of a mortgage that can be backed by the FHA, which guarantees loans to buyers with down payments as low as 3.5%. The Senate voted to approve the bill Thursday evening, after the House voted earlier in the day.
Some Republicans in the House and Senate were upset by the move, arguing that it contradicts a goal of both parties to reduce the U.S. government’s role in propping up the housing market. “I am just absolutely so discouraged at Congress in lacking the courage to deal with this issue,” said Sen. Bob Corker (R., Tenn.).
An earlier version of the legislation in the Senate would have increased loan limits for mortgage finance companies Fannie Mae and Freddie Mac as well, but that was stripped out due to opposition from House Republicans.
The loan limit fell to $625,500 on Oct. 1 in expensive markets like New York, San Francisco and Washington. They declined in around 250 counties for Fannie and Freddie, and around 600 counties saw FHA limits drop. In some cases, the FHA loan limits fell below those of Fannie and Freddie.
Carol Galante, the Obama administration’s nominee to lead the FHA, told Senate lawmakers that the administration continues to support reducing the limits.
“We maintain that it is appropriate to take a step back on the loan limits,” Ms. Galante told Senate lawmakers. However, she noted that because housing markets around the country remain weak, “there are reasonable people who may want to see us continue to stay in the business.”
The move by Congress will give borrowers seeking loans between $625,500 and $729,750 in pricey markets two options. They can take out “jumbo” loans that carry higher interest rates than those backed by Fannie and Freddie and require down payments of at least 20%. Or, they can take out an FHA loan, which allows for lower down payments but charges insurance premiums that add to borrowers’ costs.
Housing industry lobbyists pushed for Congress to reinstate the higher limits for Fannie, Freddie and FHA, citing concerns that any steps to raise borrowing costs might be too much for fragile housing markets to bear. Another Republican criticism of the action is that it would primarily benefit affluent neighborhoods.
“This means that taxpayers will be subsidizing the purchase of expensive homes by wealthy buyers,” said Sen. Richard Shelby (R., Ala.).
However, Sen. Robert Menendez (D., N.J.) said that restoring the loan limits will benefit the housing market at a time when it is weak. Doing so, he said, “won’t cost taxpayers a dime” and will benefit the housing market in many other parts of the country besides those cities.
The move by Congress came after an annual independent audit found the FHA’s cash reserves are now so depleted that there is close to 50% chance the agency could run out of money and require a taxpayer bailout in the next year.
In the past four years, as private lenders have pulled back from the mortgage market, the FHA’s market share has swollen. It backed one third of mortgages used to finance home purchases last year, up from around 5% in 2006. The FHA doesn’t make loans but insures lenders against defaults on mortgages that meet its standards.
U.S. lawmakers moved Thursday to increase the maximum size of loans that can be guaranteed by the Federal Housing Administration, even as a top Obama administration official expressed doubt about the need for the change.
A spending bill passed by Congress increases to $729,750 the maximum size of a mortgage that can be backed by the FHA, which guarantees loans to buyers with down payments as low as 3.5%. The Senate voted to approve the bill Thursday evening, after the House voted earlier in the day.
Some Republicans in the House and Senate were upset by the move, arguing that it contradicts a goal of both parties to reduce the U.S. government’s role in propping up the housing market. “I am just absolutely so discouraged at Congress in lacking the courage to deal with this issue,” said Sen. Bob Corker (R., Tenn.).
An earlier version of the legislation in the Senate would have increased loan limits for mortgage finance companies Fannie Mae and Freddie Mac as well, but that was stripped out due to opposition from House Republicans.
The loan limit fell to $625,500 on Oct. 1 in expensive markets like New York, San Francisco and Washington. They declined in around 250 counties for Fannie and Freddie, and around 600 counties saw FHA limits drop. In some cases, the FHA loan limits fell below those of Fannie and Freddie.
Carol Galante, the Obama administration’s nominee to lead the FHA, told Senate lawmakers that the administration continues to support reducing the limits.
“We maintain that it is appropriate to take a step back on the loan limits,” Ms. Galante told Senate lawmakers. However, she noted that because housing markets around the country remain weak, “there are reasonable people who may want to see us continue to stay in the business.”
The move by Congress will give borrowers seeking loans between $625,500 and $729,750 in pricey markets two options. They can take out “jumbo” loans that carry higher interest rates than those backed by Fannie and Freddie and require down payments of at least 20%. Or, they can take out an FHA loan, which allows for lower down payments but charges insurance premiums that add to borrowers’ costs.
