Building Wealth Magazine

The following is a Q&A released by the US Treasury Department to answer the folks who are not behind on their mortgage and those at risk of foreclosure and want to know how the $75 Billion Homeowner Affordability and Stability Plan affects them.

 Fact Sheet http://www.treas.gov/news/index2.html

 

Borrowers Who Are Current on Their Mortgage Are Asking:

 

1. What help is available for borrowers who stay current on their mortgage payments but have seen their homes decrease in value?

Under the Homeowner Affordability and Stability Plan, eligible borrowers who stay current on their mortgages but have been unable to refinance to lower their interest rates because their homes have decreased in value, may now have the opportunity to refinance into a 30 or 15 year, fixed rate loan. Through the program, Fannie Mae and Freddie Mac will allow the refinancing of mortgage loans that they hold in their portfolios or that they placed in mortgage backed securities.

 

2. I owe more than my property is worth, do I still qualify to refinance under the Homeowner Affordability and Stability Plan?

Eligible loans will now include those where the new first mortgage (including any refinancing costs) will not exceed 105% of the current market value of the property. For example, if your property is worth $200,000 but you owe $210,000 or less you may qualify. The current value of your property will be determined after you apply to refinance.

 

3. How do I know if I am eligible?

Complete eligibility details will be announced on March 4th when the program starts. The criteria for eligibility will include having sufficient income to make the new payment and an acceptable mortgage payment history. The program is limited to loans held or securitized by Fannie Mae or Freddie Mac.

 

4. I have both a first and a second mortgage. Do I still qualify to refinance under the Homeowner Affordability and Stability Plan?

As long as the amount due on the first mortgage is less than 105% of the value of the property, borrowers with more than one mortgage may be eligible to refinance under the Homeowner Affordability and Stability Plan. Your eligibility will depend, in part, on agreement by the lender that has your second mortgage to remain in a second position, and on your ability to meet the new payment terms on the first mortgage.

 

5. Will refinancing lower my payments?

The objective of the Homeowner Affordability and Stability Plan is to provide creditworthy borrowers who have shown a commitment to paying their mortgage with affordable payments that are sustainable for the life of the loan. Borrowers whose mortgage interest rates are much higher than the current market rate should see an immediate reduction in their payments. Borrowers who are paying interest only, or who have a low introductory rate that will increase in the future, may not see their current payment go down if they refinance to a fixed rate. These borrowers, however, could save a great deal over the life of the loan. When you submit a loan application, your lender will give you a “Good Faith Estimate” that includes your new interest rate, mortgage payment and the amount that you will pay over the life of the loan. Compare this to your current loan terms. If it is not an improvement, a refinancing may not be right for you.

 

6. What are the interest rate and other terms of this refinance offer?

The objective of the Homeowner Affordability and Stability Plan is to provide borrowers with a safe loan program with a fixed, affordable payment. All loans refinanced under the plan will have a 30 or 15 year term with a fixed interest rate. The rate will be based on market rates in effect at the time of the refinance and any associated points and fees quoted by the lender. Interest rates may vary across lenders and over time as market rates adjust. The refinanced loans will have no prepayment penalties or balloon notes.

 

7. Will refinancing reduce the amount that I owe on my loan?

No. The objective of the Homeowner Affordability and Stability Plan is to help borrowers refinance into safer, more affordable fixed rate loans. Refinancing will not reduce the amount you owe to the first mortgage holder or any other debt you owe. However, by reducing the interest rate, refinancing should save you money by reducing the amount of interest that you repay over the life of the loan.

 

8. How do I know if my loan is owned or has been securitized by Fannie Mae or Freddie Mac?

To determine if your loan is owned or has been securitized by Fannie Mae or Freddie Mac and is eligible to be refinanced, you should contact your mortgage lender after March 4, 2009.

 

9. When can I apply?

Mortgage lenders will begin accepting applications after the details of the program are announced on March 4, 2009.

 

10. What should I do in the meantime?

You should gather the information that you will need to provide to your lender after March 4, when the refinance program becomes available. This includes: information about the gross monthly income of all borrowers, including your most recent pay stubs if you receive them or documentation of income you receive from other sources your most recent income tax return information about any second mortgage on the house payments on each of your credit cards if you are carrying balances from month to month, and payments on other loans such as student loans and car loans.

 

 

Borrowers Who Are at Risk of Foreclosure Are Asking:

 

1. What help is available for borrowers who are at risk of foreclosure either because they are behind on their mortgage or are struggling to make the payments?

The Homeowner Affordability and Stability Plan offers help to borrowers who are already behind on their mortgage payments or who are struggling to keep their loans current. By providing mortgage lenders with financial incentives to modify existing first mortgages, the Treasury hopes to help as many as 3 to 4 million homeowners avoid foreclosure regardless of who owns or services the mortgage.

 

2. Do I need to be behind on my mortgage payments to be eligible for a modification?

No. Borrowers who are struggling to stay current on their mortgage payments may be eligible if their income is not sufficient to continue to make their mortgage payments and they are at risk of imminent default. This may be due to several factors, such as a loss of income, a significant increase in expenses, or an interest rate that will reset to an unaffordable level.

