Archive for the ‘HARP’ Category

Pending Legislation Could Help Homeowners Refinance

Friday, March 29th, 2013

The Responsible Homeowner Refinancing Act, a recently proposed bill in the House of Representatives, would help millions of homeowners refinance at lower interest rates, thus saving thousands of dollars a year and rewarding those who have been responsible in keeping up with mortgage payments.

HARP, he current refinancing program, only saves homeowners on the average about $2500 a year, but the new bill would increase the savings and the opportunity to refinance for millions of borrowers who met the eligibility requirements. The new bill also will supposedly help many who do not qualify under HARP.

Here is what else the new bill will do:

• Allow for streamlined refinancing options for Fannie Mae and Freddie Mac borrowers, whether or not they are currently underwater. Under the HARP program many underwater borrowers were cut out because of a lack of equity; the new legislation will require all servicers to adhere to the same set of rules, thus providing more underwater borrowers the opportunity to refinance.

•  Eliminate appraisal costs for every borrower under the program

•  Reduce refinance fees that are paid up-front

•  Remove other barriers to competition, so that other lenders could compete for your business

•  Streamline the application process so it is quicker

•  Extend HARP for one year, so that eligible borrowers could access the program

I am happy that this new bill may help some borrowers be able to refinance into lower rate loans, however, the new bill will still only apply to borrowers whose loans are Fannie or Freddie loans. There is still a very large pool of homeowners out there who would love to refinance but do not have Fannie or Freddie loans. There has been talk of legislation that would help these other borrowers, but so far we have not seen it materialize. My hope is that this will be the next big focus of our legislators.

To track the progress of this bill you can visit this site.

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Real Estate News REcap

Monday, February 20th, 2012

In case you haven’t been following the news lately, there is a lot of real estate-related news making headlines right now. Here are some of the big stories:

1.  Underwater homeowner refinancing to include non-Fannie and Freddie backed loans? Many people are aware that the new version of HARP will reach out to help homeowners who are underwater (see the previous blog), but still many more have been asking whether they will be able to seek similar refinancing possibilities if they do NOT have a loan backed by Fannie and Freddie. There have been rumblings about this, and last week I saw a few articles on this topic. HARP2, which is expected to roll out in a few weeks, is expected to open up the refinancing option to many homeowners who are underwater. Once that ball gets rolling, look for more information on applying similar relief to those who are underwater but do not have loans backed by Fannie and Freddie. This could change the housing situation and prevent many future foreclosures.

2. Home purchasing is the most affordable in decades. According to an article published last week by CNN, the National Association of Home Builders/Wells Fargo Housing Opportunity Index, housing price declines and low mortgage rates have created a rare opportunity for those who earn national median salaries – 75.9% of all new and existing homes for sale fell within that affordability range during the last quarter of 2011. The number has not been this high in the 20 year history of the index. Of course, whether one can afford a home versus whether one can actually buy one are not one and the same – obtaining loans are still tricky for many borrowers.

3. Distressed inventory is keeping California home prices low. Despite the increase in housing inventory last month, prices in California remain low due to the number of distressed inventory on the market, according to the California Association of Realtors. The Association reported that the median price of a single family detached home dropped 6.7% in January from December, and that compared to January of 2011, the median dropped 3.9%. With inventory rising and heading into the Spring sales season, it will be interesting to see what happens to prices, as some areas seem to be on the upswing.

4. Delinquency rate is dropping (but is that telling?). The rate of delinquencies has been dropping, as reported by the Mortgage Bankers Association, and is currently at only 7.6% of all mortgages. Still, about 44% of all homes in the U.S. are currently in foreclosure proceedings, which doesn’t really make the first figure sound too promising. Although California is ahead in clearing it’s backlog of distressed inventory quicker than many other states, now that the robo signing lawsuits have been settled we may see more properties go into foreclosure – a large percentage of these were waiting in the wings while the settlements were being negotiated. Also, we need to factor in HARP2, which will come into play in a few weeks – this could also have a big effect on preventing foreclosures, especially if the administration extends it to non-Fannie and Freddie backed loans, as planned. So, stay tuned – it will be an interesting year for distressed inventory.

5.  Property valuation fraud increases. The recently released Mortgage Fraud Risk Report indicated that property valuation fraud increased 8% in the fourth quarter of 2011. Arizona was ranked the riskiest state for fraud, with Nevada in close second. California ranked fourth. The report studies four specific types of fraud risk: property valuation, occupancy, identity and employment/income.

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Can Underwater Homeowners Refinance?

