From the desk of:
Rich Storey
Mortgage Advisor
615-260-8028
Mortgage applications spike
Refinancings soar as home loan rates fall after the government's actions to stabilize housing.
NEW YORK (Reuters) -- U.S. mortgage applications surged in the latest week, driven by a spike in demand for refinancing as the average rate on 30-year fixed-rate home loans fell, the Mortgage Bankers Association said on Wednesday.
Refinancing applications jumped 30% in the week ended March 13 as the borrowing rate dipped 0.07 percentage point to 4.89%, tying the record low reached in early January in a survey that dates to 1990.
The MBA's market index, which includes both purchase and refinance loans, jumped 21.2% to 876.9, the highest since mid-January.
But purchase applications rose just 1.5% last week to 257.1, a one-month high.
The Mortgage Bankers Association said its seasonally adjusted refinancing applications index jumped 29.6% in the week ended March 13 to 4,497.6, also the highest level since mid-January.
Home loan rates have fallen as the government has purchased more than $250 billion of mortgage-related assets and announced unprecedented steps to stabilize the deepest housing slump since the Great Depression.
A year ago, the average rate on a 30-year mortgage was closer to 6%.
The Federal Reserve purchases of mortgage-related assets is nearing the half-way mark targeted by the end of June to help cut mortgage costs and revive housing. The programs are widely expected to be expanded to bring borrowing costs down, stimulate purchases and help struggling homeowners to refinance and avert foreclosure.
Demand for purchases has been lagging refinancing applications. While homeowners are often compelled to cut current costs, worries about job loss or hopes that prices will cheapen further have keep many potential buyers at bay.
Refinancing requests represented about 73% of all mortgage applications last week.
Credited to: www.CNNMoney.com
Your Mortgage is Our Commitment------Expect Excellence
Wednesday, March 18, 2009
Friday, March 13, 2009
Time for Mortgage Transactions = NOW
From the desk of:
Rich Storey
Mortgage Advisor
615.260.8028
Mortgage Rates Inch Downward
NEW YORK (CNNMoney.com) -- Mortgage rates slipped last week, according to a weekly survey released Thursday.
The average 30-year fixed mortgage fell to 5.37% for the week ended March 11, according to Bankrate.com. Rates were little changed from four weeks ago, when they averaged 5.34%.
The average jumbo 30-year fixed rate rose to 6.99% from 6.77% in the prior week.
The average 15-year fixed rate mortgage slipped to 4.88% from 4.94% a week earlier.
Adjustable-rate mortgages were also mixed, with the 1-year ARM rising to 5.58% from 5.43%; the 5/1 adjustable-rate mortgage decreasing to 5.34% from 5.39%.
"Downward pressure on rates is certainly welcome news, but there's no clear direction at the moment that we can discern," according to Keith Gumbinger, vice president of HSHAssociates.com, an online publisher of consumer loan information.
A year ago, the average 30-year fixed mortgage rate was 6.39%, meaning a $200,000 loan would have carried a monthly payment of $1,249.70, according to Bankrate.com. With the average rate now at 5.37%, the monthly payment for the same size loan would be $1,119.32, a savings of $130.38 per month.
The lack of private investment in the mortgage market has kept rates from climbing back toward those year-ago rates, Gumbinger said. Most of the mortgage financing is coming from government-backed institutions such as Fannie Mae (FNM, Fortune 500), Freddie Mac (FRE, Fortune 500) and the Federal Housing Administration.
"There are very few investors interested in investing in mortgage-backed securities," said Gumbinger.
Low mortgage rates spurred an 11.3% growth in applications last week, according to a report from the Mortgage Bankers Association. Most of them were from existing homeowners seeking refinancing.
However, many of the requirements that borrowers need to meet to obtain a home loan - such as a large down payment, good credit or home equity (for refinancing) - are increasingly difficult to meet. "A lot of borrowers find themselves unable to get over the hurdles to get today's lower rates," Gumbinger said.
An increasing number of existing homeowners have found themselves owing more on their homes than what they are worth - a problem that led to an unexpected jump in foreclosures last month, according to a report released Thursday.
Congress is currently debating a bill that would allow bankruptcy judges to reduce mortgage debt for bankrupt homeowners as a last resort for preventing foreclosure.
Supporters say the bill will significantly reduce the foreclosure rate, but opponents say that mortgage modification could further pull investment out of the mortgage market.
Allowing judges to modify loans would add a new layer of risk for mortgage investors, which would drive up costs and thus mortgage rates, according to Gumbinger. "This is not a well-trodden path, nor is it well understood," he said.
Bankrate.com's national weekly mortgage survey is conducted each Wednesday from data provided by the top 10 banks and thrifts in the top 10 markets.
Credited to: www.CNNMoney.com
Rich Storey
Mortgage Advisor
615.260.8028
Mortgage Rates Inch Downward
NEW YORK (CNNMoney.com) -- Mortgage rates slipped last week, according to a weekly survey released Thursday.
