Economists debate whether or not the country is actually currently in a recession. Some say that there are positive signs that we have reached the bottom and the economy is turning around. Others, however, suggest that the country still has a long way to go and it may be years yet before we truly reach financial recovery. Regardless of who is right though, one thing is clear: many people are facing significant financial hardships and need help now.
For many, the place they need the most help is keeping their homes out of foreclosure. The sub-prime mortgage disaster has left many people unable to make their monthly payments and facing the prospect of losing their homes.
In an effort to prevent the national economy from worsening and help alleviate some of the suffering felt by homeowners, the Obama Administration introduced the "Making Homes Affordable" plan last March. So far, however, the plan has failed to have the effect the Administration claimed it would, reaching far fewer homeowners than the millions promised.
Federal Programs to Refinance and Restructure Mortgages
Making Homes Affordable created two programs meant to help homeowners keep their homes out of foreclosure by either refinancing or restructuring their home loan debt.
The first program, the Home Affordable Refinance Program(HARP), is meant to help those homeowners who want to refinance their mortgages, but are unable to secure traditional refinancing because their home has lost value in the depressed market. HARP is only open to homeowners who have their loans owned or guaranteed by the government-run Fannie Mae or Freddie Mac. Additionally, refinancing through HARP will not lower or otherwise impact the principal owed on the loan.
Other eligibility requirements of the refinancing program include:
-Homeowners must be current on their mortgage payments
-Homeowners cannot have been more than 30 days late on a payment within the last 12 months
-The amount owed on the first mortgage cannot be more than 125% of the current market value of the home
-The homeowner must be able to demonstrate a reasonable ability to pay the refinanced amount
The second program, the Home Affordable Modification Program(HAMP), applies to homeowners who are delinquent in the mortgage payments and either in foreclosure or facing the immediate threat of foreclosure. Once a homeowner's application is in review for the program, any foreclosure proceedings against him or her must be stayed until an eligibility decision is made.
To be eligible for HAMP, homeowners must demonstrate a financial hardship that makes it impossible for them to meet their mortgage obligations. This financial hardship may include things like unemployment and medical expenses. Some of the other qualifications homeowners must meet include:
-The unpaid principal balance on a single home cannot be more than $729,000
-The monthly mortgage payment must be more than 31% of the homeowner's monthly pre-tax income
-The first mortgage on the home must have originated on or after January 1, 2009
-The home must be the primary residence
If the homeowner has more than one mortgage lien on the property, only the first mortgage is eligible for modification under the program.
Criticisms of the Federal Programs
Even as the federal government continues to laud the successes of its Making Homes Affordable programs, those who have sought acceptance into either program are telling a different story. Some of the chief criticisms of the federal mortgage programs include:
- The programs are not helping as many people as the Administration claimed they would. According to reports, only 6% of the 4 million eligible homeowners are participating in the refinancing or restructuring programs. As of September, 88% of the 1 million ARM mortgages had not been modified or refinanced. Only 575,000 homeowners have been offered a trial program and of those, only 360,000 currently are underway.
- The programs only are mandatory for federal lenders and not private ones. Right now, private lenders like Bank of America and Citigroup are not required to participate in either program. Given that private lenders hold 85% of the 14 million mortgages in the country, their participation is necessary to offer any real relief.
- Voluntary involvement by private lenders is limited. Even though the federal government is pushing private lenders to become more involved - and giving them bail-out money as an incentive - the participation rates by private banks and other lenders are still low. Recent reports put JP Morgan Chase at the top of the list, having enrolled 20% of its eligible customers in the federal program. Wells Fargo and Bank of America round-out the bottom of the list with 6% and 4% respective enrollment.
- The process itself is difficult for homeowners. When homeowners are deemed eligible to participate in the program, they are buried under paperwork and may be forced to wait months before they obtain final approval. Many private lenders do not have the resources or personnel to handle the onslaught of requests, leading to lost documents, duplicate requests and long waits. The process is confusing at best, making it not worth the hassle for some frustrated homeowners.
- The programs do not offer relief to those who need it most.Arguably the biggest problem with the program is that it fails to help those in the worst financial straits. Homeowners behind in their payments are not eligible for the refinancing option. Those who qualify for the restructuring option must be able to make three payments on-time during the trial period in order to secure final approval for the restructured mortgage. If they fail to do so, they are dropped from the trial program and their home is subject to foreclosure. It stands to reason that an option should be made available for those in the worst financial conditions who cannot meet the eligibility requirements for either program.
