Daily Real Estate News | October 22, 2008More Leeway in Revised FHA Refi Program

Hope for Homeowners, the program put in place in July that was supposed to refinance failing home loans, hasn’t proven to be very workable, critics say.

Now it’s being improved.

The program gives the U.S. Department of Housing and Urban Development $300 billion to refinance failing home loans. But the original plan didn’t take into account that first and second lien holders, on mortgages where multiple lien holders apply, would in some cases fight over letting the buyer walk away.

The original legislation demanded that the lender have the property reappraised and then write off 10 percent of the new value. Now the rules have been modified to give HUD more flexibility to set the new loan level, including giving the second lien holder a buyout.

HUD Secretary Steve Preston says the original plan left lenders dealing with uncertainty. The revised version gives them more control. "It will give them an opportunity to have a bird in the hand rather than something possible down the road," Preston says.

Source: Reuters News, Patrick Rucker (10/21/2008

Daily Real Estate News | October 22, 2008Mortgage Workouts Increase as Banks Ramp Up

Banks, faced with rising foreclosures, government pressure and economic realities, are growing more willing to modify loans to keep borrowers out of foreclosure.

More than three million U.S. homeowners over the last 15 months have either received loan modifications or are involved in programs where that will be the result.

* About 2.26 million mortgages have been modified under the Hope Now program, an alliance of mortgage servicers, counselors and investors.

* An estimated 400,000 homeowners are expected to participate in a new Federal Housing Administration program that allows borrowers in trouble to refinance into a 30-year FHA loan.

* Nearly 400,000 borrowers whose loans came from Countrywide Financial will be refinanced through new owner Bank of America as part of an agreement resulting from a class action lawsuit.

Source: USA Today, Stephanie Armour (10/22/2008)

Basic Consumer Facts about the HOPE for Homeowners Program


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What is the HOPE for Homeowners Program?	This is a new program for borrowers at risk of default and foreclosure. The program provides new, 30-year, fixed rate mortgages that are insured by the Federal Housing Administration (FHA). It may help you refinance your mortgage into a more affordable payment. H4H is voluntary. Both lender(s) and borrower(s) must agree to participate.
When does H4H Begin?	The program begins October 1, 2008 and ends September 30, 2011.
Who is eligible?	You should contact your lender to determine eligibility, but you may be eligible if, among other factors: The home is your primary residence, and you have no ownership interest in any other residential property, such as second homes. Your existing mortgage was originated on or before January 1, 2008 and you have made at least six payments. You are not able to pay your existing mortgage without help. As of March 2008, your total monthly mortgage payments due were more than 31 percent of your gross monthly income. You certify that you have not been convicted of fraud in the past 10 years, intentionally defaulted on debts; and did not knowingly or willingly provide material false information to obtain existing mortgage(s).
Who should I contact?	FHA does not accept loan applications. Borrowers seeking help should contact their lender, another FHA-approved lender, or a housing counselor to apply or learn more about their options.
How much can I borrow?	Your new H4H mortgage will be no more than 90% of the new appraised value of your home with the lender essentially writing down your current mortgage to that amount.
What costs do I have to pay?	The new mortgage, if approved, will replace all of the current mortgages on your home. You will not owe any payments, fees or debts on mortgages you now hold. You must agree to share both the equity created at the beginning of this new mortgage and a portion of any future appreciation in the value of your home. In addition to an upfront mortgage insurance payment of 3%, you will pay a 1.5% annual mortgage insurance premium on your outstanding mortgage balance. This premium will be included in your monthly payments. You will need to pay closing costs on the loan. You will receive a Good Faith Estimate of these costs.
Will my new interest rate be lower than my current rate?	The interest rate for the new mortgage will be based on current market interest rates and will be provided by the lender.
I currently have a second mortgage. If needed, can I take out a second mortgage under this program?	You cannot take out a second mortgage for the first five years of the loan, except under certain circumstances for emergency repairs.
How can I learn more about the program and start the application process?	Review the Frequently Asked Questions page at www.fha.gov to learn more about the program. Contact an FHA-approved lender to apply. You can find a list of lenders at www.fha.gov Contact a Housing Counselor. A list of Housing Counselors can be found at www.fha.gov Consumer Disclosure

FACT SHEET: HOPE FOR HOMEOWNERS TO PROVIDE ADDITIONAL MORTGAGE ASSISTANCE TO STRUGGLING HOMEOWNERS


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HOPE for Homeowners will provide another resource to the Federal Housing Administration's (FHA) existing efforts to aid struggling homeowners. Under the program, borrowers having difficulty paying their mortgages will be eligible to refinance into FHA-insured mortgages they can afford.