The average 30-year fixed mortgage fell to 5.37% for the week ended March 11, according to Bankrate.com. Rates were little changed from four weeks ago, when they averaged 5.34%.
The average jumbo 30-year fixed rate rose to 6.99% from 6.77% in the prior week.
The average 15-year fixed rate mortgage slipped to 4.88% from 4.94% a week earlier.
Adjustable-rate mortgages were also mixed, with the 1-year ARM rising to 5.58% from 5.43%; the 5/1 adjustable-rate mortgage decreasing to 5.34% from 5.39%.
"Downward pressure on rates is certainly welcome news, but there's no clear direction at the moment that we can discern," according to Keith Gumbinger, vice president of HSHAssociates.com, an online publisher of consumer loan information.
A year ago, the average 30-year fixed mortgage rate was 6.39%, meaning a $200,000 loan would have carried a monthly payment of $1,249.70, according to Bankrate.com. With the average rate now at 5.37%, the monthly payment for the same size loan would be $1,119.32, a savings of $130.38 per month.
The lack of private investment in the mortgage market has kept rates from climbing back toward those year-ago rates, Gumbinger said. Most of the mortgage financing is coming from government-backed institutions such as Fannie Mae (FNM, Fortune 500), Freddie Mac (FRE, Fortune 500) and the Federal Housing Administration.
"There are very few investors interested in investing in mortgage-backed securities," said Gumbinger.
Low mortgage rates spurred an 11.3% growth in applications last week, according to a report from the Mortgage Bankers Association. Most of them were from existing homeowners seeking refinancing.
However, many of the requirements that borrowers need to meet to obtain a home loan - such as a large down payment, good credit or home equity (for refinancing) - are increasingly difficult to meet. "A lot of borrowers find themselves unable to get over the hurdles to get today's lower rates," Gumbinger said.
An increasing number of existing homeowners have found themselves owing more on their homes than what they are worth - a problem that led to an unexpected jump in foreclosures last month, according to a report released Thursday.
Congress is currently debating a bill that would allow bankruptcy judges to reduce mortgage debt for bankrupt homeowners as a last resort for preventing foreclosure.
Supporters say the bill will significantly reduce the foreclosure rate, but opponents say that mortgage modification could further pull investment out of the mortgage market.
Allowing judges to modify loans would add a new layer of risk for mortgage investors, which would drive up costs and thus mortgage rates, according to Gumbinger. "This is not a well-trodden path, nor is it well understood," he said.
Bankrate.com's national weekly mortgage survey is conducted each Wednesday from data provided by the top 10 banks and thrifts in the top 10 markets.
Credited to: www.CNNMoney.com
Monday, March 9, 2009
FHA Financing is in big demand...
From the desk of:
Rich Storey
Mortgage Advisor
615-260-8028
Looking for a Mortgage? Check Out the F.H.A.’s Rules
By TARA SIEGEL BERNARD
Published: March 4, 2009
The Federal Housing Administration used to be known as a place for low-income borrowers with tarnished credit histories. But now, it has become a destination for borrowers whose credentials are respectable, but not stellar.
To qualify for the best interest rates on a new or refinanced mortgage, you need to have a top-notch credit score and a substantial down payment or home equity. But if you have less than perfect credit and less than 20 percent in home equity, an important threshold, you’ll have to pay a lot more. And that’s why many of those borrowers are turning to the F.H.A.
The F.H.A. requires down payments of only 3.5 percent and has less stringent credit requirements than conventional mortgages backed by Fannie Mae and Freddie Mac, the two government-controlled mortgage finance companies. F.H.A. mortgages also have become one of the least expensive alternatives for new mortgages and refinancing, given the increase in fees tacked onto traditional loans.
“Just about anyone that is putting down less than 20 percent needs to consider F.H.A. financing,” said Joe Rogers, executive vice president of Wells Fargo Home Mortgage. “That doesn’t mean they need to take it, but they should consider it.”
The F.H.A., which was created during the Great Depression, does not make loans, but insures mortgages that meet its guidelines. Because the F.H.A. is the only viable option for a lot of people, its loans now account for a much larger percentage of all mortgages. In 2005 and 2006, at the height of the housing boom, only 1.8 percent of all mortgages were F.H.A.-backed, according to Inside Mortgage Finance. Last year, that number ballooned to 17.1 percent. The F.H.A. now insures 4.8 million single-family mortgages worth about $550 billion.
Historically, F.H.A. loans carried a certain stigma. They were viewed as hard-to-obtain loans for low-income consumers with checkered credit histories and small down payments. They also tended to be more expensive.
But in the current market, the opposite is often true. Qualifying for a regular mortgage has become more expensive, sometimes prohibitively so, given the many fees that are now layered onto conventional loans backed by Fannie Mae and Freddie Mac.
