The Home Affordable Refinance Program is extended…again!

March 22, 2011 by Leave a Comment

Update: Home Affordable Refi Program has been extended through December 2013!

Good news for home owners who have a qualified conventional mortgage where their home has depreciated in value and they want to refinance to a lower rate or more stable program, the Fannie Mae Home Affordable Refinance Program and Freddie Mac's Relief Refinance have been extended to next summer (notes dated on or before June 30, 2012). 

In addition to extending the cut off date for this program, which was scheduled to sunset this summer, Fannie Mae has expanded the loans they will consider for this program.  From their March 14, 2011 announcement:

"Currently to be eligible for Refi Plus or DU Refi Plus the existing mortgage loan being refinanced had to be purchased by Fannie Mae prior to March 1, 2009 or in an MBS pool with an issue date prior to March 1, 2009.  With these program changes, mortgage loans are now eligible if they were purchased by Fannie Mae prior to June 1, 2009 or in an MBS pool with an issue date prior to June 1, 2009….

Loans purchased by Fannie Mae between March 1, 2009 and June 1, 2009 will not recognized by Fannie's underwriting system (DU) until April 11, 2011. 

I am thrilled that Fannie is adding three months of their loans to be eligible for the HARP program which makes the qualifying dates consistant Freddie Mac's program. 

Remember, you do not have to go to your mortgage servicer (who you make your mortgage payment to) for this program…unless you have pmi.  Wouldn't it be great if some of the big banks who have been refusing to consider borrrowers with private mortgage insurance for the HARP program loosen up?  One can hope!  If you're a borrower who's been refused a Home Affordable refi by your bank due to privatate mortgage insurance, you may want to sign this petition.

Related post: 

The Home Affordable Refinance Program extended until next summer  [includes info on Fannie Mae's Home Affordable program].

Freddie Mac's Home Affordable Refinance - Refinance Relief Program

Filed Under: Fannie, Freddie and FHFA, HARP - Home Affordable Refi, Refinance

My Interview on NPR: Credit and Refinancing

November 10, 2010 by 3 Comments

If you listen to the soothing voices of NPR in the mornings, you may have heard NPR's Wendy Kaufman's interview discussing the challenges of refinancing with lower credit scores.  I actually meet with Wendy about a week ago in Bellevue so she could interview me for this piece which I'm told will be airing again around 8:50 this morning PST on KPLU (88.5 a.m.).

You can also read the text version which includes a link to the broadcast:  Home Loan Blues: Refinancing Isn't So Easy

Here are some points I'd like to add to the interview:

It is more challenging to refinance (or purchase) in today's market.  Especially if you compare it to the wild subprime era of a few years ago…however the pendulum is still swinging tighter.  Mortgage guidelines absolutely needed to swing back from subprime, however some people may surprised to experience a mortgage transaction today.   The broadcast included a borrower who had to take clear copies of his documents–that would have happened before too assuming his supporting documentation (bank statements) were even required.   Today's underwriter is asking a lot more "why" instead of simply checking off a box that was generated by a streamlined automated underwriting system.  Qualifying for a mortgage is not impossible but you do need to be cooperative and provide what your mortgage professional asks of you…including that last page of your bank statement, even if it's blank.

With regards to credit scoring, we continue to see the minimum allowed credit score being raised.  It used to be that a 700 credit score or higher was considered great.  Now there are three different credit score "brackets" with conforming mortgages if your score is in the 700 range.   With higher loan to value loans, like FHA, many lenders are requiring a mid-score of 640 or higher (some lenders may go lower but I expect their credit score standards to increase too at a higher rate).

There are programs available for refinancing your home if you have lost equity and/or have a lower credit score.  If home owners currently have an FHA mortgage or conforming mortgage that qualifies for a Home Affordable Refi, they may still be able to take advantage of today's low rates.  If your home is located in Washington state, I'm happy to review your scenario at no obligation to see if refinancing makes sense for you. 

Listen to the NPR interview where I discuss credit scores.

