Posts Tagged ‘refinance’

For decades, grandparents have passed on the knowledge that the best investment you can make is homeownership.  You will have a fixed payment for 20 to 30 years.  At the end of that term, you can live without a house payment. If you need the money, sell your home and rent.

Even though the housing market started to crash in 2006, I believe that our grandparents were right.  Let me give you some examples.  Home prices have gained 42% since 2000.  The market has lost 4%.  According to Trulia, it is cheaper to purchase a new home in 72% of America’s cities than to rent.  In case you haven’t heard, interest rates are at all times lows.  With low rates and low values, you are getting more bang for your buck and keep dollarsin your pocket.  One thing is sure.  Rates and values will start to rise.

I wanted to talk about this today because I know a lot of people are on the fence and are trying to time the market.  Now is the time.  Don’t hesitate … make a decision.  Homeownership is an American dream that we shouldn’t take for granted.  But, just like our grandparents once told us, it is the best investment that you can make.

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If you read my blog post back on October 14th, I mentioned how I would fix the current refinancing problem and the reasons there was a problem to begin with.  Well, I didn’t have a crystal ball, but it looks like our government has come up with a workable solution for homeowners who are underwater with their appraised value.  The highlights are below:

Highlights included:

  • Geared towards borrowers who refinance into lower amortization periods.
  • Allowing LTVs to 125% and above.
  • Eliminating new appraisals where there is a reliable estimate of value.
  • Waiving certain representations and warranties that lenders commit to in making loans owned or guaranteed by the FNMA and FHLMC.  (This was the primary reason most investors did not offer LTVs above 105% on the current HAMP programs.)
  • Extending the end date for HARP until Dec. 31, 2013.

Loans eligible for the new plan:

  • Loans that were originally sold to FNMA or FHLMC before May 31, 2009 with an LTV of 80% or above.  If you are unsure who purchased your loan, below are the links for Fannie Mae and Freddie Mac.

Implementation Dates:

FHFA is the agency that regulates both Fannie Mae and Freddie Mac, but both Fannie and Freddie have not released any additional information on HARP Phase II.  Per the news release, they will “issue guidance with operation details…by November 15”, and at this time we should have a better idea how these changes will affect their current DU Refi Plus and LP Open Access programs.  Delivery of these loans to the agencies is not expected to be available until the first quarter of 2012.   

Pricing:

There will be an adjustment to your new interest rate due to the increased risk of a higher LTV (loan to value).  However with the reps and warranties fees being lowered or waived, quality borrowers, historically low rates, and loan level adjustments that benefit borrowers in shorter term mortgages; most lenders are optimistic pricing will be reasonable.  Initially expect a wide variance of market prices as lenders estimate where pricing should be until the first HARP security is actually priced in the first quarter of 2012.

 This could be awesome news for about 5 million households who could benefit from this program.  As more details come to light, I will continue to provide updates.

The questions:  What happens if rates have dropped and I would love to refinance my home?  What if I owe more than my home is worth?  I get calls everyday asking these same questions.  These homeowners have an interest rate in the 5% range or higher, would love to save money, but…..  Have rates dropped? Yes. Have home values dropped?  Yes.  Fannie Mae does have a program called Refi Plus that will allow you to refinance in this situation, but only up to a certain limit.

The solution:  What if our esteemed government released a program that would allow everyone, regardless of appraised value, to do that.  The program could be strict and simple.  Allow homeowners who have not been late on a mortgage payment in the last 12 months, have a DTI (debt to income ratio) less than 45%, and a credit score over 720 to use this program.

The benefits:  Are you kidding?  They are endless but let me name a couple.  First, this program would keep homeowners from giving up and walking away from a home in which they are currently upside down.  Thus, less foreclosures.  Less foreclosures = higher home values.  Second, if I refinance my home I will have more money in my pocket every month. Common sense tells me that the more money I have, the more money I will spend.  Do you think this will help the economy?  Of course it will.

Who’s with me?  We have got to use some common sense in order to get our great country out of this recession.  A simple tweak in the mortgage products that are being offered will do the trick.