The fees are generally levied on borrowers deemed to be more risky. The charges depend on your credit score and the amount of money you’re borrowing relative to the value of your home. But they tend to hit people with credit scores under 700 and less than 20 percent in home equity. Carrying a home equity loan may result in extra fees, as will taking cash out of your home when you refinance.
The extra charges aren’t the only hurdle consumers may face. Borrowers with less than 20 percent in home equity must also purchase private mortgage insurance. The insurance has become much more difficult to qualify for and more expensive, especially in areas where home values have declined the most.
F.H.A. borrowers won’t avoid mortgage insurance, but they will escape the extra fees, lenders and mortgage brokers said. And that’s why, for many families, the F.H.A. program has become the most economical option.
If you’re having trouble securing a mortgage or refinancing an existing loan, here’s what you need to know about the F.H.A’s program:
ELIGIBILITY Borrowers need to prove that they have sufficient income to meet their monthly mortgage payments.
Generally speaking, your payments, including taxes and insurance, should not exceed 31 percent of gross income. When you include car payments, student loans and other obligations, your total debt shouldn’t exceed more than 43 percent of gross income. But these thresholds are only guidelines. So if you have a larger than required down payment, or a good amount of money in the bank, you may be able to bend these rules.
The F.H.A. doesn’t impose any income limits or credit score minimums, but people with credit scores below 500 must have at least 10 percent of equity in their home to be eligible. (The average F.H.A. borrower has a score of 640.)
But to keep default rates down, many F.H.A.-approved lenders have recently started to impose their own credit score minimums — above and beyond the F.H.A’s. guidelines — and are requiring more stringent income documentation. Clearly, they’re trying to protect themselves: if a particular lender’s default rates exceed neighboring lenders, they can be audited and even removed from the program.
“In the last month and a half, there has been a dramatic increase in the minimum credit score required,” said Michael Moskowitz, president of Equity Now, a New York mortgage lender that makes F.H.A. loans. “Some went to 580 and others went to 620.”
COSTS Whether an F.H.A. loan will cost less depends on your personal situation. Currently, however, borrowers with credit scores less than 700 with less than 20 percent in home equity often come out ahead with F.H.A. loans. At the very least, lenders and brokers say it pays to compare the costs of an F.H.A.-insured loan versus a conventional mortgage if you fit into this category.
Generally, an F.H.A. loan’s total costs — including the interest rate and mortgage insurance — become less than a traditional mortgage’s costs as your credit score and home equity declines.
All borrowers must pay an upfront mortgage premium of 1.5 to 1.75 percent of the loan, which is usually tacked onto the loan amount. You must also pay an annual mortgage insurance premium of 0.50 of the loan amount (if you are borrowing 95 percent or less of your home’s value) or 0.55 percent (if your loan is more than that).
That premium is broken down into monthly payments. The monthly mortgage premium can be canceled once the mortgage amount falls to less than 78 percent of the home’s value, but it must be paid for at least five years — and it can only be eliminated by paying down your mortgage (not through appreciation in the value of your home).
Excluding the insurance premium, closing costs are about the same amount as you would pay with a traditional mortgage. All homes must be appraised — which costs about $400, on average — unless you’re refinancing an existing F.H.A. loan, said John Councilman, president of AMC Mortgage in Fallston, Md., and chairman of the National Association of Mortgage Brokers’ F.H.A. committee.
LOAN LIMITS
In many areas, loan amounts appear to hew closely to the conforming loan limits set by Fannie Mae and Freddie Mac. But F.H.A. limits are much lower in less expensive areas: in the lowest-cost areas, the F.H.A. will insure loans up to $271,050, though that number can rise to $729,750 in the costliest parts of, say, New York or California.
TYPES OF LOANS The F.H.A. never trafficked in the exotic subprime loans that started the financial crisis. The vast majority of borrowers get a 30-year fixed-rate mortgage, though it also offers 15-year fixed rates and adjustable-rate mortgages.
FINDING A LENDER Lenders need to be approved by the F.H.A. to participate in the program. You can find lenders or free counseling services through the Department of Housing and Urban Development’s Web site. You can search for mortgage brokers through the Upfront Mortgage Brokers Association, a trade group whose members state their fees in advance (though you’ll have to peruse the list for brokers that work with F.H.A. lenders).
'
ADDED BENEFITS All F.H.A. loans can be assumed by a new borrower — as long as they qualify — which allows more flexibility if you plan on selling the home later. If mortgage rates were to rise, the new borrower is entitled to the existing interest rate.
Meanwhile, your down payment can be a gift from a family member. And co-borrowers don’t necessarily need to occupy the home. Moreover, the F.H.A. is more reluctant to foreclose on its borrowers. It has said that borrowers in default get to keep their homes about 65 percent of the time.
“They do not foreclose as quickly or without a thorough vetting of the situation,” Mr. Councilman said. “That’s very important in today’s market.”