Housing industry lobbyists pushed for Congress to reinstate the higher limits for Fannie, Freddie and FHA, citing concerns that any steps to raise borrowing costs might be too much for fragile housing markets to bear. Another Republican criticism of the action is that it would primarily benefit affluent neighborhoods.
“This means that taxpayers will be subsidizing the purchase of expensive homes by wealthy buyers,” said Sen. Richard Shelby (R., Ala.).
However, Sen. Robert Menendez (D., N.J.) said that restoring the loan limits will benefit the housing market at a time when it is weak. Doing so, he said, “won’t cost taxpayers a dime” and will benefit the housing market in many other parts of the country besides those cities.
The move by Congress came after an annual independent audit found the FHA’s cash reserves are now so depleted that there is close to 50% chance the agency could run out of money and require a taxpayer bailout in the next year.
In the past four years, as private lenders have pulled back from the mortgage market, the FHA’s market share has swollen. It backed one third of mortgages used to finance home purchases last year, up from around 5% in 2006. The FHA doesn’t make loans but insures lenders against defaults on mortgages that meet its standards.
Saturday, September 10, 2011
Refinancing while underwater
Like so many homeowners across the country, you can start to sense a feeling of helplessness when attempting to refinance a loan which is higher than the current value of your home ... yes, you are underwater and looking for a fresh breath. Here's some info you may find helpful in your endeavor.
“A lot of people have been sitting and not doing anything,” said Cari Sweet-Kostoplis, a senior mortgage banker at Atlantic Home Loans in Lincoln Park, N.J. But they may qualify to refinance their loans through a variety of programs aimed at avoiding late or partial payments or foreclosure. “I don’t think a lot of people are aware that they have this option,” said Jeff Kinney, the vice president for innovation and development of Fannie Mae, who oversees refinancing activity. Because interest rates remain low, he said, refinancing may bring their payment “to a level that is sustainable to them and put money in their pockets.”
In the New York region, according to Zillow.com, some 17.1 percent of single-family homes right now are considered underwater, which means the owners owe more on the mortgage than the home is worth. (The national average of underwater properties is 28.4 percent.)
Those looking to refinance through programs offered by Fannie Mae and Freddie Mac, the government buyers of home loans, will first need to find out who holds or services their mortgage so they can determine whether they qualify. On their Web sites, both agencies provide links that show whether a particular address is in their portfolio.
Be careful, though, if you own an apartment. “Sometimes the system doesn’t recognize the unit” number, said Matt Hackett, the underwriting manager of Equity Now, a direct mortgage lender based in New York.
If your loan is owned by Fannie or Freddie, you may qualify for the Home Affordable Refinance Program, or HARP. Some 2.5 million to 3 million homeowners may be eligible to use HARP, according to government estimates — provided, among other things, that they have not been late on their payments more than once in the last 12 months.
Instead of the 80 percent loan-to-home-value required in most initial mortgages today (the remaining 20 percent comes from your down payment), HARP loans offer up to 125 percent, to cover the home’s shrunken value. That means a home appraised at $500,000 could warrant a loan of up to $625,000, if the owner’s income was sufficient to repay it, instead of the maximum $400,000 in most conventional mortgages.
Federal Housing Administration loans also have refinancing options. One of them, the F.H.A. Short Refinance option, requires the lender to write down at least 10 percent of the remaining balance of the loan and the homeowner to be current on payments, among other requirements. Still other programs are available for people who have lost their jobs.
If your loan is held by a bank or has been bundled up and sold to an investment group, your options may be more limited. “It is case by case,” Mr. Hackett said. You may need to call around to locate other lenders willing to refinance underwater loans.
Lenders like Atlantic Home Loans have started offering loans with lender-paid mortgage insurance, and will refinance at 95 percent of the value, Mrs. Sweet-Kostoplis said. She added that one of her clients reduced her mortgage payment by $850 a month when the rate came down to 4.5 percent from 6.7 percent.
When you meet with your mortgage officer, Mrs. Sweet-Kostoplis advised, don’t hide anything in your financial situation. “The mortgage person is on your team” and wants to help you stay in your home, she said. If you need help sorting out your options, HUD lists agencies and counselors whose advice is generally free.