Conclusion
People who have found themselves behind on their mortgages and facing foreclosure have other options besides seeking participation in one of the federally-sponsored Making Homes Affordable programs. Lenders have created their own refinancing and restructuring programs for many homeowners. If a bank program is not an option, homeowners may be able to keep their home out of foreclosure by negotiating a private settlement with the lender or filing for Chapter 13 bankruptcy protection.
Even though the unemployment and foreclosure numbers in Louisiana are considered moderate when compared to other states, this does not mean people in the state are not suffering from the economic downturn. According to the Louisiana Economic Vital statistics, foreclosures in Louisiana increased by 46% in August 2009 over the prior month. For more information on your legal options to reduce debt, contact an experienced attorney.
Article provided by Grand Law Firm
Visit us at www.grandlawfirm.com
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Wednesday, October 7, 2009
Mortgage Programs Fall Short in Keeping Homeowners out of Foreclosure
Saturday, April 4, 2009
Fannie Mae Refinancing Volume Jumps to $77 Billion in March
/PRNewswire / -- Fannie Mae (NYSE:FNM) announced today that the company's refinancing volume jumped to $77 billion in March, nearly twice the refinancing volume the company experienced during the month of February and the company's largest refinance month since 2003.
"The volumes we are seeing are very encouraging," said Tom Lund, Executive Vice President, Single-Family Mortgage Business. "A majority of our business volume in March was in refinanced loans, and we anticipate that volumes will increase even more as millions of additional homeowners become eligible to refinance under the President's Making Home Affordable plan. Providing broader access to affordable, sustainable mortgages through expanded refinancing opportunities is a critical part of preventing future foreclosures and hastening recovery."
The company also disclosed that more than 500,000 borrowers have accessed Fannie Mae's online assistance to inquire about the possibility of refinancing their loan under the Obama Administration's refinancing plan, and more than 80,000 callers have contacted Fannie Mae's national hotline since the plan was announced.
Home Affordable Refinance
Fannie Mae launched its Home Affordable Refinance initiative last month as part of the President's Making Home Affordable plan. Key features include:
Additional Flexibilities: Most borrowers refinancing an existing Fannie Mae loan will not be required to buy new or additional mortgage insurance if the loan at the time of the refinance is more than 80 percent of a home's value. Any existing mortgage insurance may be carried forward to the new loan. In addition, Fannie Mae can refinance loans up to 105 percent of a home's value with this new flexibility, so even borrowers who are "underwater" -- who owe more than their home is worth -- may be able to refinance. This will expand the number of borrowers able to take advantage of lower interest rates that reduce monthly payments, or refinance into a more sustainable mortgage.
Streamlined Processing: Beginning April 4, the 1,600 lenders and 29,000 mortgage brokers using Fannie Mae's Desktop Underwriter(R) platform will be able to process an application to refinance an existing Fannie Mae loan, allowing for greater lender origination capacity and easier refinancing for borrowers.
What Borrowers Need to Know:
-- To qualify, your mortgage loan must be owned by Fannie Mae.
-- You must have a solid payment history on your existing mortgage.
-- The expanded refinance flexibility ends in June 2010.
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Wednesday, March 18, 2009
Fannie Mae Refinancing Volume Jumps to $41 Billion in February
/PRNewswire-FirstCall/ -- Fannie Mae (NYSE:FNM) announced on Wednesday that the company's refinancing volume jumped to more than $41 billion in February, nearly three times the refinancing volume the company experienced during the month of January and the largest refinancing volume in nearly a year.
"Borrowers are increasingly taking advantage of the low mortgage rates available in the market today," said Tom Lund, Executive Vice President, Single-Family Mortgage Business. "We anticipate that volumes will increase even more as millions of additional homeowners become eligible to refinance under the President's Making Home Affordable plan. Providing broader access to affordable, sustainable mortgages through expanded refinancing opportunities is a critical part of preventing future foreclosures and hastening recovery."
The company also disclosed that more than 100,000 borrowers have accessed its online mailbox to inquire about their eligibility for refinancing under the Obama Administration's refinancing plan, and about 50,000 callers have contacted Fannie Mae's national hotline since the plan was announced. In addition, today the company launched a new online look-up tool on the company's Web site (www.fanniemae.com) that will allow borrowers to quickly determine if they have a Fannie Mae-held mortgage -- a determining factor in whether a borrower is eligible for the program.
