Interesting times.
Everything You Know is Wrong
Posted on 02/18/2009 7:01:38 AM PST by cc2k
And President Obama is there today, in Phoenix, to unveil his "Homeowner Affordability and Stability Plan," which will help bring relief to homeowners and bring some order to the housing market.
The President will talk more about his plan a little later today. In the meantime, we’re sure you have a lot of questions, like, Am I eligible for assistance? Might I be able to modify my loan? When do I apply? We've put together an example sheet that will show you what options might be available to you, depending on the circumstances of your mortgage, as well as answers to some common questions (below).
Questions and Answers for Borrowers about the
Homeowner Affordability and Stability Plan
Borrowers Who Are Current on Their Mortgage Are Asking:
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.
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.
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.
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.
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.
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.
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.
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.
Mortgage lenders will begin accepting applications after the details of the program are announced on March 4, 2009.
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:
Borrowers Who Are at Risk of Foreclosure Are Asking:
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.
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.
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.
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.
Yes. Mortgages on 2, 3 and 4 unit properties are eligible as long as you live in one unit as your primary residence.
Only the first mortgage is eligible for a modification.
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.
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.
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.
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.
Ask your lender or counselor to be considered 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.
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
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.
Give a man a fish, and he’ll be back the next day to ask for another,
at which time, you can demand of him something that he wouldn’t have complied with yesterday.
And yet again, the irresponsible are told “It’s okay if you screwed up. You don’t have to take responsiblity for your mistake.”
And so they’ll do it again, naively confident that they’ll never have to pay the price.
Yup, reward failure, punish success. That’s what liberals do.
Interesting times.
Everything You Know is Wrong
Thanks for the reply. I don’t think I qualify anyway with my income.
Gee - easy for you to pontificate when you got into a crap mortgage and Countrywide did the work for you by offering 4.625% on a 30-yr fixed.
I’m paying 6% on a 30-yr, seven years in. I had exactly one day in December to try and get a 4.5% refinance rate. After that day, the rates jumped back over 5%. The only reason you got a sweet rate is because you took out an historically risky loan in the first place. Whether or not you were responsibly paying, you were rewarded for the potential of default down the road. So spare us the finger wagging.
I don’t owe more than my house is worth. I’m in the middle of a major remodel, but paying cash for it. I bought a house that cost less than 1/2 of what I was qualified to buy. I make my payments early and pay extra.
Silly me.
That is the whole point of the ‘stimulus’ too. The best witch doctors are the ones who wave the dead chicken nearest to the rainfall.
Except here, instead of merely waving a dead chicken (or a reasonable facsimile), the ‘stimulus’ is a grab-bag of far-left desires accumulated since 1980. So it is a two-fer. They get their fascism, AND their fascism is credited with the economic recovery. It is politically beautiful, truly a marvel of cunning. To top it all off, the dumb-ass Republican leadership and clueless Faux Noise talking heads are spouting off complete garbage that the “stimulus won’t work, and Obama will be crushed by his dismal failure”.
WRONG WRONG WRONG, it will not play out like that at all. The economy most certainly will recover before 2012, for reasons completely unrelated to the machinations of the federal government, and Obama will bask in glory, fanned lovingly by a devoutly corrupt media. Everyone who said otherwise will look like a complete idiot, and the reputation of the worldview espoused by Republicans will be eviscerated for a decade or two. This is the FDR debacle redux. An entire generation of faulty economic thinking will be the most dangerous fruit of this exercise.
Oh please big government, save me! What a crock. Doing the right thing no longer pays off in this country with these nimrods at the helm. Doing the wrong thing pays off big time.
Remember that video of that woman who said Hussein was going to pay her mortgage and fill her gas tank during the campaign? Well, they found you - and me.
Focault's Pendulum wrote:Good question. And there isn't a good answer.
Quick question.I have 100k left on my mortgage. I can afford to pay it off. Should I? Or should I let it ride. I've got a pretty good fixed rate.
If we're heading into a deflationary period, paying off the debt would make sense. Today's dollars are worth less than tomorrows in that scenario.
If we're headed for inflation (or hyperinflation), then you'll be paying the debt with dollars that are worth less in the future. If that's where you believe we're heading, it would make more sense to put the money into an inflation hedge (perhaps precious metals) and pay off the debt later. If the inflation is high, and your hedge holds up, you'll come out ahead.
On the third hand, if TSHTF, owning the property outright, with no mortgage, could be an important factor.
Lately my crystal ball has been defective. It clouds up somewhere between 24 hours and 2 weeks out. Beyond that, I use a "Magic 8 Ball" for backup. But it isn't so reliable either. You'll have to check your own crystal ball and alternates for advice.
It's a stool alright...just not the kind they think.
My house lost over $200K from the height of the boom, but I still have over $100K positive equity. Without another bubble (which we don’t need), I’d guess it will take 8-10 years to recover the $200K.
I could have taken out a fixed but I was only set to be in this house for 24 months so 99 out of 100 mortgage brokers would have not suggested a fixed rate. So spare me your douchey sniping and maybe you should get your facts straight before you take to attacking someone who apparaently hit a nerve with the “Prodigal Son” comment.
So you tried to game the system by taking out an ARM and assuming the property value would just continue to magically go up? You probably didn’t put much of anything down since you believed you wouldn’t be in there more than two years, which left you underwater within the first twelve months. So far as 99 out of 100 mortgage brokers and the advice they give, anyone who listened got reamed. I suppose that included you.
Douche.
So what, if anything, is the gubmint doing to make it harder for people to walk away from their homes if they are upside down big time? Let me rephrase, SHOULD the gubmint be doing anything there?
I’d be happy to have some positive equity. Any at all. I guess if I take into account how much it went up after we bought it and how much it’s fallen now it’s lost about $160k. $110k from what we bought at.
Of course we bought right before the bubble burst so that’s why we don’t have any equity in the house, no matter how much extra we can put toward the mortgage each month.
Luckily, my dad “loaned” us the money for the downpayment and closing costs, otherwise we’d be even more screwed.
Screw it. I’m sorry about that post above. Just frustrated with the country swirling the bowl. Please forgive my sniping/name-calling.
The criteria for eligibility will include having sufficient income to make the new payment and an acceptable mortgage payment history.
In other words, if you are already making it, we will help you get a lower rate.
But if you are falling behind because your ARM made your interest skyrocket along with your monthly payment, you are still screwed.
Housing prices are still too high. They got too high because you and your buddies in CONgress destroyed regulatory structures that prevented excessive leverage over the course of more than 20 years. It was not just Democrats or Republicans that did this, it was both parties....
There is a price for a given house, a given MBS, a CDO. It is the price negotiated between a willing buyer and a willing seller - nothing more or less. So long as the government continues to actively interfere in these markets and try to "prop up prices" (no matter where it is) you will see spreads widen and markets remain frozen. The longer markets remain frozen due to government interference, the worse the damage to our economy, the more people will be laid off, the more businesses will fail and the lower the stock market will sink. Its really that simple, and that the people in Washington DC, including both McCain and Obama, are too tone-deaf to understand the basics of how markets work, is outrageous. That we as Americans allow this claptrap to continue instead of recognizing the fundamental truth of how markets work and why interfering with them in this fashion can never succeed is even more so.
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