Thursday, February 16th, 2012

One of the biggest problems with the state of housing ownership is that one in four homeowners in the U.S. are underwater, meaning that they owe more on their mortgage than the current market value of their homes. In many situations this leads to foreclosure or other options like short sales or deeds in lieu of foreclosure. But what about the homeowners who are not delinquent, have been making their payments, maintaining their credit and doing the right thing, despite the drastic drop in value of their homes? Help is on the way…

The new HARP2 (Home Affordable Refinance Program, version 2) debuts March 15. This new revised version of the program hints at helping those who could not qualify under the original program because they were not delinquent. Here are the differences:

Proposed program: The new HARP guidelines, which will be released next month and have been extended until December 31, 2013, will enable underwater homeowners who are not delinquent to refinance their homes. This program will allow refinances, like HARP,  for underwater homeowner regardless of whether your loan is with Fannie or Freddie. Here are the requirements:

1. Loans must be current, with a good 12 month payment history – no late payments in the last 6 months and only one is allowed in the last 12 months

2. Loan to value limits will be eliminated, so homeowners will be able to refinance regardless of how far the values of their homes have dropped (under the current HARP, the loan to value limit was set at 125%, so many homeowners did not qualify).

3.  No appraisals or underwriting will be required, making the refinancing process easier. There will likely be a home inspection, just to make sure the home is in decent condition, but not a formal appraisal.

4.  The loan must be backed by either Fannie Mae or Freddie Mac. To find out if your loan qualifies, you can visit http://www.fanniemae.com/loanlookup/ and http://www.freddiemac.com/corporate/.

There has been some talk of a similar program to HARP that will help those who do not have loans backed by Fannie or Freddie. Hopefully in the future we will see such a program.

The new HARP will undoubtedly help many people stuck in that gray area – where they are not delinquent but feel trapped under a mortgage that exceeds current value and an interest rate that is much higher than current rates. Contact your mortgage broker to discuss whether you can qualify for the new HARP. For more information on HARP, go to http://www.makinghomeaffordable.gov or call (888) 995-HOPE (the number for HopeNow, a government-sponsored counseling organization that is a wonderful resource).

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Will Homeowners Really Be Helped by New HARP Changes?

Wednesday, October 26th, 2011

Recently the Obama administration announced changes to the Home Affordable Refinance Program (HARP) that are aimed at helping homeowners refinance mortgages, even when there is no equity in their homes. Their goal is to help the millions of homeowners and prevent more foreclosures, but what is involved and will it really work?

Some of the changes to HARP include the following:

1.  Fee reduction. Many of the fees associated with refinancing will be reduced.

2. Current loan to value cap on fixed rate home loans will disappear. This was the reason many homeowners could not take advantage of HARP initially, since the value of their homes had decreased significantly.

3.  Reduced underwriting guidelines. Some of the changes almost hint at a stated income situation, with a verbal income verification…but we will have to wait and see the specifics when they are announced.

4.   Appraisal changes. The new plan will have a valuation system for appraisals, called “automated valuation,” which will do away with the need for new appraisals, and hopefully avoid appraisal issues that have plagued refinancing in the past.

There are a few caveats, most importantly that the homeowner has to be current on their mortgage. The home also must be a primary residence, and borrowers will be able to shop rates with other lenders, not just the lender who currently holds their loan. More details will be revealed next month. Some of these changes sound promising, and I do believe that more homeowners will get to take advantage of the lower rates without these restrictions, but the big question is:

Will the new HARP really help the housing market?

I have to say no to this. While this is a nice plan to help some more people get into lower mortgages, the fact is that it does not shine the light on the bigger problem in real estate – homeowners who have fallen behind on their mortgages. The new HARP offers no help to these people, and their homes will likely turn into a big future foreclosure wave. The negative equity in these homes is so great that neighborhoods will continue to be effected by their foreclosures, with comparables continuing to drop.

The other big problem I see with the new program is that it has to be implemented by the banks. Although some banks, like Bank of America, claim to embrace the new program, chances are we will still face many hurdles from the banks with implementation. Banks are  simply too scared to refinance many mortgages, and the re-default rate is high, making them risky.

While I think the new HARP plan can help some homeowners, I think it is just the beginning. I stand by my opinion that housing must be fixed if we ever want to see the economy improve. We need MUCH more than what HARP can do. We need to help the millions of people who are unable to pay their mortgages, prevent the wave of foreclosures down the road, and find ways to deal with the heavy inventory currently owned by the lenders that is not yet on the market. To do this, we need the cooperation of the major lenders in formulating plans to help these people.

What do you think?

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