Home Affordable Refinance
Fannie Mae launched its Home Affordable Refinance initiative earlier this month as part of the President's Making Home Affordable plan. Key features include:
-- Additional Flexibilities: Most borrowers refinancing an existing
Fannie Mae loan will not be required to buy new or additional mortgage
insurance if the loan at the time of the refinance is more than 80
percent of the home's value. Existing mortgage insurance must be
carried forward to the new loan. In addition, Fannie Mae can
refinance loans up to 105 percent of a home's value with this new
flexibility, so even borrowers who are "underwater" -- who owe more
than their home is worth -- may be able to refinance. This will
expand the number of borrowers able to take advantage of lower
interest rates that reduce monthly payments, or refinance into a more
sustainable mortgage.
-- Streamlined Processing: Beginning April 4, all 1,600 lenders and
29,000 mortgage brokers using Fannie Mae's Desktop Underwriter(R)
platform will be able to process an application to refinance any
existing Fannie Mae loan, allowing for greater lender origination
capacity, more consumer choice and easier refinancing for borrowers.
What Borrowers Need to Know:
-- To qualify, your mortgage loan must be owned by Fannie Mae.
-- You must have a solid payment history on your existing mortgage.
-- The expanded refinance flexibility ends in June 2010.
Fannie Mae exists to expand affordable housing and bring global capital to local communities in order to serve the U.S. housing market. Fannie Mae has a federal charter and operates in America's secondary mortgage market to enhance the liquidity of the mortgage market by providing funds to mortgage bankers and other lenders so that they may lend to home buyers. Our job is to help those who house America.
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Wednesday, March 4, 2009
Fannie Mae Undertakes 'Making Home Affordable' Refinancing and Modification Initiatives
/PRNewswire-FirstCall/ -- Fannie Mae (NYSE:FNM) today began making two new initiatives -- Home Affordable Refinance and Home Affordable Modification -- available to its servicers and borrowers as part of the Obama Administration's Making Home Affordable program. The two initiatives are designed to significantly expand the numbers of borrowers who can refinance or modify their mortgages to a payment that is affordable now and into the future.
"Making Home Affordable provides crucial tools to mortgage lenders and homeowners coping with financial hardship and declining home prices," said Herb Allison, president and chief executive officer. "Potentially millions of homeowners could qualify for and benefit from these initiatives. The people of Fannie Mae will do all they can to make the program a success for homeowners across America and to advance the nation's housing recovery."
Home Affordable Refinance
Home Affordable Refinance includes new refinancing flexibilities for homeowners whose loans are owned by Fannie Mae. Key features include:
-- Additional Flexibilities: Most borrowers refinancing an existing
Fannie Mae loan will not be required to buy new or additional mortgage
insurance if the loan at the time of the refinance is more than 80
percent of a home's value. Any existing mortgage insurance may be
carried forward to the new loan. In addition, Fannie Mae can refinance
loans up to 105 percent of a home's value with this new flexibility,
so even borrowers who are "underwater" -- who owe more than their home
is worth -- may be able to refinance. This will expand the number of
borrowers able to take advantage of lower interest rates that reduce
monthly payments, or refinance into a more sustainable mortgage.
-- Streamlined Processing: Beginning in April, all 1,600 lenders and
29,000 mortgage brokers using Fannie Mae's Desktop Underwriter(R)
platform will be able to process an application to refinance any
existing Fannie Mae loan, allowing for greater lender origination
capacity and easier refinancing for borrowers.
What Borrowers Need to Know:
-- To qualify, your mortgage loan must be owned by Fannie Mae.
-- You must have a solid payment history on your existing mortgage.
-- The expanded refinance flexibility ends in June 2010.
Home Affordable Modification
Through the Home Affordable Modification, Fannie Mae will work with loan servicers across the country to help distressed borrowers modify their current loan into a mortgage that is more affordable and sustainable. Loan servicers participating in the program may reduce interest rates, lengthen the payment time frame or take other steps, such as principal forbearance, to bring the monthly payments down to as low as 31 percent of the borrower's gross (pre-tax) income.