 

3. How do I know if I qualify for a payment reduction under the Homeowner Affordability and Stability Plan?

In general, you may qualify for a mortgage modification if (a) you occupy your house as your primary residence; (b) your monthly mortgage payment is greater than 31% of your monthly gross income; and (c) your loan is not large enough to exceed current Fannie Mae and Freddie Mac loan limits. Final eligibility will be determined by your mortgage lender based on your financial situation and detailed guidelines that will be available on March 4, 2009.

 

4. I do not live in the house that secures the mortgage I’d like to modify. Is this mortgage eligible for the Homeowner Affordability and Stability Plan?

No. For example, if you own a house that you use as a vacation home or that you rent out to tenants, the mortgage on that house is not eligible. If you used to live in the home but you moved out, the mortgage is not eligible. Only the mortgage on your primary residence is eligible. The mortgage lender will check to see if the dwelling is your primary residence.

 

5. I have a mortgage on a duplex. I live in one unit and rent the other. Will I still be eligible?

Yes. Mortgages on 2, 3 and 4 unit properties are eligible as long as you live in one unit as your primary residence.

 

6. I have two mortgages. Will the Homeowner Affordability and Stability Plan reduce the payments on both?

Only the first mortgage is eligible for a modification.

 

7. I owe more than my house is worth. Will the Homeowner Affordability and Stability Plan reduce what I owe?

The primary objective of the Homeowner Affordability and Stability Plan is to help borrowers avoid foreclosure by modifying troubled loans to achieve a payment the borrower can afford. Lenders are likely to lower payments mainly by reducing loan interest rates. However, the program offers incentives for principal reductions and at your lender’s discretion modifications may include upfront reductions of loan principal.

 

8. I heard the government was providing a financial incentive to borrowers. Is that true?

Yes. To encourage borrowers who work hard to retain homeownership, the Homeowner Affordability and Stability Plan provides incentive payments as a borrower makes timely payments on the modified loan. The incentive will accrue on a monthly basis and will be applied directly to reduce your mortgage debt. Borrowers who pay on time for five years can have up to $5,000 applied to reduce their debt by the end of that period.

 

9. How much will a modification cost me?

There is no cost to borrowers for a modification under the Homeowner Affordability and Stability Plan. If you wish to get assistance from a HUD-approved housing counseling agency or are referred to a counselor as a condition of the modification, you will not be charged a fee. Borrowers should beware of any organization that attempts to charge a fee for housing counseling or modification of a delinquent loan, especially if they require a fee in advance.

 

10. Is my lender required to modify my loan?

 

No. Mortgage lenders participate in the program on a voluntary basis and loans are evaluated for modification on a case-by-case basis. But the government is offering substantial incentives and it is expected that most major lenders will participate.

 

11. I’m already working with my lender / housing counselor on a loan workout. Can I still be considered for the Homeowner Affordability and Stability Plan?

Ask your lender or counselor to be considered under the Homeowner Affordability and Stability Plan.

 

12. How do I apply for a modification under the Homeowner Affordability and Stability Plan?

You may not need to do anything at this time. Most mortgage lenders will evaluate loans in their portfolio to identify borrowers who may meet the eligibility criteria. After March 4 they will send letters to potentially eligible homeowners, a process that may take several weeks. If you think you qualify for a modification and do not receive a letter within several weeks, contact your mortgage servicer or a HUD-approved housing counselor. Please be aware that servicers and counseling agencies are expected to receive an extraordinary number of calls about this program.

 

13. What should I do in the meantime?

You should gather the information that you will need to provide to your lender on or after March 4, when the modification program becomes available. This includes

·                     information about the monthly gross income of your household including recent pay stubs if you receive them or documentation of income you receive from other sources

·                     your most recent income tax return

·                     information about any second mortgage on the house

·                     payments on each of your credit cards if you are carrying balances from month to month, and

·                     payments on other loans such as student loans and car loans.

 

14. My loan is scheduled for foreclosure soon. What should I do?

Contact your mortgage servicer or credit counselor. Many mortgage lenders have expressed their intention to postpone foreclosure sales on all mortgages that may qualify for the modification in order to allow sufficient time to evaluate the borrower’s eligibility. We support this effort.

 

Source: http://www.treas.gov/initiatives/eesa/homeowner-affordability-plan/ConsumerQA.pdf

Lee Williams

Sr. Mortgage Consultant

Lee@GGGLoans com

(415) 310-0855

Twitter: @Building_Wealth

The media picked up on the prospect of 4.5% fixed mortgages back in November causing a lot of people to wait for rates to come down to this level before refinancing.  11 straight weeks of interest rate drops lead us to 4.5% fixed rate mortgages for the first time ever!!!  Yay!  But that celebration was short lived as rates jumped back up about a half a percent later that same week.  Boo!!! Fundamentally pressures on interest rates are sound with much of the increase coming from banks trying to unclog their pipelines.  So many people rushing to refinance caused most lenders to slow things up a bit by raising rates.