Credited to: www.NYTimes.com
Rich Storey
Mortgage Advisor
615-260-8028
Looking for a Mortgage? Check Out the F.H.A.’s Rules
By TARA SIEGEL BERNARD
Published: March 4, 2009
The Federal Housing Administration used to be known as a place for low-income borrowers with tarnished credit histories. But now, it has become a destination for borrowers whose credentials are respectable, but not stellar.
To qualify for the best interest rates on a new or refinanced mortgage, you need to have a top-notch credit score and a substantial down payment or home equity. But if you have less than perfect credit and less than 20 percent in home equity, an important threshold, you’ll have to pay a lot more. And that’s why many of those borrowers are turning to the F.H.A.
The F.H.A. requires down payments of only 3.5 percent and has less stringent credit requirements than conventional mortgages backed by Fannie Mae and Freddie Mac, the two government-controlled mortgage finance companies. F.H.A. mortgages also have become one of the least expensive alternatives for new mortgages and refinancing, given the increase in fees tacked onto traditional loans.
“Just about anyone that is putting down less than 20 percent needs to consider F.H.A. financing,” said Joe Rogers, executive vice president of Wells Fargo Home Mortgage. “That doesn’t mean they need to take it, but they should consider it.”
The F.H.A., which was created during the Great Depression, does not make loans, but insures mortgages that meet its guidelines. Because the F.H.A. is the only viable option for a lot of people, its loans now account for a much larger percentage of all mortgages. In 2005 and 2006, at the height of the housing boom, only 1.8 percent of all mortgages were F.H.A.-backed, according to Inside Mortgage Finance. Last year, that number ballooned to 17.1 percent. The F.H.A. now insures 4.8 million single-family mortgages worth about $550 billion.
Historically, F.H.A. loans carried a certain stigma. They were viewed as hard-to-obtain loans for low-income consumers with checkered credit histories and small down payments. They also tended to be more expensive.
But in the current market, the opposite is often true. Qualifying for a regular mortgage has become more expensive, sometimes prohibitively so, given the many fees that are now layered onto conventional loans backed by Fannie Mae and Freddie Mac.
The fees are generally levied on borrowers deemed to be more risky. The charges depend on your credit score and the amount of money you’re borrowing relative to the value of your home. But they tend to hit people with credit scores under 700 and less than 20 percent in home equity. Carrying a home equity loan may result in extra fees, as will taking cash out of your home when you refinance.
The extra charges aren’t the only hurdle consumers may face. Borrowers with less than 20 percent in home equity must also purchase private mortgage insurance. The insurance has become much more difficult to qualify for and more expensive, especially in areas where home values have declined the most.
F.H.A. borrowers won’t avoid mortgage insurance, but they will escape the extra fees, lenders and mortgage brokers said. And that’s why, for many families, the F.H.A. program has become the most economical option.
If you’re having trouble securing a mortgage or refinancing an existing loan, here’s what you need to know about the F.H.A’s program:
ELIGIBILITY Borrowers need to prove that they have sufficient income to meet their monthly mortgage payments.
Generally speaking, your payments, including taxes and insurance, should not exceed 31 percent of gross income. When you include car payments, student loans and other obligations, your total debt shouldn’t exceed more than 43 percent of gross income. But these thresholds are only guidelines. So if you have a larger than required down payment, or a good amount of money in the bank, you may be able to bend these rules.
The F.H.A. doesn’t impose any income limits or credit score minimums, but people with credit scores below 500 must have at least 10 percent of equity in their home to be eligible. (The average F.H.A. borrower has a score of 640.)
But to keep default rates down, many F.H.A.-approved lenders have recently started to impose their own credit score minimums — above and beyond the F.H.A’s. guidelines — and are requiring more stringent income documentation. Clearly, they’re trying to protect themselves: if a particular lender’s default rates exceed neighboring lenders, they can be audited and even removed from the program.
“In the last month and a half, there has been a dramatic increase in the minimum credit score required,” said Michael Moskowitz, president of Equity Now, a New York mortgage lender that makes F.H.A. loans. “Some went to 580 and others went to 620.”
COSTS Whether an F.H.A. loan will cost less depends on your personal situation. Currently, however, borrowers with credit scores less than 700 with less than 20 percent in home equity often come out ahead with F.H.A. loans. At the very least, lenders and brokers say it pays to compare the costs of an F.H.A.-insured loan versus a conventional mortgage if you fit into this category.
Generally, an F.H.A. loan’s total costs — including the interest rate and mortgage insurance — become less than a traditional mortgage’s costs as your credit score and home equity declines.
All borrowers must pay an upfront mortgage premium of 1.5 to 1.75 percent of the loan, which is usually tacked onto the loan amount. You must also pay an annual mortgage insurance premium of 0.50 of the loan amount (if you are borrowing 95 percent or less of your home’s value) or 0.55 percent (if your loan is more than that).
That premium is broken down into monthly payments. The monthly mortgage premium can be canceled once the mortgage amount falls to less than 78 percent of the home’s value, but it must be paid for at least five years — and it can only be eliminated by paying down your mortgage (not through appreciation in the value of your home).