What Borrowers Need to Know:
-- To modify a loan through Home Affordable Modification, it must be for
your primary residence.
-- You need not wait to become delinquent with your payments -- a plan
can be put in place as soon as you think you may have trouble making
your mortgage payment.
-- The amount you owe on your mortgage must be less than or equal to
$729,750.
-- The program is for mortgages originated prior to January 1, 2009.
-- Certain eligibility requirements, including attesting to a financial
hardship, may apply in some cases.
To ensure borrowers currently at risk of a foreclosure have the opportunity to apply for a Home Affordable Modification, Fannie Mae servicers have been directed not to proceed with a foreclosure until a borrower has been evaluated for the program.
Finding Out if a Loan is Owned by Fannie Mae
Borrowers can find out if their loan is owned by Fannie Mae in one of two ways:
-- Call your current mortgage lender or servicer. The phone number
should be on your monthly mortgage statement or monthly coupon book.
-- Contact Fannie Mae. Call 1-800-7FANNIE (8 a.m. - 8 p.m. ET) or visit
http://www.fanniemae.com/homeaffordable.
Fannie Mae also intends to make an online tool available later this month so borrowers can look up their loan and determine if it is owned by the company.
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Freddie Mac Announces Two Initiatives Supporting President Obama's Making Home Affordable Plan
/PRNewswire-FirstCall/ -- Freddie Mac (NYSE:FRE) today announced two new mortgage initiatives under President Obama's Making Home Affordable plan designed to help families with Freddie Mac-owned mortgages who are delinquent, at-risk of default, or struggling to refinance because of declining property values.
The new initiatives include Freddie Mac's Relief Refinance(SM) Mortgage and the implementation of the Obama Administration's new Home Affordable Modification program.
"We are proud to support President Obama's bold initiative to restore stability and affordability to the housing market," said Freddie Mac Chairman of the Board, John Koskinen. "Today's announcement will give Freddie Mac seller/servicers the tools to refinance borrowers into loans with more affordable terms and provide at-risk borrowers with a potent new loan modification alternative."
Refinance Relief for More Borrowers
The new Freddie Mac Relief Refinance Mortgage is designed to assist borrowers who are current on their mortgage payments but who would benefit from refinancing into mortgages with terms that better position them for long-term homeownership. To qualify, borrowers must have mortgages that are owned or guaranteed by Freddie Mac.
Eligible borrowers can use Relief Refinance Mortgages to improve their position for long term homeownership success by reducing their current mortgage interest rate or shortening the amortization term. Similarly, the Relief Refinance Mortgage can be used to replace an adjustable rate mortgage, an Initial Interest(R) Mortgage or balloon/reset mortgage with a 15-, 20- or 30-year fixed-rate mortgage.
The loan-to-value ratio on Relief Refinance Mortgages can be as high as 105 percent of the property's value. There is no maximum TLTV/HTLTV ratio, however Relief Refinance Mortgages cannot be used to payoff or reduce subordinate liens. What's more, existing liens must continue to be subordinate to the Relief Refinance Mortgages.
To reduce borrower costs and simplify the refinance process Freddie Mac is encouraging lenders to use Home Value Explorer (HVE) when applicable, Freddie Mac's sophisticated automated valuation model. In addition, lenders using HVE will not be required to provide the standard representations and warranties on the property's value, condition and marketability.
Lenders will not have to re-underwrite a borrower if the Relief Refinance Mortgage raises their monthly principal and interest payment by 20 percent or less. But, in cases where the change in monthly principal and interest payment is more than 20 percent, borrowers will be underwritten through a simplified process. to increase their success with the new mortgage.
Mortgage insurance (MI) is not required if the existing mortgage does not require MI. Otherwise, MI coverage on the new loan must be the same as on the original mortgage.
Freddie Mac Relief Refinance Mortgages are only available for a limited time. Seller/Servicers must deliver Relief Refinance Mortgages under contracts taken out on or after April 1, 2009 through the company's on-line selling system. In addition, Relief Refinance Mortgages must be originated by June 10, 2010.
National Modification Effort Launched
Freddie Mac also announced support for the new national Home Affordable Modification program which begins on April 1, 2009 and is designed to help more at-risk borrowers achieve successful homeownership by lowering their monthly payments. To qualify, borrowers must have a Freddie Mac-owned or guaranteed mortgage originated on or before January 1, 2009.
