Will we get more Refinancing Options for Homeowners?

As much as the government talks about staying out of housing, it can’t. President Obama is expected to unveil a new refinance plan today in Virginia at 10AM CST. Whatever plan it is, no one expects it to pass through Congress, IF Congressional approval is required. Recall that this plan was previewed by Obama during his SOTU address last week. The plan would allow non-agency mortgage holders (so those mortgages not backed by Fannie/Freddie) who are current to refinance into a lower-interest federally insured mortgage (via the FHA). Borrowers could qualify even if they had negative equity. The plan could help as many as 3.5M homeowners refinance. The plan is expected to cost ~$5-10B and Obama will call for a new fee to be charged to banks to pay for the proposal – because they have all the money, right?

I don’t know about you, but since history has a tendency to repeat itself rest assured, any and all costs will be passed onto the Homeowner.

The Government Announces a New Benefit for Homeowners

 The Administration has just announced a major expansion to the Home Affordable Refinance Program (HARP) in an attempt to help more homeowners by enabling them to refinance high loan-to-value mortgage loans at current low interest rates.  The changes are effective in a few weeks and tens of thousands of homeowners will be eligible for this new program. 

To qualify for the enhanced HARP, the existing mortgage loan of a borrower must be owned or guaranteed by Fannie Mae or Freddie Mac and the current balance of the mortgage must exceed 80 percent of the value of the property.   The homeowner must also be current on the loan at the time of the refinance and must not have had a late payment on the mortgage in the past six months or more than one late payment in the past 12 months.

The most important enhancement to this program is the removal of the loan-to-value ratio cap for eligible mortgages. Originally, any mortgage that exceeded 125% of the value of the property was not eligible. Now the loan can exceed 125% of the value.  This change makes tens of thousands of homeowners eligible to refinance at today’s record low interest rates.  Even better, Fannie Mae and Freddie Mac are eliminating certain loan fees to make the refinances even more attractive.

Want to know if you are eligible for this great new program?  First Step is to check to see who owns your home.  It must be either Fannie Mae at http://www.fanniemae.com/loanlookup/  or Freddie Mac at  https://ww3.freddiemac.com/corporate/ .  Remember what I said in an earlier post?  Even if you are not comming up on their website does not mean they don’t own your loan.  You may need to call your lender direct and ask them, ”Who owns my loan?” 

If you are still having trouble and need some assistance, the  team at Centurion Mortgage is great.  They are always happy to help and can walk you through the never ending maze which we call home lending.    If you are interested the assistance is  free and there is  no obligation for the review.   They do suggest you act quickly because lenders are likely to get inundated as soon as the word gets out that the pricing should be better and there is no cap on your equity position.  Not to mention  you never know how long these record low rates will last.

Until next time…….

What is HARP and why does Everyone keep talking about it?

HARP stands for Home Affordability Refinance Program.  It is basically a stimulus package brought to you by the Obama Administration.  The main crux of “HARP” is to be able to help homeowners refinance their property even if there is no equity.  So basically it goes like this.  

I am a homeowner who has been making my house payments on time for the last twelve months.  My interest rate is 7%!  I want and need to refinance my home but to do so is a nightmare.  Why?  Well the banks do not want to refinance to someone like me who has no equity in their property.  I can’t find out home much equity I have because banks will not take an appraisal from an appraiser I call.  In Fact the only time I am allowed to speak to an appraiser is when the bank orders it directly and they come knocking on my door to appraise my home.  This new way of doing business went into effect the beginning of 2011 with the new legislation that our wonderful Congress enacted.  So even if I found a competent appraiser that indicates I may have some equity the bank will not use my appraiser only their own approved appraisers. 

The second obstacle I face may be mortgage insurance.  If my property has any equity but less than 20% the lenders require mortgage insurance to cover them in case I default on my loan.  Granted I have been making my house payments on time for the last 13 years but because my value has gone down mortgage insurance is required. However that is only if I have some equity, if I owe more than the property is worth.  Lenders will not give me a loan regardless of how high my fico score is or my income.

This is how and why HARP came to be.  The premise behind HARP is that as long as I have made my house payment on time for the last twelve months and I have good credit (most lenders require 640 fico score or higher) and my loan is not more than 125% of the value they lender will refinance my home.  Sounds simple enough, however the banks don’t allow anything to be too simple, maybe they like the fact that I am paying them 7% whereas if I refinanced I would be able to drop my rate to 4%. 

Bottom line is the program is not a mandate from the Obama Administration.  Obama allows the banks to opt in to the program.  To be eligible your loan must be owned by Fannie Mae or Freddie Mac.  If your loan is owned by one of these two agencies than the majority of lenders will refinance your home up to 125% of the value. 

Certain restrictions apply and not every home that is owned by Fannie and Freddie show up on their websites so a call to your current lender is of course needed.  If you are needing and wanting to refinance and need some assistance putting it together contact the talented team at Centurion they can be reached at  http://www.CenturionMF.com  or drop them a line at  562-533-5600.  They  can help you see if you will qualify and reduce your monthly house payment.

After all, who couldn’t use some extra cash these days?

The Big Bad FICO Score!

Afraid of the Fico Score?  It seems everyone wants it. Landlords, Mortgage companies even utility companies. 

It doesn’t have to cause so much apprehension as long as you are aware of what it is used for and what it can actually do for you.

Your Fico score helps issuers of credit decide and assess how you will more than likely pay on your debt.  It’s used by most lenders to determine if you are a good risk.  There are three credit bureaus that most lenders report to: Experian, TansUnion and Equifax.  Scores range from 350 to 850.  The higher the score the more lenders want your business and the better the terms are for the credit!