Fannie Mae also has a broader umbrella, called Refi Plus, that can be used by people whose mortgages finance second homes and income properties. The programs have flexibility; most of them run through June 30, 2012.
Given where rates are, your immediate action could ring you the results you are looking for ... so pick up the phone and Good Luck to you.
“A lot of people have been sitting and not doing anything,” said Cari Sweet-Kostoplis, a senior mortgage banker at Atlantic Home Loans in Lincoln Park, N.J. But they may qualify to refinance their loans through a variety of programs aimed at avoiding late or partial payments or foreclosure. “I don’t think a lot of people are aware that they have this option,” said Jeff Kinney, the vice president for innovation and development of Fannie Mae, who oversees refinancing activity. Because interest rates remain low, he said, refinancing may bring their payment “to a level that is sustainable to them and put money in their pockets.”
In the New York region, according to Zillow.com, some 17.1 percent of single-family homes right now are considered underwater, which means the owners owe more on the mortgage than the home is worth. (The national average of underwater properties is 28.4 percent.)
Those looking to refinance through programs offered by Fannie Mae and Freddie Mac, the government buyers of home loans, will first need to find out who holds or services their mortgage so they can determine whether they qualify. On their Web sites, both agencies provide links that show whether a particular address is in their portfolio.
Be careful, though, if you own an apartment. “Sometimes the system doesn’t recognize the unit” number, said Matt Hackett, the underwriting manager of Equity Now, a direct mortgage lender based in New York.
If your loan is owned by Fannie or Freddie, you may qualify for the Home Affordable Refinance Program, or HARP. Some 2.5 million to 3 million homeowners may be eligible to use HARP, according to government estimates — provided, among other things, that they have not been late on their payments more than once in the last 12 months.
Instead of the 80 percent loan-to-home-value required in most initial mortgages today (the remaining 20 percent comes from your down payment), HARP loans offer up to 125 percent, to cover the home’s shrunken value. That means a home appraised at $500,000 could warrant a loan of up to $625,000, if the owner’s income was sufficient to repay it, instead of the maximum $400,000 in most conventional mortgages.
Federal Housing Administration loans also have refinancing options. One of them, the F.H.A. Short Refinance option, requires the lender to write down at least 10 percent of the remaining balance of the loan and the homeowner to be current on payments, among other requirements. Still other programs are available for people who have lost their jobs.
If your loan is held by a bank or has been bundled up and sold to an investment group, your options may be more limited. “It is case by case,” Mr. Hackett said. You may need to call around to locate other lenders willing to refinance underwater loans.
Lenders like Atlantic Home Loans have started offering loans with lender-paid mortgage insurance, and will refinance at 95 percent of the value, Mrs. Sweet-Kostoplis said. She added that one of her clients reduced her mortgage payment by $850 a month when the rate came down to 4.5 percent from 6.7 percent.
When you meet with your mortgage officer, Mrs. Sweet-Kostoplis advised, don’t hide anything in your financial situation. “The mortgage person is on your team” and wants to help you stay in your home, she said. If you need help sorting out your options, HUD lists agencies and counselors whose advice is generally free.
Fannie Mae also has a broader umbrella, called Refi Plus, that can be used by people whose mortgages finance second homes and income properties. The programs have flexibility; most of them run through June 30, 2012.
Given where rates are, your immediate action could ring you the results you are looking for ... so pick up the phone and Good Luck to you.
Friday, August 19, 2011
I just bought my house and Homeowner mortgage write-off may be in jeopardy
Decisions in coming weeks by the 12-member bipartisan congressional committee tasked with reducing the federal deficit could affect mortgage interest deductions.
If you take mortgage interest tax deductions, the next 100 days could have significant financial implications for you because of Congress' new federal debt ceiling plan.
Although the compromise legislation itself involved no new taxes, it created an unusual mechanism — an evenly split, 12-member bipartisan super-committee that could call for major cutbacks on real estate write-offs by Thanksgiving.
All it will take is a single vote by a lone senator or House member who breaks with his or her party to put the mortgage interest deduction into serious play.
Here is what's about to unfold and how it could affect you: The legislation signed by the president Aug. 2 calls for a two-step increase in the federal debt ceiling plus spending cuts of about $917 billion. It also created the Joint Select Committee on Deficit Reduction with the goal of slashing an additional $1.5 trillion from the deficit during the coming decade.