 

Filed Under: Credit Scores and Reporting, Interviews, Podcasts, Refinance

Another Reason You Should Not Postpone Refinancing Your Seattle Home: Your Neighbor’s Foreclosure

October 28, 2010 by Leave a Comment

The media is reporting that the Seattle-Tacoma-Bellevue area saw a huge increase in foreclosures from information provided by RealtyTrac.  According to the media, the Seattle area has had an increase of 71% in foreclosures; one of the largest increases in the nation.  I agree with CNBC's Diana Olick's take on the data:

"During the housing boom, Seattle was actually the last to see the big boom in prices and then on the other side, the last to see the big drop in prices so it could be that Seattle is kind of catching up with the rest of the country now seeing those foreclosures because prices did get so high there and drop so precipitously."

 

Foreclosures and short sales do impact property values and the current "appraised value" of your home as an appraiser may need to use a nearby short sale as a comparable property for your home.  If you're considering refinancing, and your refinance requires an appraisal, this may impact your loan-to-value and home qualifying for the new loan if your home appraises for less than originally expected.  Some refi's do not require an appraisal, such as an FHA Streamline (where you are refinancing an existing FHA mortgage to a new FHA mortgage) and some Fannie Mae Home Affordable refi's are qualified without an appraisal…but a majority of mortgages do require an appraisal.  (I wish that all appraisals could be waived if the home owners qualifed based on employment, income and credit…I truly beleive this would help stimulate the economy…but it's not the case).

If you are delaying a refinance, you may be risking more than losing today's low interest rate, you may be risking your home's appraised value. 

Related post:

It's Not You,It's Your Neighbors

The Wild Card of Refinancing

Declining Home Values: Good for Buyers – Bad for Refi's

When an Appraisal Comes in Low for a Refi

The Cash-In Refinance

Pricing a Home Affordable Refinance

Filed Under: Appraisals, Refinance

Buying a Home with Owner Occupied Financing After Refinancing Your Home as Owner Occupied

October 28, 2010 by 13 Comments

I’m seeing a trend where home owners are refinancing their current home as “owner occupied” and then weeks after closing, try buying another home as “owner occupied”.  You cannot have two owner occupied homes.   It’s really that simple. 

I’ve had a couple of surprised people contact me who thought they could buy a home just following a refinance only to learn by their mortgage originator that they have to finance the new home as an investment property.   Financing an investment property not only offers a slightly higher interest rate than a mortgage for a primary residence, it also has tougher guidelines with higher down payment requirements and greater reserves (savings).  

If you are considering refinancing your primary residence and possibly buying another home, you should discuss this with your mortgage originator as soon as possible.  You will be signing a deed of trust which has language that you intend to occupy that home for 12 months.  Some folks might feel that the “intending to occupy” means that they can refinance as owner occupied and a couple months later buy “owner occupied” and odds are, they will be caught.  It may be purely unintended for this to happen, but be prepared for the possibility the new purchase to be treated as an investment property, even if you’re going to live there. 

If you’re considering taking advantage of the lower home prices and lower rates, you may want to delay your refinance of your current “primary residence” or talk to your mortgage originator about refinancing your current home as an investment property.  Your next purchase might qualify as a second home, however the property typically needs to be about 50 miles away from your primary residence (the one you just refinanced) and it is the underwriter’s call on whether or not the second home “makes sense”…this can be a real grey area.  

Life happens and we know plans change. Be upfront with your mortgage professional if you’re thinking about buying a home.  You may want to ask them to verify with your personal scenario with an underwriter.  Finding yourself in the middle of a transaction to buy your next home and having it declined as owner occupied can be an expensive experience.

Related post:

Is it a Primary Residence, Second Home or Investment Property

Can I Convert My Existing Home to an Investment Property to Buy My Next Home?

Filed Under: Investment Property, Refinance, Residential Purchase Tagged With: , , , ,

You Don’t Have to Lock Your Rate to Start Your Refi

October 22, 2010 by Leave a Comment

If you are interested in refinancing, or even buying a home, you don't need lock in your rate at application.  A majority of the Seattle area clients I work with, delay starting the refinance process until rates reach the point where they are wanting to lock.   A mortgage rate lock commits a specific interest rate and program for a certain period of time.