Excluding the insurance premium, closing costs are about the same amount as you would pay with a traditional mortgage. All homes must be appraised — which costs about $400, on average — unless you’re refinancing an existing F.H.A. loan, said John Councilman, president of AMC Mortgage in Fallston, Md., and chairman of the National Association of Mortgage Brokers’ F.H.A. committee.
LOAN LIMITS
In many areas, loan amounts appear to hew closely to the conforming loan limits set by Fannie Mae and Freddie Mac. But F.H.A. limits are much lower in less expensive areas: in the lowest-cost areas, the F.H.A. will insure loans up to $271,050, though that number can rise to $729,750 in the costliest parts of, say, New York or California.
TYPES OF LOANS The F.H.A. never trafficked in the exotic subprime loans that started the financial crisis. The vast majority of borrowers get a 30-year fixed-rate mortgage, though it also offers 15-year fixed rates and adjustable-rate mortgages.
FINDING A LENDER Lenders need to be approved by the F.H.A. to participate in the program. You can find lenders or free counseling services through the Department of Housing and Urban Development’s Web site. You can search for mortgage brokers through the Upfront Mortgage Brokers Association, a trade group whose members state their fees in advance (though you’ll have to peruse the list for brokers that work with F.H.A. lenders).
'
ADDED BENEFITS All F.H.A. loans can be assumed by a new borrower — as long as they qualify — which allows more flexibility if you plan on selling the home later. If mortgage rates were to rise, the new borrower is entitled to the existing interest rate.
Meanwhile, your down payment can be a gift from a family member. And co-borrowers don’t necessarily need to occupy the home. Moreover, the F.H.A. is more reluctant to foreclose on its borrowers. It has said that borrowers in default get to keep their homes about 65 percent of the time.
“They do not foreclose as quickly or without a thorough vetting of the situation,” Mr. Councilman said. “That’s very important in today’s market.”
Credited to: www.NYTimes.com
Friday, March 6, 2009
America's New Savings Plan: Mortgage Refinance
From the desk of:
Rich Storey
Mortgage Advisor
615-260-8028
America's New Savings Plan: Mortgage Refinance
By: Catherine Brock January 21, 2009
Mortgage rates are edging lower after the government announced a plan to purchase mortgage-backed securities. Homeowners are using the trend to save money on their monthly mortgage payments. In 1998, long before the housing crisis, former Vice President Al Gore said, "Americans are resourceful people."
Love him or hate him, you have to hope Gore was right-because for many, resourcefulness is what it will take to manage through this economic cycle. Many American households are finding added financial security from an unlikely source: their homes. Even as the housing crisis grinds on and saps wealth from personal balance sheets, some homeowners are still able to tap the benefits of owning property. The trend is largely related to a big drop in mortgage rates, which was preceded by the Federal Reserve's announcement that it would buy $600 billion of mortgage-backed securities.
According to Freddie Mac's weekly mortgage rates data, the average rate on a 30-year fixed-rate mortgage has declined more than 1.3 points since October-from 6.46 percent for the week ending October 30, to 5.14 percent for the week ending December 24. A decline of that magnitude equates to savings of about $84 per month, or $1,008 per year for every $100,000 financed. The 15-year rates have shown a similar trend, dropping from 6.19 to 4.91 percent.
Monthly savings generated by a lower mortgage payment should be measured in light of the upfront closing costs associated with the mortgage refinance. Homeowners who can breakeven on the closing costs in two or three years may, however, end up saving tens of thousands of dollars in total interest over the life of the loan.
At a time when layoff worries and economic uncertainty are running high, homeowners are thrilled with the idea of saving money by lowering their mortgage payments. The interesting thing about this refinancing boom is that homeowners generally aren't looking to spend the extra money; they're more likely to tuck it away in an emergency fund.
Mortgage refinance requirements still tight
While many homeowners are interested in getting a piece of the mortgage refinance action, not all are qualifying. Declining housing values and tighter lending requirements make it difficult for those who purchased their homes when real estate was peaking. Lenders aren't budging on their conservatism either; borrowers will need to have 20 percent home equity along with good credit and a stable job history.
Homeowners who want to explore the possibility of a mortgage refinance should begin by getting a free online appraisal. If the online appraisal returns a home value that equates to at least 20 percent home equity, there's a chance the mortgage refinance can be done. The lender will, of course, require a full loan application and professional appraisal before offering a loan approval. In the midst of a housing crisis, leveraging the home's borrowing power to save money is one way to get resourceful. It's just too bad this savings plan isn't available to everyone.
Credited to: www.MortgageLoan.com
Rich Storey
Mortgage Advisor
615-260-8028
America's New Savings Plan: Mortgage Refinance
By: Catherine Brock January 21, 2009
Mortgage rates are edging lower after the government announced a plan to purchase mortgage-backed securities. Homeowners are using the trend to save money on their monthly mortgage payments. In 1998, long before the housing crisis, former Vice President Al Gore said, "Americans are resourceful people."