The committee is required to vote on a plan to achieve these objectives by Nov. 23, using revenue increases, spending cuts or a combination. If the committee members cannot agree on a plan or if either chamber of Congress votes it down, automatic and severe spending cuts of $1.5 trillion will be imposed equally on the Department of Defense and domestic programs including Medicare provider payments.
Membership consists of six Republicans and six Democrats — three each from the Senate and House — chosen by party leaders. To approve a final package of deficit cuts and extend the debt ceiling, all that will be needed is a simple majority — seven votes.
House and Senate leaders selected their six members last week: Democratic Sens. Patty Murray of Washington, Max Baucus of Montana and John F. Kerry of Massachusetts; Democratic Reps. James E. Clyburn of South Carolina, Xavier Becerra of California and Chris Van Hollen of Maryland; Republican Sens. John Kyl of Arizona, Pat J. Toomey of Pennsylvania and Rob Portman of Ohio; and Republican Reps. Jeb Hensarling of Texas, Dave Camp of Michigan and Fred Upton, also of Michigan.
The selections appear to include members who have taken stances in the past that are consistent with party positions — Democrats typically favor revenue increases to help close the deficit, whereas Republicans generally want to slash spending without raising taxes. But there is a real possibility that one or more members on either side could be concerned enough about the prospect of painful automatic military or social-program spending cuts that they would go with their conscience and break party ranks.
That compromise might well involve new revenue — one of the lowest-hanging sources of which is the mortgage interest deduction. Lobbying groups who seek to preserve housing write-offs already are gearing up for battle on Capitol Hill.
The National Assn. of Realtors sent an urgent alert to its 1.1 million members asking them to directly "engage their members of Congress on the importance of preserving real estate tax provisions" during the coming several weeks. Officials acknowledge that the super-committee's structure — with its guaranteed punishments for failure aimed squarely at Republicans (military spending) and Democrats (social programs) — makes it more difficult than usual to influence the final outcome.
After decades of being considered politically sacrosanct, why are homeowner mortgage write-offs suddenly on the chopping block? No. 1 is sheer size. The congressional Joint Committee on Taxation estimates that the home mortgage interest deduction will cost the federal government $100 billion during fiscal 2011 and $107.3 billion in fiscal 2012. Between 2008 and 2012, the cumulative write-offs for mortgage interest are projected to total just under half a trillion dollars.
Among the options open to the super-committee: Lower the maximum mortgage amount eligible for interest deductions to $500,000 from the current $1.1 million; replace the deduction with a tax credit that would be usable by lower- and moderate-income owners as well as those with higher incomes; eliminate interest deductions on second homes; and phase out the deductibility of homeowner property tax payments.
Defenders of the write-offs argue that high levels of homeownership are essential to economic growth and social stability, and fully justify the tax system preferences they receive. National opinion polls regularly find widespread support for the write-offs, even among renters. Also, academic and trade group studies project that any abrupt, across-the-board reduction in the deductibility of mortgage interest would have a severe effect on home values, possibly sending them plummeting as much as 15%.
Critics, on the other hand, consider the write-offs inherently unfair: They're skewed to benefit upper-income owners disproportionately, and are highly concentrated geographically along the West Coast, the Northeastern states and mid-Atlantic.
Where's this debate ultimately headed? It's much too early to predict. But any way you look at it, real estate write-offs could be in greater political jeopardy in the next three months than they have been at any time in the last 25 years.
If you own a home, and this plan is successful, the current Administration is attempting to partially fund their monetary decisions with your tax writeoffs, whether you agree or not; AND if you don't own a home, it will be exponentially more difficult for you to realize the American dream.
This decision could create an even wider gap between the rich and the rest. Now's the time, even if you've never done this before to write your Senator and Congressman to let them know your opinion... and as always -
Keep the faith!
reproduced from a Kenneth R. Harney article - Reporting From Washington—
If you take mortgage interest tax deductions, the next 100 days could have significant financial implications for you because of Congress' new federal debt ceiling plan.
Although the compromise legislation itself involved no new taxes, it created an unusual mechanism — an evenly split, 12-member bipartisan super-committee that could call for major cutbacks on real estate write-offs by Thanksgiving.
All it will take is a single vote by a lone senator or House member who breaks with his or her party to put the mortgage interest deduction into serious play.