If your are serious about refinancing and rates are within range of your goal but you're not ready to lock, I recommend starting your loan application prior to the lock.  This gets one step out of the way and allows your mortgage originator to review your information and to make sure that the rate you're being quoted is accurate.  We will provide you with your preliminary loan documentation and work on your credit approval.

One benefit of delaying your lock is that a shorter lock period may be required for processing your transaction.  It may also help avoid an extension, should the rate lock expire.   The risk, however, is that you miss out on today's very low rates.  Borrowers should consider which risk they can tolerate more: the risk of locking in too early and having rates improve or the risk of locking in too late and having rates rise.  Personally, I'm not a "floater"…if I like the rate, I lock it….but it is the borrower's choice.

If your home is located in Washington state, where I'm licensed to originate, I'm happy to help you with this.  There is no cost to you until the appraisal is ordered and the appraisal can be postponed until you decide to lock.  And if you complete your application with me on line (click "apply here") I'm currently offering a $300 credit towards your closing costs when your mortgage funds with Mortgage Master Service Corporation.

So what are you waiting for?

Filed Under: Interest Rates, Refinance

One More Week before FHA Changes Mortgage Insurance Premiums

September 24, 2010 by Leave a Comment

I've written about the upcoming changes to FHA's upfront and annual mortgage insurance premiums which is effective on all case numbers obtained October 4, 2010 and later.  This impacts both purchases and refinances.  If you're considering utilizing FHA for a refinance and you're going to retain your home for more than four years, you may want to consider taking now.

Here's a comparison between the two mortgage insurance scenarios based on an FHA streamline refinance with no appraisal based on the current 30 year fixed rate of 4.250% (apr 5.013) as of today, Sept. 24, 2010, at 12:30 p.m. with a $528,695 base loan amount:

FHA mortgage insurance with FHA case number issued by October 1, 2010 or earlier:

Upfront Mortgage Insurance Premium of 2.25% = $11,895.00

Base loan amount of $528,695 plus $11,895 (most borrowers finance the ufmip) = $540,590.  Amoritzed for 30 years at 4.25% provides a principal and interest payment of $2,659.38.

Annual mortgage insurance premium of 0.55% of the base loan amount ($2907.82) divided by 12 months = $240.46.

$2,659.35 plus $240.46 = $2,899.91 principal, interest and mortgage insurance payment.

FHA mortgage insurance with case numbers issued October 4, 2010 or later:

Upfront mortgage insurance premium of 1.00% = $5,286, creating a total loan amount of $533,981.  Amortized for 30 years at 4.35% provides a principal and interest payment of $2,626.87.

Annual mortgage insurance premium of 0.90% of the base loan amount ($4758.26) divided by 12 months = $393.48.

$2,626.87 plus $393.48 = $3,020.35 principal, interest and mortgage insurance payment.

THIS IS AN INCREASE IN PAYMENT OF $120.44 PER MONTH IF WAITING UNTIL OCTOBER TO OBTAIN YOUR FHA CASE NUMBER.  

What can you do if you're considering an FHA loan?  If you're "tight" on qualifying with your debt-to-income ratios, you may want take action PRIOR TO OCTOBER.  Obtaining an FHA case number has nothing to do with when  you take your application or lock in  your rate.

If you are interested in an FHA purchase, refinance or streamline refi and your home is located in Washington state, I am happy to help you!  Mortgage Master Service Corporation is a Direct Endorsed, HUD approved FHA lender and I've been originating FHA loans for over 10 years.  Just click on the apply tab above or send me an email!

PS:  Many home owners who currently have an FHA mortgage are able to take advantage of today's low interest rates with an FHA streamline refi without an appraisal.

Filed Under: FHA, Mortgage Insurance, Refinance, Residential Purchase

FHA Streamline Refi’s with No Appraisal

August 20, 2010 by Leave a Comment

When HUD changed the guidelines for FHA streamlines last fall,I thought they had pretty much stuck a fork in a program that has been very beneficial to home owners who have an FHA insured mortgage loan.  You see, HUD made it to where if a borrower opted to not have an appraisal, they cannot finance their closing cost or reserves/prepaids.  Back then I never thought we would see rates at their current levels.  With today's rates, many home owners can opt for a slightly higher than "par" rate to have the lender pay for a portion of their closing costs.   In addition, it doesn't matter what your home's current appraised value is since there is no appraisal!

