Do You Qualify for the hottest mortgage loan, HARP?
FHA refinance loans aren’t always attainable for self-employed borrowers looking for fixed rate refinancing, because HUD requires full income documentation. Loan modification plans can be nearly impossible for borrowers in high cost regions like California, New York and Florida who have jumbo mortgage loans. Mortgage relief is often easier said than done.
When the stimulus package passed, millions of homeowners felt they were dissed. While the new mortgage relief program focuses on homeowners in foreclosure, it offers nothing for the homeowner who is responsible and current with their home loan payment. To compensate for this oversight, the U.S. Department of Treasury recently launched the Home Affordable Refinance Program (HARP). “HARP was created specifically to provide access to reduced-cost home refinancing for responsible homeowners with no equity in their home. Millions of Americans have lost their home equity due to the decline in home prices,” said Joe Engle, president of Loan Smart, Inc. in Thousand Oaks, California.
Presently, millions of homeowners find themselves in the unsettling predicament of having to sit on high mortgage interest rates that are not affordable or about to rest to a higher payment that will tip the budget negatively. Most good borrowers are unable to refinance their homes and take advantage of historically low interest rates, because of the declining home values.
Through the Home Affordable Refinance Program 4 to 5 million responsible homeowners will have the opportunity to refinance their homes, even if they owe more than 80% of their property’s value. “With low fixed rate mortgage refinancing, many families could see a reduction in their mortgage payments by thousands of dollars per year,” said Engle. Unfortunately, not everyone qualifies for Home Affordable Refinance Programs. This refinance program only benefits homeowners with home mortgages owned or guaranteed by Freddie Mac and Fannie Mae, which are Government Sponsored Enterprises. “At Loan Smart, we can assist homeowners with determining if they qualify for HARP by researching to find out if their loan is owned by either Freddie Mac or Fannie Mae,” commented Engle. Engle points out that HARP will offer a huge advantage to homeowners with first and second mortgages. HARP will allow for refinancing of the first mortgage up to 105% of the current home value, with the second mortgage remaining in place.
For months, thousands of homeowners have been awaiting Barrack Obama’s new administration because of the promised “Hope” and lengthy discussions regarding foreclosure prevention and mortgage relief. Of course their have been distressed homeowners who have reported better loan payments, but most are growing frustrated in a long line of borrowers awaiting a loan modification or a foreclosure. Foreclosure scams and fraudulent loan modification programs have been reported in an alarming fashion.
The new federal program to let people refinance or renegotiate their home loans is expected to help millions of Americans lower monthly payments and avoid foreclosure. So what strings are attached? Some homeowners have expressed concerns about the impact to their credit report or the tax implications from a short sale or loan modification. Other struggling borrowers who are still paying low teaser mortgage rates might fear their monthly mortgage payment skyrocketing. Here are some questions and answers on concerns homeowners might have about the Making Home Affordable program.
QUESTION- How will my credit report and score be affected?
ANSWER- According to Norm Magnuson of the Consumer Data Industry Association, a trade group based in Washington. In most cases, mortgage refinancing does not affect your score since it’s simply a rewritten mortgage, this is especially true of home refinance under a federal program like FHA since one of the terms of eligibility is that homeowners can’t have missed a payment in the past year. It is still unclear what impact a federal mortgage modification an adjustment to terms of an existing home loan, rather than a new one — will have on credit profiles, however, Magnuson said. Regulators haven’t yet determined how the loan modifications will be reported, if at all.
If you are considering submitting a new application for a loan workout or modification under Making Home Affordable, it means you’ve already missed payments and hurt your credit profile. A loan modification should improve your credit profile in the long-run since the idea is to get you on track for meeting payments. It might also free up money to pay off other debts. Credit repair has been increasing in popularity and this may be one of the factors.
QUESTION- Is it possible my payments will be higher?
ANSWER- If you’re still paying a low, introductory rate, it’s possible your monthly mortgage payment will increase slightly under the federal refinancing program. But the idea is to avoid the big interest rate spikes that typically come with variable rate mortgage loan. After submitting a request for the Making Home Affordable program, your current mortgage lender should give you a “good faith estimate” that includes your new interest rate, mortgage payment and the total cost of the loan. Compare the numbers with your current loan; you might decide that refinancing isn’t an improvement. You can also check out the payment reduction estimator on the government’s Web site at http://www.makinghomeaffordable.gov.
QUESTION- Should I wait to see if mortgage interest rates come down in a couple of months before applying?
ANSWER- Probably not, since mortgage rates are at historic lows. Last week, rates on thirty-year mortgage loans inched upward to nearly 4.9%, but that’s still close to the lowest level since the Great Depression. Ken Inadomi, director of the New York Mortgage Coalition said, “Waiting for mortgage rates to drop further would be irresponsible and could backfire.” Even low intro mortgage rates should not be that much lower than fixed interest rates these days and in some cases, they may even be higher. So it’s probably in your best interest to lock in now to a low rate refinance loan that you can afford. Remember, the Making Home Affordable program expires on June 10, 2010.