Here is what's about to unfold and how it could affect you: The legislation signed by the president Aug. 2 calls for a two-step increase in the federal debt ceiling plus spending cuts of about $917 billion. It also created the Joint Select Committee on Deficit Reduction with the goal of slashing an additional $1.5 trillion from the deficit during the coming decade.
The committee is required to vote on a plan to achieve these objectives by Nov. 23, using revenue increases, spending cuts or a combination. If the committee members cannot agree on a plan or if either chamber of Congress votes it down, automatic and severe spending cuts of $1.5 trillion will be imposed equally on the Department of Defense and domestic programs including Medicare provider payments.
Membership consists of six Republicans and six Democrats — three each from the Senate and House — chosen by party leaders. To approve a final package of deficit cuts and extend the debt ceiling, all that will be needed is a simple majority — seven votes.
House and Senate leaders selected their six members last week: Democratic Sens. Patty Murray of Washington, Max Baucus of Montana and John F. Kerry of Massachusetts; Democratic Reps. James E. Clyburn of South Carolina, Xavier Becerra of California and Chris Van Hollen of Maryland; Republican Sens. John Kyl of Arizona, Pat J. Toomey of Pennsylvania and Rob Portman of Ohio; and Republican Reps. Jeb Hensarling of Texas, Dave Camp of Michigan and Fred Upton, also of Michigan.
The selections appear to include members who have taken stances in the past that are consistent with party positions — Democrats typically favor revenue increases to help close the deficit, whereas Republicans generally want to slash spending without raising taxes. But there is a real possibility that one or more members on either side could be concerned enough about the prospect of painful automatic military or social-program spending cuts that they would go with their conscience and break party ranks.
That compromise might well involve new revenue — one of the lowest-hanging sources of which is the mortgage interest deduction. Lobbying groups who seek to preserve housing write-offs already are gearing up for battle on Capitol Hill.
The National Assn. of Realtors sent an urgent alert to its 1.1 million members asking them to directly "engage their members of Congress on the importance of preserving real estate tax provisions" during the coming several weeks. Officials acknowledge that the super-committee's structure — with its guaranteed punishments for failure aimed squarely at Republicans (military spending) and Democrats (social programs) — makes it more difficult than usual to influence the final outcome.
After decades of being considered politically sacrosanct, why are homeowner mortgage write-offs suddenly on the chopping block? No. 1 is sheer size. The congressional Joint Committee on Taxation estimates that the home mortgage interest deduction will cost the federal government $100 billion during fiscal 2011 and $107.3 billion in fiscal 2012. Between 2008 and 2012, the cumulative write-offs for mortgage interest are projected to total just under half a trillion dollars.
Among the options open to the super-committee: Lower the maximum mortgage amount eligible for interest deductions to $500,000 from the current $1.1 million; replace the deduction with a tax credit that would be usable by lower- and moderate-income owners as well as those with higher incomes; eliminate interest deductions on second homes; and phase out the deductibility of homeowner property tax payments.
Defenders of the write-offs argue that high levels of homeownership are essential to economic growth and social stability, and fully justify the tax system preferences they receive. National opinion polls regularly find widespread support for the write-offs, even among renters. Also, academic and trade group studies project that any abrupt, across-the-board reduction in the deductibility of mortgage interest would have a severe effect on home values, possibly sending them plummeting as much as 15%.
Critics, on the other hand, consider the write-offs inherently unfair: They're skewed to benefit upper-income owners disproportionately, and are highly concentrated geographically along the West Coast, the Northeastern states and mid-Atlantic.
Where's this debate ultimately headed? It's much too early to predict. But any way you look at it, real estate write-offs could be in greater political jeopardy in the next three months than they have been at any time in the last 25 years.
If you own a home, and this plan is successful, the current Administration is attempting to partially fund their monetary decisions with your tax writeoffs, whether you agree or not; AND if you don't own a home, it will be exponentially more difficult for you to realize the American dream.
This decision could create an even wider gap between the rich and the rest. Now's the time, even if you've never done this before to write your Senator and Congressman to let them know your opinion... and as always -
Keep the faith!
reproduced from a Kenneth R. Harney article - Reporting From Washington—
Thursday, August 11, 2011
HUD ruling brings new hope and higher 'Cash for Keys' to BofA borrowers
The Department of Housing and Urban Development has reached a settlement with Bank of America that releases the company from liability for failing to adequately provide alternatives to foreclosure on 57,000 delinquent government-insured mortgages.