With an FHA streamline refi, if the loan has less than 36 payments, there may be a credit of the balance of the upfront mortgage insurance premium if it was financed (99% of loans have the ufmip financed).  The credit is on a sliding scale (the earlier in the loan, the larger the credit). 

Closing costs are reduced since there's no appraisal fee (and no worry about what your home may appraise for).  The loan amount is limited to the current principal balance plus the new upfront mortgage insurance premium.   With today's pricing, many Seattle area home owners are typically bringing in the mortgage payment they would have "skipped" or funds to start their reserve account at closing and enjoying the benefit of a much lower payment due tot he reduced rate.   Borrowers will receive a refund of the balance of their reserve account a few weeks after closing from their existing mortgage servicer.

FHA mortgage insurance premiums are set to change in weeks (October 4, 2010).  Although the upfront premium is decreasing, the annual (monthly) is increasing and the net effect is more expensive that the current formula.

At Mortgage Master Service Corporation, we are a HUD Endorsed Lender with our own in-house FHA underwriters.   I've been originating FHA loans for over 10 years and I'm happy to provide you a free rate quote for your home located in Washington state.

UPDATE:  In order to qualify for an FHA streamline refinance, the borrower must:

  • have an FHA insured mortgage
  • have made a mimium 6 mortgage payments (seasoning) by the time they apply
  • have a minimum mid-credit score of 620 640 (or higher)
  • document income and employment
  • document assets needed for closing
  • Last but not least, the proposed refinance must create a "net-tangible" benefit to the borrower.
Filed Under: Appraisals, FHA, Refinance Tagged With:

HUD Announces Possible Principal Reduction: The “FHA Short Refinance”

August 6, 2010 by Leave a Comment

HUD has been busy!  They just issued another press release stating that starting September 7, 2010, FHA will offer "certain 'underwater' non-FHA borrowers who are current on their existing mortgage and who's lenders agree to write off at least ten percent of the unpaid principal balance of the first mortgage, the opportunity to qualify for a new FHA insured mortgage".   This program will be available on FHA case numbers issued on or after September 7, 2010 and must close before December 31, 2012.

The biggest catch that I see is that this voluntary program requires that all mortgage lien holders consent to the refinance.  Any first mortgage being paid off must agree to reduce their principal balance by a minimum of 10% and the second mortgage must agree to be subordinated.   There's a maximum combined loan to value limit of 115%.  It will be interesting to see how the banks embrace this program.

Here are some other requirements for the FHA Short Refinance:

  • the home owner must have negative equity
  • the home owner must be current on their existing mortgage that's being refinanced.
  • owner occupied (primary residence) only
  • the mortgage being refinanced may not be an FHA insured loan (NOTE: if you're upside down on your FHA insured loan, you can do a streamline FHA with no appraisal).
  • existing lien holder must write off at least 10% of the principal balance
  • first mortgage maximum loan to value is 97.75% for the new FHA loan and 115% combined loan to value when there is a second mortgage.

Potential borrowers of this program will be subject to "Borrower Certification" which was enacted by the Dodd-Frank Wall Street Reform and Consumer Protection Act on July 21, 2010.  If the borrower has been convicted in the last ten years of any of the following: (a) felony larceny, theft, fraud, or forgery; (b) money laundering; or (c) tax evasion.  More details are expected to follow.

Last but not least, the Mortgagee Letter advises that borrowers need to be aware that, as with any loan forgiveness action, short refinancing under this program may be reflected as a negative feature on a borrowers credit score and that anyone who is considering this type of transaction should contact their tax advisors regarding the cancellation of debt and possible tax consequences.

It will be interesting to see how many banks will participate in reducing principal balances and how this will work with the Home Affordable refinances.  This could be a nice resource for home owners who don't have Fannie Mae or Freddie Mac securitized mortgage but want to take advantage of our current historic low interest rates.

Stay tuned…I'll keep you posted.

 

Filed Under: FHA, Refinance
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