Love him or hate him, you have to hope Gore was right-because for many, resourcefulness is what it will take to manage through this economic cycle. Many American households are finding added financial security from an unlikely source: their homes. Even as the housing crisis grinds on and saps wealth from personal balance sheets, some homeowners are still able to tap the benefits of owning property. The trend is largely related to a big drop in mortgage rates, which was preceded by the Federal Reserve's announcement that it would buy $600 billion of mortgage-backed securities.
According to Freddie Mac's weekly mortgage rates data, the average rate on a 30-year fixed-rate mortgage has declined more than 1.3 points since October-from 6.46 percent for the week ending October 30, to 5.14 percent for the week ending December 24. A decline of that magnitude equates to savings of about $84 per month, or $1,008 per year for every $100,000 financed. The 15-year rates have shown a similar trend, dropping from 6.19 to 4.91 percent.
Monthly savings generated by a lower mortgage payment should be measured in light of the upfront closing costs associated with the mortgage refinance. Homeowners who can breakeven on the closing costs in two or three years may, however, end up saving tens of thousands of dollars in total interest over the life of the loan.
At a time when layoff worries and economic uncertainty are running high, homeowners are thrilled with the idea of saving money by lowering their mortgage payments. The interesting thing about this refinancing boom is that homeowners generally aren't looking to spend the extra money; they're more likely to tuck it away in an emergency fund.
Mortgage refinance requirements still tight
While many homeowners are interested in getting a piece of the mortgage refinance action, not all are qualifying. Declining housing values and tighter lending requirements make it difficult for those who purchased their homes when real estate was peaking. Lenders aren't budging on their conservatism either; borrowers will need to have 20 percent home equity along with good credit and a stable job history.
Homeowners who want to explore the possibility of a mortgage refinance should begin by getting a free online appraisal. If the online appraisal returns a home value that equates to at least 20 percent home equity, there's a chance the mortgage refinance can be done. The lender will, of course, require a full loan application and professional appraisal before offering a loan approval. In the midst of a housing crisis, leveraging the home's borrowing power to save money is one way to get resourceful. It's just too bad this savings plan isn't available to everyone.
Credited to: www.MortgageLoan.com
Thursday, March 5, 2009
Housing Plan: How it Works
From the desk of:
Rich Storey
Mortgage Advisor
615.260.8028
New Mortgage Plan: Who Qualifies and How It Works
For homeowners looking to make sense of the Obama administration's new mortgage rescue plan, the program can be basically broken down into two sections.
One part is for homeowners facing foreclosure due to missed payments and are at risk of defaulting on their loans. For them, the government will give the lender financial incentives to "modify" the existing mortgage, reducing the monthly payments so that the homeowner can stay current on the loan and keep their home.
The other part is for homeowners who are keeping up with their mortgage payments but can't refinance with their lender because the value of their home has fallen below the amount of the mortgage.
For these "under water" homeowners, the rescue plan will help refinance the mortgage to lower the monthly payments. There are several restrictions, however, so relatively few homeowners in this category will actually qualify.
That's the simple explanation. But both plans have a lot of moving parts, so here's what you need to know if you want to take advantage of them.
Mortgage Modification
If you're facing foreclosure and want to "modify" your mortgage to keep your home, you must meet the following criteria:
Have secured your mortgage before Jan. 1, 2009
Have a primary mortgage of less than $729,500
You must live on the property
Must fully document income with tax returns and pay stubs
Sign a financial hardship statement
Go for counseling if your total household debt totals more than 55 percent of income.
"Homeowners must be late on their payments to qualify," says Trish Summers, a private mortgage banker with Luxury Mortgage company in Stamford, Connecticut.
CNBC.com
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If you meet all those qualifications, your lender will then determine how much to lower your monthly payment so it's about 31% of your gross monthly income. The interest rate could be as low as 2%.
Homeowners pay no fees for the modification. However, homeowners could face a balloon payment at the end if your lender reduced your monthly principal payment during the modification. So if your lender reduced your total payments $20,000, you could owe that amount when paid off your loan, refinanced or sold your house.
But there is some financial benfit for the homeowner in the plan. For every month a homeowner makes a payment on time, the Treasury will pay an incentive that reduces the principal balance on a loan. Over five years the total principal reduction could add up to $5,000.
There's also a trial period period for the modification.
"The loan servicer gets paid by Fannie (Mae) or Freddie (Mac) after three months," says Summers. "If the homeowner pays the mortgage on time, the servicer gets $1,000 from the government each year for the next three years. If the mortgage is not paid on time in those three months, the deal is over."
And the new loan rate can go up after 5 years. It's only a low in the beginning to help the homeowner dig themselves out.
The plan is in effect until the end of 2012 and can only be used once.