The agreement, a draft of which was obtained by American Banker, was previously undisclosed. It has been forged on a separate but parallel track from continuing settlement talks between Bank of America, state attorneys general and other regulators over alleged mortgage origination and servicing failures.
B of A's pact with HUD requires it to waive a minimum of $10 million in unpaid mortgage payments and vet each of the 57,000 delinquent borrowers for a possible loan modification, short sale or other foreclosure alternative.
"Our total costs for the program will be multiples of that" $10 million minimum, B of A spokesman Dan Frahm said. The deal calls for measures to "ensure these customers have every opportunity to stay in their homes," he added.
After such outreach, the settlement paves the way for B of A to foreclose on homes that borrowers could not afford even after a mortgage modification and those that have been left vacant by owners.
In forging the agreement, HUD decided to forgo steep monetary damages or admissions of error from the bank.
Instead, it pushed for the lender to implement steps that in most cases it was supposed to have already taken under the terms of its FHA-guaranteed loans, with the apparent aim of minimizing foreclosures and related insurance claims.
"We took the borrowers into account first," said HUD general counsel Helen Kanovsky. "We think that that's really the best thing for the FHA [insurance] fund as well."
The agreement is HUD's first involving settlement of claims in which a servicer failed to offer loss mitigation to borrowers. It does not, however, prevent HUD from seeking damages from B of A for unrelated origination and servicing failures.
"We fought for as narrow a [legal] release as possible and as much money as possible," Kanovsky said.
Under HUD's standard terms, borrowers must be less than 12 months delinquent to qualify for loan modifications. With the B of A settlement, the minimum of $10 million the bank agreed to pay will go to covering past-due arrearages and giving borrowers who are more than a year behind the possibility of qualifying for foreclosure alternatives.
The agreement was signed July 11 by B of A senior vice president Robert Gaither, who directed queries to a company spokesman.
All of the 57,000 borrowers covered by the agreement are 12 to 24 months delinquent. They account for only 4% of the total 1.5 million FHA loans that B of A services but a substantial portion of the company's seriously delinquent loans. B of A holds $19.8 billion in FHA-insured loans that are 90 days or more delinquent, and another $3.1 billion in FHA loans 31 to 89 days delinquent, the bank said in its second-quarter earnings release.
Under its terms with HUD, B of A will have to pay an independent monitor to review its modification work and report to HUD. It is also obligated to seek borrowers through database searches, letters, phone queries and visits to properties. Borrowers who fail to qualify for loan modifications, will receive from B of A $4,000 for a short sale and $7,500 for a deed-in-lieu of foreclosure.
The deal reflects the high levels of financial uncertainty surrounding such negotiations. In May, B of A agreed to pay $20 million, or double the minimum for the latest settlement, for improperly foreclosing on a relatively few 160 homes of military service members.
The settlement is "not a lot of money for the potential losses that the federal government may have to make good on," said Diane Thompson, an attorney for the National Consumer Law Center.
The minimum $10 million payment of borrowers' arrearages is unlikely to defray the FHA's losses on foreclosures, she said.
But if Bank of America is "able to identify the loans, and if people are still in the homes, and if they waive payments over past 12 months, then that's more valuable than a big fine for Bank of America," Thompson said. "But there are a lot of ifs there."
The largest banks hold billions of dollars of delinquent FHA loans on their balance sheets for which they have not yet filed claims. This may be because of concerns that they may have violated stringent HUD servicer requirements and could be held liable for treble damages related to false claims. One sticking point in settling such claims is that the FHA requires all servicers to have employees conduct face-to-face interviews with FHA borrowers once they become 60 days delinquent, a procedure most servicers either did not undertake or cannot document.
As part of the deal HUD has also agreed to pay any mortgage insurance claims and waive any pending administrative actions against B of A, its officers, directors or employees "in connection with servicing or loss mitigation deficiencies." The only exclusion is for allegations involving improper transfers of titles.
B of A also has agreed not to claim expenses on any FHA insurance claims for taxes, liens or property preservation incurred from November 2010 through July 2011.
The agreement, a draft of which was obtained by American Banker, was previously undisclosed. It has been forged on a separate but parallel track from continuing settlement talks between Bank of America, state attorneys general and other regulators over alleged mortgage origination and servicing failures.
B of A's pact with HUD requires it to waive a minimum of $10 million in unpaid mortgage payments and vet each of the 57,000 delinquent borrowers for a possible loan modification, short sale or other foreclosure alternative.