To demonstrate its commitment to the Administration's new initiative, Freddie Mac has directed its servicers to ensure that every possible effort is made to achieve a successful workout for delinquent borrowers through the new Home Affordable Modification program or Freddie Mac's other workout options before initiating a foreclosure.
The new Home Affordable Modification program is expected to further reduce payments to more affordable levels, and in some cases assist eligible homeowners before they fall behind on their mortgage payments.
Last year, Freddie Mac approved more than 87,000 workouts on its seriously delinquent loans and launched the Streamlined Modification Program in November 2008 with Fannie Mae, the Federal Housing Finance Agency, and the HOPE Now Alliance.
Next Steps For Borrowers
Borrowers interested in learning more about the Freddie Mac Relief Refinance Mortgage or the Home Affordable Modification program should contact their mortgage servicer. Borrowers should also contact their servicer to find out if Freddie Mac owns or guarantees their mortgage.
Freddie Mac also said that depending on the level of borrower response to the Relief Refinance Mortgage program and the new modification initiative and the number of borrowers who qualify for such refinancings and modifications, the impact of resulting prepayments on certain Freddie Mac Mortgage Participation Certificates, or PCs, could be material.
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Monday, October 6, 2008
Two-Thirds of Struggling Homeowners Meet Key Criteria for Housing Bill Relief, According to Survey by CCCS of Greater Atlanta
PRNewswire/ -- Almost two-thirds of homeowners who called Consumer Credit Counseling Service (CCCS) of Greater Atlanta for foreclosure prevention counseling in recent months appear to meet the threshold requirements for relief under the new federal housing bill that took effect Oct. 1, according to a recent survey of those homeowners.
Of 591 people surveyed in late September, 381 of them, or 64.6 percent, said they met five key eligibility criteria for the mortgage refinancing program.
On July 30, President Bush signed the Housing and Economic Recovery Act of 2008. The law created a new program called Hope for Homeowners intended to help families save their homes from foreclosure. Mortgage lenders participating in the program can allow "at risk" borrowers to refinance their current mortgage into a new fixed-rate loan insured by the FHA. Lenders' participation in the program is voluntary.
"Our survey results indicate this new FHA program holds the potential to help a large number of Americans struggling to pay their mortgage," said Suzanne Boas, president of CCCS of Greater Atlanta. "Not everyone will be able to meet the terms. But if someone meets the basic criteria laid out in the housing bill, it would be worth a phone call to their lender to ask about the FHA program."
Homeowners must meet several requirements to be considered for the program. People who called CCCS of Greater Atlanta in July and August trying to avoid foreclosure were surveyed about these requirements by email from Sept. 19-23.
To be counted among the 64.6 percent of survey takers who appear to meet the threshold criteria, people needed to indicate that they live in the home with the problem mortgage; their mortgage was originated before January 2008; they didn't have an existing home equity line or other second mortgage; they did not own another home and they spend at least 31 percent of their gross monthly income on mortgage debt.
From those surveyed, the top challenge to participation in the FHA program is paying off a home equity loan or second mortgage. Thirty-five percent of respondents reported that their home secures more than one loan.
A second mortgage or home equity loan must be paid before a homeowner can qualify for the refinance program. It is possible to pay off the second mortgage through proceeds from the new FHA loan. That could be difficult if the first and second mortgage are held by different lenders because only the primary loan qualifies for the FHA program.
Also, nearly 20 percent of respondents say they don't spend at least 31 percent of their gross monthly income on their mortgage -- a threshold required by the FHA refinance program.
Borrowers who qualify for the FHA program are responsible for paying loan origination fees, as well as an insurance premium to FHA equal to 1.5 percent of the principal annually.
There are several other conditions:
-- The borrower must certify there was no misrepresentation in their application for the existing loan.
-- The borrower must agree to share both initial equity and future appreciation with The U.S. Housing and Urban Development Department (HUD).
-- The equity sharing agreement provides that if the house is sold within the first year, 100 percent of the initial equity (generally 10 percent of the value of the property at origination) will go to FHA. After 1 year, FHA is entitled to 90 percent of the initial equity. The percentage keeps dropping in 10 percent increments to 50 percent after the fifth year, where it stays.
-- In addition to the initial equity which is a fixed amount, 50 percent of any future appreciation of the property must be paid to HUD when the property is sold.
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