QUESTION- What are the tax implications?
ANSWER- Charges for refinancing a mortgage are tax deductible. The total cost should be evenly divided to be deducted over the life of the mortgage, Inadomi said. Other costs, such as attorney or appraisal fees, are not deductible.You will also have to adjust your mortgage interest deduction if you get a lower interest rate.
QUESTION- Can I try to refinance or renegotiate my mortgage on my own, without going through the program?
ANSWER- Working directly with a lender shouldn’t be a problem if you think you’re not eligible for the federal program. Just beware of getting a third party involved, especially if they ask for an upfront fee.
The Federal Bureau of Investigation would get funds to boost the ranks of agents investigating mortgage fraud and predatory lending under a budget blueprint unveiled by the Obama administration Thursday. The Department of Housing and Urban Development would also receive increased funding to crack down on fraudsters and mortgage lenders who prey on home buyers and refinancing borrowers. The funding increases come amid evidence of rising incidence of mortgage fraud, perhaps the result of increased scrutiny of illegal or predatory practices amid the housing meltdown.
Suspicious activity reports filed by financial institutions on suspected mortgage fraud increased 44% in the 12 months ending in June 2008 compared with the prior year, the Financial Crimes Enforcement Network, a U.S. Treasury unit, said this week. The White House budget blueprint doesn’t specify the increase spending sought to combat mortgage fraud. Details of its budget will be unveiled in mid-April. The White House has proposed a total budget of $47.5 billion for HUD for fiscal year 2010, a $7.4 billion increase over the level contained in a House budget bill approved on Wednesday. The $47.5 billion doesn’t include $13.6 billion in economic stimulus funds devoted to HUD projects and programs, of which roughly $10 billion have already been allocated by the agency.
Mortgage rates are beginning to show some positive results for rebuilding the mortgage industry. Record low mortgage rates have spurred a surge in homeowners wanting to refinance. According to a report from Mortgage Bankers Association, over 85% of new home loan activity involved refinancing applications.
Mortgage lenders are swamped by the giant wave of mortgage refinancing requests. Many have shed staff the past couple of years as the housing market slumped. Now they lack the manpower to quickly process refinancing requests. “Lenders aren’t prepared for the surge,” says Mark Zandi of Moody’s Economy.com. Some mortgage lenders are even hiring more people to accommodate the growing demand for refinancing. Read the complete article online. Mortgage Refinancing Activity Skyrockets.
In a recent article, Barry Habib, CEO of the Mortgage Market Guide talks about the challenges mortgage lenders and brokers have with their clients after the Federal Reserve lowers key rates. Mortgage lenders in every state report similar challenges after Fed meetings. Claudio Pereida, a mortgage broker in Orange County said, “every time the Fed lowers the rates, my clients call me and expect their mortgage in process to have the rate reduced.” He continued, “locked or unlocked borrowers really believe that if the Fed lowers interest rates that their rate showed be dropped as well.” He tries to explain to them that it doesn’t work that way but the customers seem to feel that they aren’t being treated fairly. Many refinancing borrowers call their loan officer and demand a rate reduction. Many patient homeowners are perplexed as to why mortgage refinancing rates have not dropped during Fed’s last six rate cuts.
According to Bryan Dornan, a mortgage banker from California, “In most cases, the home lenders anticipate the Fed cutting the rate and actually lower the rates prior to the Federal Reserve meeting and announcing the key rate discounting.” This can be challenging to explain to borrowers who have watched a three point reduction by the Federal Reserve yet have no positive effect on mortgage rates for refinancing purposes. How many mortgage lenders and brokers out there have lost borrowers with loans in process for similar issues?
The Federal Reserve meets today to discuss the economy and key interest rates that significantly affect credit and mortgage rates. It is widely anticipated that the Fed leave the key interest rates at 2%, which would keep the prime-lending rate for consumers at 5%. The Federal Reserve has signaled that its next move on interest rates is likely a hike but when the Fed changes directions remains unclear. Several Maryland FHA Mortgage Lenders indicated in a recent article that, rate and term refinancing has declined for conventional loans but has increased slightly for FHA streamline refinance loans. According to Drew Mchale, “FHA streamline business is very volatile, because if the interest rates rise at all, then borrowers typically back out of the loan, because the benefits disappear.”
Charles Plosser, president of the Federal Reserve Bank of Philadelphia, last month said the Fed probably will need to boost rates “sooner rather than later” even if employment and financial conditions haven’t revived. Richard Fisher, president of the Federal Reserve Bank of Dallas, opposed the Fed’s decision in June to leave mortgage rates unchanged. He said he preferred a rate increase then to fend off inflation. Mortgage lenders eagerly await the Fed’s next moves.