"Our total costs for the program will be multiples of that" $10 million minimum, B of A spokesman Dan Frahm said. The deal calls for measures to "ensure these customers have every opportunity to stay in their homes," he added.
After such outreach, the settlement paves the way for B of A to foreclose on homes that borrowers could not afford even after a mortgage modification and those that have been left vacant by owners.
In forging the agreement, HUD decided to forgo steep monetary damages or admissions of error from the bank.
Instead, it pushed for the lender to implement steps that in most cases it was supposed to have already taken under the terms of its FHA-guaranteed loans, with the apparent aim of minimizing foreclosures and related insurance claims.
"We took the borrowers into account first," said HUD general counsel Helen Kanovsky. "We think that that's really the best thing for the FHA [insurance] fund as well."
The agreement is HUD's first involving settlement of claims in which a servicer failed to offer loss mitigation to borrowers. It does not, however, prevent HUD from seeking damages from B of A for unrelated origination and servicing failures.
"We fought for as narrow a [legal] release as possible and as much money as possible," Kanovsky said.
Under HUD's standard terms, borrowers must be less than 12 months delinquent to qualify for loan modifications. With the B of A settlement, the minimum of $10 million the bank agreed to pay will go to covering past-due arrearages and giving borrowers who are more than a year behind the possibility of qualifying for foreclosure alternatives.
The agreement was signed July 11 by B of A senior vice president Robert Gaither, who directed queries to a company spokesman.
All of the 57,000 borrowers covered by the agreement are 12 to 24 months delinquent. They account for only 4% of the total 1.5 million FHA loans that B of A services but a substantial portion of the company's seriously delinquent loans. B of A holds $19.8 billion in FHA-insured loans that are 90 days or more delinquent, and another $3.1 billion in FHA loans 31 to 89 days delinquent, the bank said in its second-quarter earnings release.
Under its terms with HUD, B of A will have to pay an independent monitor to review its modification work and report to HUD. It is also obligated to seek borrowers through database searches, letters, phone queries and visits to properties. Borrowers who fail to qualify for loan modifications, will receive from B of A $4,000 for a short sale and $7,500 for a deed-in-lieu of foreclosure.
The deal reflects the high levels of financial uncertainty surrounding such negotiations. In May, B of A agreed to pay $20 million, or double the minimum for the latest settlement, for improperly foreclosing on a relatively few 160 homes of military service members.
The settlement is "not a lot of money for the potential losses that the federal government may have to make good on," said Diane Thompson, an attorney for the National Consumer Law Center.
The minimum $10 million payment of borrowers' arrearages is unlikely to defray the FHA's losses on foreclosures, she said.
But if Bank of America is "able to identify the loans, and if people are still in the homes, and if they waive payments over past 12 months, then that's more valuable than a big fine for Bank of America," Thompson said. "But there are a lot of ifs there."
The largest banks hold billions of dollars of delinquent FHA loans on their balance sheets for which they have not yet filed claims. This may be because of concerns that they may have violated stringent HUD servicer requirements and could be held liable for treble damages related to false claims. One sticking point in settling such claims is that the FHA requires all servicers to have employees conduct face-to-face interviews with FHA borrowers once they become 60 days delinquent, a procedure most servicers either did not undertake or cannot document.
As part of the deal HUD has also agreed to pay any mortgage insurance claims and waive any pending administrative actions against B of A, its officers, directors or employees "in connection with servicing or loss mitigation deficiencies." The only exclusion is for allegations involving improper transfers of titles.
B of A also has agreed not to claim expenses on any FHA insurance claims for taxes, liens or property preservation incurred from November 2010 through July 2011.
Friday, August 5, 2011
BofA offers to lower the balance of distressed mortgages ... if you qualify
If you're a cash-strapped homeowner in California with a mortgage serviced by Bank of America, you may have a chance at getting your principal lowered through a state program that helps people stay in their homes.
The California Housing Finance Agency said earlier this week that Bank of America is now part of Keep Your Home California’s principal-reduction program, making it the largest loan servicer involved in lowering loan balances for those with economic hardships.
A servicer is a company homeowners make their mortgage payments to every month. Bank of America serves more than two million home loans in the state, agency officials said.
Other servicers involved are the California Department of Veterans Affairs, the California Housing Finance Agency, Community Trust/Self Help, GMAC, Guild Mortgage Company and Vericrest Financial.