Refinancing Option
If your current on your mortgage but your bank won't let you refinance because your mortgage is "under water," here's how you qualify for the government refinancing program:
Your home must be the primary residence
Your loan must be owned by Fannie Mae or Freddie Mac
You must have sufficient income to support the new mortgage debt
You can't take cash out of the new loan to pay other debt
There's another big restriction, however, that will make many homeowners ineligible for the program: the value of your house can't have fallen much below the amount of the mortgage.
"The ceiling of eligibility is 105 percent of current market value of the property—so that’s not going to help homeowners who have suffered home price declines," says Greg McBride, senior financial analyst at Bankrate.com. "Say you bought a house for $320,000. Your mortgage balance is now $300,000 But the house is now worth only $225,000. You are stuck, you can't refinance, even if you made your payments on time."
McBride says the loan to value ceiling should be raised. "It should be something in the neighborhood of 150 percent," says McBride. It's too low to help people in Florida, California, Nevada and Arizona. Those markets are at the epicenter of the foreclosure crisis."
Still, if you do qualify, here's what you get:
Your mortgage will be refinanced to 30 or 15 years 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 payments but be reduced but not principal
Plenty of Critics
The Obama plan says it will help as many as 4 million struggling borrowers modify their loans and some 5 million refinance their current loans. But industry experts remain skeptical.
"One in five homes have come down in value across the country," says Summers. I'm not sure this plan is going to help in refinancing. I think they really need to reduce the balance on the loans to make this work."
And as for the modifications, McBride says there will be those getting help when they made bad decisions.
"I don’t have much hope for it," says McBride. "In reviewing the guidelines, I see nothing to prevent a homeowner that cashed out equity when prices were on the way up, from getting a modification. Are they going to give back the big screen TV and BMW? Probably not."
Credited to: www.CNBC.com
Rich Storey
Mortgage Advisor
615.260.8028
New Mortgage Plan: Who Qualifies and How It Works
For homeowners looking to make sense of the Obama administration's new mortgage rescue plan, the program can be basically broken down into two sections.
One part is for homeowners facing foreclosure due to missed payments and are at risk of defaulting on their loans. For them, the government will give the lender financial incentives to "modify" the existing mortgage, reducing the monthly payments so that the homeowner can stay current on the loan and keep their home.
The other part is for homeowners who are keeping up with their mortgage payments but can't refinance with their lender because the value of their home has fallen below the amount of the mortgage.
For these "under water" homeowners, the rescue plan will help refinance the mortgage to lower the monthly payments. There are several restrictions, however, so relatively few homeowners in this category will actually qualify.
That's the simple explanation. But both plans have a lot of moving parts, so here's what you need to know if you want to take advantage of them.
Mortgage Modification
If you're facing foreclosure and want to "modify" your mortgage to keep your home, you must meet the following criteria:
Have secured your mortgage before Jan. 1, 2009
Have a primary mortgage of less than $729,500
You must live on the property
Must fully document income with tax returns and pay stubs
Sign a financial hardship statement
Go for counseling if your total household debt totals more than 55 percent of income.
"Homeowners must be late on their payments to qualify," says Trish Summers, a private mortgage banker with Luxury Mortgage company in Stamford, Connecticut.
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If you meet all those qualifications, your lender will then determine how much to lower your monthly payment so it's about 31% of your gross monthly income. The interest rate could be as low as 2%.
Homeowners pay no fees for the modification. However, homeowners could face a balloon payment at the end if your lender reduced your monthly principal payment during the modification. So if your lender reduced your total payments $20,000, you could owe that amount when paid off your loan, refinanced or sold your house.
But there is some financial benfit for the homeowner in the plan. For every month a homeowner makes a payment on time, the Treasury will pay an incentive that reduces the principal balance on a loan. Over five years the total principal reduction could add up to $5,000.
There's also a trial period period for the modification.
"The loan servicer gets paid by Fannie (Mae) or Freddie (Mac) after three months," says Summers. "If the homeowner pays the mortgage on time, the servicer gets $1,000 from the government each year for the next three years. If the mortgage is not paid on time in those three months, the deal is over."
And the new loan rate can go up after 5 years. It's only a low in the beginning to help the homeowner dig themselves out.
The plan is in effect until the end of 2012 and can only be used once.
Refinancing Option
If your current on your mortgage but your bank won't let you refinance because your mortgage is "under water," here's how you qualify for the government refinancing program:
Your home must be the primary residence
Your loan must be owned by Fannie Mae or Freddie Mac
You must have sufficient income to support the new mortgage debt
You can't take cash out of the new loan to pay other debt
There's another big restriction, however, that will make many homeowners ineligible for the program: the value of your house can't have fallen much below the amount of the mortgage.
"The ceiling of eligibility is 105 percent of current market value of the property—so that’s not going to help homeowners who have suffered home price declines," says Greg McBride, senior financial analyst at Bankrate.com. "Say you bought a house for $320,000. Your mortgage balance is now $300,000 But the house is now worth only $225,000. You are stuck, you can't refinance, even if you made your payments on time."