Here are some things you will want to AVOID AT ALL COSTS in order to keep your fico score in the higher digits. 

MAKING LATE PAYMENTS, Payment history accounts for a whopping 35 percent of your score.  Needless to say paying late is one of the worst things you can do.  The more times late 30, 60 or 90 days, the more damage it will do to your credit.  Making payments late can cause you to lose up to 200 points. 

MAXING OUT CREDIT CARDS.   Believe it or not when you max out your credit cards your available credit decreases compared to your available credit.  Keep balances low or pay off those cards.  Keeping your cards Maxed can cause you to lose about 100 points on your credit.  

INQUIRES.  While some like to say there is a difference between a hard inquiry and soft inquiry, the both impact your scores.  So it’s always in your best interest not to have your credit run numerous times.  The internet can be a killer on inquires.  I had a client shopping for a mortgage once through the internet; she went to one of those sites where lenders compete for your loan.  Well, all 10 lenders pulled her credit and her fico scores dropped.  Needless to say she was not happy.   Excessive credit pulls/inquiries can drop your credit score by 30 to 60 points!  So beware.

CLOSING OLD CARDS.  Who knew, you think you are doing something good and it bites you in the H____y! Once you close old cards your available credit decreases which in turn will impact your scores.  Unless the card has annual fees where you just want to get rid of it.  Having old accounts on your credit does not hurt you only closing the accounts do.  Impact on credit up to 100 points!

So keep these things in mind and above all check your own credit at least one to two times a year to make sure you are not a victim of a stolen identity.  You can go to MyFico.com and request a copy (cost is $20.00) the cost is well worth it to keep an eye on your credit.    It’s important to take action and dispute any items that are reported in error.  After all you never know when your fico score may come in handy.

How low can it really go?

How low can rates go?  Seems to be the question I get a lot these days.  The honest answer is…..who knows, but if the rates are at least a ½ percent lower than what you are paying now you may want to consider a refinance. 

When weighing the benefits of a refinance it is always good to  consider how long you plan on being In the home, how many months you have already paid into the loan , the costs involved in refinancing as well as how much  of a monthly house payment  you can save. 

One of the bigger hurdles today in refinancing is the lack of equity as the last few years as been tough on values.  Depending on who owns your loan will make the difference on being able to refinance and if there will be any Mortgage Insurance.

HARP also known as Home Affordable Refinance Program will allow refinancing up to 125% LTV.  The benefit of this program is if you don’t have equity in this current market you may still be able to refinance.  

This program has been instrumental in allowing me to help refinance three of my past clients just this last month.  It does work!

If you have a rate of 5% or higher I encourage you to call to see what you may be able to save.   Rates are low now, so what are you waiting for?

Fear and Loathing, Being late on your Mortgage

It is not easy these days, cost of living has sky rocketed (Yeah cantelopes for $4.00 each) we wonder if we will have a job tomorrow (My good friend just got let go after 23 years of service) and (at least)  my dollar does not seem to be buying everything I need to support my family, let alone pay my bills. 

So I make a choice, food on the table versus paying the mortgage on time.  Should be an easy choice right?  Wrong! 

You know the phone calls will start and you know they are going to charge a late fee which will make it even harder to  catch up come next month.  After all living paycheck to paycheck seems to be the new normal. 

I tried the Obama bail out programs, I went to the websites to see if I qualify I checked to see if my mortgage was owned by Fannie Mae or Freddie Mac   ( I found out that  even if your loan does not show up on these websites Fannie or Freddie can still own your loan so you always want to double check with your current lender)  The problem is the banks don’t seem to want to help or maybe the people they hired don’t know what they are doing.  Either way relief is just not in sight. 

For most of us I think the fear comes from not knowing what can happen, the consequences if you will.  The Loathing comes from finding out the consequences of being late and the disgust we feel when no one seems to care.

If you pay your mortgage after the 15th but before the 30th day will  earn you a late fee of 5% of your payment amount  (in most cases) which of course will make next months payment that much more. 

Being late more than 30 days on your mortgage will impact your credit.  Your lender will report your mortgage late to the bureaus (Equifax, Experian, and Trans Union)  Once your mortgage lender does this your fico score will drop.  You may be thinking who cares, but when your mortgage lender reports this late the majority of your other creditors that you may have credit cards with etc., will more than likely immediately lower your credit limit that you have with them and ready for the good part……Increase your Interest Rate! 

Talk about the double Whammy.  You thought you were having troubles before? Now your credit card payments have just increased, your credit limits have decreased possibly to the point where you can’t borrow anymore and your fico score just plummeted which will now make you ineligible for at least two of the Obama programs that you may have been eligible for. 

If you believe you are eligible to refinance because Fannie Mae or Freddie Mac owns your mortgage and you are having troubles making your house payment before you go late on your mortgage or your credit cards, it may make more sense to possibly be late on bills that don’t show up on your credit immediately like a phone bill or gas bill.   Don’t get me wrong if you fail to pay them and the account goes into collection it will be reported on your credit, but, if you have cut your expenses back as far as you can and are stilling having problems making ends meet, the phone company will not report you late if you pay them late.  This may just give you sometime to see if  you can qualify for a lower payment with a refinance even if you owe more on your home than its worth!

HAMP and HARP are just two of the programs currently supported by the Obama Administration, check them out one may be right for you. 

As always any questions or comments are appreciated.