For borrowers who refinance under HOPE for Homeowners, lenders will be required to "write down" the size of the mortgage to a maximum of 90 percent of the home's new appraised value. In many instances, lenders will determine that such a reduction in principal will allow them to avoid a costly foreclosure, while helping borrowers stay in their homes.

HUD strongly encourages borrowers to work with their current lender to determine if HOPE for Homeowners is the right program for them. Lenders should explore all options, including HOPE for Homeowners, before issuing foreclosure notices. For lenders, this voluntary program will serve as another loss mitigation tool that can be used to help families keep their homes.

Sustainable, Affordable Homeownership

HOPE for Homeowners will only offer 30-year fixed rate mortgages - so the borrower's last payment will be the same as the first payment. Further, this program will maintain FHA's long-standing requirement that new loans be based on a family's long-term ability to repay the mortgage. Only owner-occupants are eligible for FHA-insured mortgages.

Consistent with statutory requirements, borrowers must also meet the following criteria:

Their mortgage must have originated on or before January 1, 2008;
They cannot afford their current loan;
They must have made a minimum of six full payments on their existing first mortgage and did not intentionally miss mortgage payments;
They do not own a second home;
Their mortgage debt-to-income must be at least 31 percent;
They did not knowingly or willfully provide false information to obtain the existing mortgage, and they have not been convicted of fraud in the last 10 years;
They must follow FHA's long-standing and strict policy of fully documented income and employment.
Homeowners must agree to share both the equity created at the beginning of their new HOPE for Homeowners mortgage and any future appreciation in the value of their home.
To participate, existing subordinate lenders must agree to release their outstanding mortgage liens.

The new HOPE for Homeowners mortgage payment must be at or below 31 percent of the borrower's income, unless there is "trial modification" period prior to loan application. A trial modification would give borrowers the opportunity to demonstrate their capacity and willingness to make a mortgage payment that does not exceed 38 percent of their monthly income.

Funding
FHA will insure up to $300 billion in new loans.

Program Timeline
The program will last from October 1, 2008 through September 30, 2011.

Voluntary Lender Participation
FHA will continue to offer lenders an alternative to foreclosing on borrowers. Similar to FHASecure, lenders will be required to write-down the outstanding mortgage principal balances to 90 percent of the new value of the property. In many cases, reductions in principle will cost lenders less than the losses associated with foreclosure.

Homeowners In Need Should Act Now
While lenders are gearing up to offer this new program, families should not wait to seek mortgage relief. Right now, homeowners can determine if they are already eligible for mortgage assistance through FHASecure. They can obtain information through any of the following options:

Contact current lender
Contact a local, HUD-approved housing counseling agency at HUD.gov;
Contact the HOPE NOW Alliance at 1 (888) 995-HOPE; or
Call FHA at 1 (800) CALL-FHA.

Daily Real Estate News | April 14, 2008Consequences for 'Walk-Away' Borrowers

The government and the lending industry are taking aim at “walk-away” home owners who stop making payments and months later send the house keys back to their lender.

Such borrowers will not be able to get another mortgage through Fannie Mae for five years, unless there are “documented extenuating circumstances.” In that case, the prohibition is three years. Even after the prescribed time has elapsed, a borrower with a foreclosure in his file will have to make at least a 10 percent down payment and have a FICO credit score of at least 680 to qualify for a Fannie Mae loan.

Freddie Mac, which counts foreclosures as major credit black mark for seven years, is now aggressively pursuing walk-away borrowers where permitted under state law, a senior official said.

Federal legislation enacted last year allows home owners who negotiate loan modifications with lenders and have portions of their principal debt eliminated to escape income tax liability for the amount forgiven.

Walk-away borrowers, by contrast, have nothing forgiven, and the Internal Revenue Service may demand taxes on the balance they never paid, the IRS says.

Source: Washington Post Writers Group, Kenneth R. Harney (04/12/2008)