Also, there is a chance of a rate drop again this week as the Fed sits in a two day meeting focused on further helping to shore up the crumbling credit markets and build investor confidence.  The $500 Billion dollars committed to buying Mortgage Backed Securities has lead us to record lows in interest rates.

Now here’s the bad news.  First, with 50% of all home sales in the Bay Area Read the rest of this entry »

Consumers are often baffled by the home appraisal process. They may feel their home is worth a certain dollar amount, and therefore, the appraised value doesn’t make sense to them. It is important to know that appraisal guidelines are dictated by the lenders. In many states, the lenders must disclose the purpose of the appraisal, as each situation carries its own set of rules.

In essence, lender guidelines force appraisers to put a fair market value on a home based upon comparable sales in the area where the home is located, as the home must be bracketed according to size and value. For example, there is no set amount associated with a great view, pool, spa, bathroom upgrades, etc. If a homeowner installs Read the rest of this entry »

There are 220 million people in America eligible for credit, however credit card companies sent out over 6 BILLION offers last year.  Besides the obvious waste of paper, these offers create a real risk of Identity Theft. 

Should you ever need to take out new credit you are much more likely to get great credit card deals at sites like BankRate.com so there is no need for these offers to clog your mailbox.

If you would like to reduce the number of pre-screened credit and insurance offers you are receiving, visit www.optoutprescreen.com or call 1-888-5OptOut (1-888-567-8688) to opt-out of these offers. This is a free service to consumers offered by the major credit bureaus.

Through this website, you may request to:

• Opt-Out from receiving Firm Offers for Five Years - (electronically).
• Opt-Out from receiving Firm Offers permanently - (mail).
• Opt-In and be eligible to receive Firm Offers. This option is for consumers who have previously completed an Opt-Out request - (electronically).

Other consumers who wish to decrease the amount of unsolicited telemarketing calls they receive should register with the Federal Trade Commission’s National Do Not Call Registry at: www.donotcall.gov or by phone 1-888-382-1222.
Lee Williams

Choosing the Right Real Estate Agent

I thought I’d share the way I financed my last car as another way to keep your own money in your pocket and still get what you want. First of all, I’m lucky enough to have enough cash on hand to go buy a new car outright. But then, after handing all that money over to a car dealer, I would no longer have that cash, and would have purchased a depreciating asset that immediately lost value once I drove it off the lot and would continue to depreciate. Cars are not an investment. They are, however, a necessary way of life in Texas due to our lack of good public transportation and long distances to get anywhere. So, no matter what, I must have a car. I already have an 11 year old Saturn with 235K miles on it that was paid for a long time ago that I use for beating around town. I kept it because it’s reliable and cheap to maintain. But I recently wanted a second brand new car (my other second car, a Buick Regal of the same age was donated to charity at the time) to flaunt my status a little without being too ostentatious or flashy.

Here’s the math: I purchased a new Beetle convertible and “financed” $20K. I took $20K of my own money and purchased a 5 year CD at my credit union that was paying 4.5% return, with the option if the interest rates went up I could bump it upwards (’step-up’) twice with no penalty. I then pledged that $20K CD as security on a secured loan to myself for 5 years at 6% (locked in). I have the added benefit that the car was then completely paid for when I drove it off the lot Read the rest of this entry »

Banks got stupid, thinking that values would rise eternally, replacing sound underwriting with the belief that they were secured by the ever rising real estate.

In an effort to gain more market share, they came up with ever more creative ways of selling loans – lower start rates, easier qualifying, no documentation, no fees…  And they offered huge incentives to their distribution channels, both their own retail branches and mortgage brokers, to sell their products.  In their greed, they forgot reason, and made many loans that should not have been made.

The greater ease of buying created more demand for housing, putting upward pressure on the prices and creating artificially inflated values.  So buyers paid too much for their homes, using loans Read the rest of this entry »

The Benefits of a Professional Consultant

Choosing the right lender is a key element to managing your mortgage. As a mortgage consultant, my goal is not just to provide you with a loan, but also to help select the one most beneficial to you and your long-term goals, and then, help you manage that debt over time. There are not many lenders out there who provide this type of personalized service.

My job is just beginning when your first loan closes. I will continuously monitor rates on your behalf, and stay in touch with you to make sure we remain on target with your financial goals.

Seek Pre-Approval

What’s the difference between pre-qualification and pre-approval?

Pre-qualification is the starting point in your search for mortgage financing. A quick snapshot is taken which includes income, existing debt, savings, length of employment, etc. All of these factors will then be analyzed to determine your loan eligibility.

Pre-approval is Read the rest of this entry »

I am really excited about the prospect of a major news announcement next week that could dramatically affect the Californian housing market. Click Here to see a short video.

If all things go as expected, California real estate is about to get a major boost with the passage of the Economic Stimulus Package HR 5140.  Most of the talk about this $152 billion plan has been about the $300, $600, or $1,200 payments many individuals can expect to receive this year to help spur the economy.  
 

Even more important to California home owners and people looking to buy homes here is the temporary increase in the size of Fannie Mae & Freddie Mac insurable loans.  The current amount Read the rest of this entry »