Agency officials hope that list continues to grow.
"We believe principal reduction can be an appropriate tool for helping qualified homeowners obtain an affordable and sustainable modification," said Claudia Cappio, California Housing Finance Agency's executive director, in a statement.
Keep Your Home California’s principal-reduction program is one slice of a $2 billion effort to help struggling homeowners avoid foreclosure.
Qualified homeowners could be eligible for up to $50,000 in assistance from the Keep Your Home California program, which requires the mortgage investor to match dollar-for-dollar the amount provided by the program.
For instance, if the program agrees to reduce the principal by $50,000, then the mortgage investor must match that $50,000 reduction, resulting in a total $100,000 reduction.
Bank of America borrowers who don't qualify for the principal-reduction program will be evaluated by bank representatives to explore other options, including a loan modification.
Keep Your Home California is funded by the U.S. Treasury Department.
If you have questions, call 888.954.KEEP (5337) or visit KeepYourHomeCalifornia.org.
The California Housing Finance Agency said earlier this week that Bank of America is now part of Keep Your Home California’s principal-reduction program, making it the largest loan servicer involved in lowering loan balances for those with economic hardships.
A servicer is a company homeowners make their mortgage payments to every month. Bank of America serves more than two million home loans in the state, agency officials said.
Other servicers involved are the California Department of Veterans Affairs, the California Housing Finance Agency, Community Trust/Self Help, GMAC, Guild Mortgage Company and Vericrest Financial.
Agency officials hope that list continues to grow.
"We believe principal reduction can be an appropriate tool for helping qualified homeowners obtain an affordable and sustainable modification," said Claudia Cappio, California Housing Finance Agency's executive director, in a statement.
Keep Your Home California’s principal-reduction program is one slice of a $2 billion effort to help struggling homeowners avoid foreclosure.
Qualified homeowners could be eligible for up to $50,000 in assistance from the Keep Your Home California program, which requires the mortgage investor to match dollar-for-dollar the amount provided by the program.
For instance, if the program agrees to reduce the principal by $50,000, then the mortgage investor must match that $50,000 reduction, resulting in a total $100,000 reduction.
Bank of America borrowers who don't qualify for the principal-reduction program will be evaluated by bank representatives to explore other options, including a loan modification.
Keep Your Home California is funded by the U.S. Treasury Department.
If you have questions, call 888.954.KEEP (5337) or visit KeepYourHomeCalifornia.org.
Saturday, July 9, 2011
Fannie Mae and Freddie Mac possible merger introduced in new bill
It's been an interesting topic going back to 2009 and today, legislation was introduced by Republican Representative Gary Miller of California and Democratic Representative Carolyn McCarthy of New York to merge Fannie Mae and Freddie Mac. This would create a single entity allowing the government held organization to collectively purchase mortgages and sell them to investors as government backed securities.
The new entity would seemingly operate in a not-for-profit setup, creating a “secondary market facility” for residential mortgage loans. Secondary Market Operations is no news to us however the idea is ... Operating costs would be supported by buying home loans and then pooling them into bonds sales which would generate income. All realized profits would be returned to the U.S. Treasury. Banks would pay a “guarantee” fee on loans which would also serve to financially support the new entity. The plan claims to address severe losses by requiring investors to pay a fee to finance an insurance fund.
Read the full story here: http://agentgenius.com/real-estate-mortgage-economy/bill-introduced-to-merge-fannie-mae-freddie-mac-realistic/
Rep. Miller said, “we don’t want Congress meddling,” so the bill notes the new operation would be governed by a presidentially appointed board.
The new entity would seemingly operate in a not-for-profit setup, creating a “secondary market facility” for residential mortgage loans. Secondary Market Operations is no news to us however the idea is ... Operating costs would be supported by buying home loans and then pooling them into bonds sales which would generate income. All realized profits would be returned to the U.S. Treasury. Banks would pay a “guarantee” fee on loans which would also serve to financially support the new entity. The plan claims to address severe losses by requiring investors to pay a fee to finance an insurance fund.
Read the full story here: http://agentgenius.com/real-estate-mortgage-economy/bill-introduced-to-merge-fannie-mae-freddie-mac-realistic/
Rep. Miller said, “we don’t want Congress meddling,” so the bill notes the new operation would be governed by a presidentially appointed board.
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