McBride says the loan to value ceiling should be raised. "It should be something in the neighborhood of 150 percent," says McBride. It's too low to help people in Florida, California, Nevada and Arizona. Those markets are at the epicenter of the foreclosure crisis."
Still, if you do qualify, here's what you get:
Your mortgage will be refinanced to 30 or 15 years 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 payments but be reduced but not principal
Plenty of Critics
The Obama plan says it will help as many as 4 million struggling borrowers modify their loans and some 5 million refinance their current loans. But industry experts remain skeptical.
"One in five homes have come down in value across the country," says Summers. I'm not sure this plan is going to help in refinancing. I think they really need to reduce the balance on the loans to make this work."
And as for the modifications, McBride says there will be those getting help when they made bad decisions.
"I don’t have much hope for it," says McBride. "In reviewing the guidelines, I see nothing to prevent a homeowner that cashed out equity when prices were on the way up, from getting a modification. Are they going to give back the big screen TV and BMW? Probably not."
Credited to: www.CNBC.com
Obama's Mortgage Plan
From the the desk of:
Rich Storey
Mortgage Advisor
615-260-8028
Obama's mortgage plan hopes to stem tide of foreclosures
Triangle Business Journal
The Obama administration on Wednesday announced a loan modification program that it says could keep as many as many as 9 million borrowers in their homes.
The U.S. Department of the Treasury announced the Making Home Affordable Plan, part of President Barack Obama’s efforts to pump life back into the economy.
The plan would create a $75 billion loan modification program that would allow “responsible homeowners” to refinance to interest rates as low as 2 percent.
“For many families, a low-cost refinancing could reduce mortgage payments by thousands of dollars per year,” a Treasury Department news release said.
The initiative would only help homeowners who commit to make payments to stay in their home. It will not help speculators or house flippers, the department said.
The plan will include homeowners at risk of imminent default, even if they are current on their mortgage payments.
For a loan modification, lenders would have to reduce the mortgage payments to no more than 38 percent of the borrower’s income. The Treasury Department would share the cost for lenders to cut that debt-to-income ratio to 31 percent.
Loans could be extended to up to 40 years.
Those lenders who do participate would have to modify all loans, not just the worst ones.
Loans originated before Jan. 1 are eligible for the program, which runs through 2012.
Homeowners who have an unpaid principal balance of as much as $729,750 can participate.
There are also incentives for those who service these loans.
They will receive an upfront fee of $1,000 for each eligible modification meeting guidelines established created by the initiative. They will also receive “pay for success” monthly fees – as long as the borrower stays current on the loan – of up to $1,000 each year for three years.
The plan also would allow as many as 5 million “responsible homeowners” who have mortgages through Fannie Mae and Freddie Mac to refinance through June 2010.
The Treasury Department said it will continue to purchase Fannie Mae and Freddie Mac mortgage-backed securities to promote stability and liquidity in the marketplace.
Credited to: www.bizjournals.com
Rich Storey
Mortgage Advisor
615-260-8028
Obama's mortgage plan hopes to stem tide of foreclosures
Triangle Business Journal
The Obama administration on Wednesday announced a loan modification program that it says could keep as many as many as 9 million borrowers in their homes.
The U.S. Department of the Treasury announced the Making Home Affordable Plan, part of President Barack Obama’s efforts to pump life back into the economy.
The plan would create a $75 billion loan modification program that would allow “responsible homeowners” to refinance to interest rates as low as 2 percent.
“For many families, a low-cost refinancing could reduce mortgage payments by thousands of dollars per year,” a Treasury Department news release said.
The initiative would only help homeowners who commit to make payments to stay in their home. It will not help speculators or house flippers, the department said.
The plan will include homeowners at risk of imminent default, even if they are current on their mortgage payments.
For a loan modification, lenders would have to reduce the mortgage payments to no more than 38 percent of the borrower’s income. The Treasury Department would share the cost for lenders to cut that debt-to-income ratio to 31 percent.
Loans could be extended to up to 40 years.
Those lenders who do participate would have to modify all loans, not just the worst ones.
Loans originated before Jan. 1 are eligible for the program, which runs through 2012.
Homeowners who have an unpaid principal balance of as much as $729,750 can participate.
There are also incentives for those who service these loans.
They will receive an upfront fee of $1,000 for each eligible modification meeting guidelines established created by the initiative. They will also receive “pay for success” monthly fees – as long as the borrower stays current on the loan – of up to $1,000 each year for three years.
The plan also would allow as many as 5 million “responsible homeowners” who have mortgages through Fannie Mae and Freddie Mac to refinance through June 2010.
The Treasury Department said it will continue to purchase Fannie Mae and Freddie Mac mortgage-backed securities to promote stability and liquidity in the marketplace.
Credited to: www.bizjournals.com
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