Fred's Mortgage Blog

Yesterday I wrote the first of two parts on the Homeowner Affordability & Stability plan that was released by the Obama administration on Wed March 4th. Which contained two major parts they hoped would have an impact on assisting homeowners with troubled mortgage. The first part of the plan which I blogged about yesterday is a modification program that Servicers will offer to borrowers with high debt-to-income ratios or who are at risk of foreclosure. The second part of the plan which I am blogging about today, a refinance program for existing Fannie Mae or Freddie Mac loans.

As I stated yesterday our Executive Vice President at McCue Mortgage, Kim Neilson and others are still assessing the details of the Homeowner Affordability & Stability plan to determine our next steps, but in the mean time we are trying to provide a summary of its major points so that it might help other to better understandable it.  So here we go:

The second part of the plan is a refinance program for existing Fannie Mae or Freddie Mac loans. Fannie Mae is offering two different programs:

1. The Refi Plus Program that requires the servicer of the loan to be the originating lender.
2. The DU Refi Plus Program (DU is the Automated Underwriting System for Fannie Mae) that allows any lender using DU to originate the loan as long as the existing loan is a Fannie Mae loan.
   

Freddie Mac requires the servicer of the loan to be the originating lender. Some specifics of the program are:

• Existing mortgage must currently be a Fannie or Freddie loan.
  
• Existing loan may not be considered ineligible (must get an Approved/Eligible from DU). Ineligible loans include existing mortgage loans that received a DU Expanded approval (EA).
  
• Maximum LTV for 1-2 unit properties is 105% and require an appraisal.
  
• Maximum LTV for 3-4 unit properties is 80% and also require an appraisal.
• No maximum CLTV.
  
• Existing mortgage must be current and have acceptable mortgage payment history. No minimum FICO score is required although borrower must meet bankruptcy and foreclosure requirements. In addition, borrower must demonstrate credit worthiness.
  
• Rate and term refinance only (No Cash Out) - purchase money seconds MAY Not be included.
  
• Loan level price adjustments (points) will apply (determined by credit score on credit report)
• MI required (same coverage factor of existing loan) for mortgage loans that had original LTV’s greater than 80%.
  
• DU Refi Plus must receive Approve/Eligible and will not be available until April 4. Income and employment verification is required.
  
• Refi Plus is a manual underwrite and requires verbal verification of employment. Lender must determine that the borrower has a reasonable ability to repay the mortgage based on current information provided by borrower.

There it is in a nut shell.  I actually have higher expectations for this part of the plan then I do for the Loan Modification part. This part of the plan stands a chance to actually help those who have good credit and have little to no equity in their property.  But I do not see it doing anything for those who are in areas that property values have taken a noticeable hit, and 105% LTV is not going to do anything for them.  Also this does offer a second option to FHA which will allow a borrower to go to a 96.5% LTV on a No Cash Out Refi.

While I think that this plan might actually help a few people, but it will be a source of false hope for many more.  As I ended my last post, the purpose for providing this information is so that those who read it may have a better understanding of the "Homeowner Affordability & Stability Plan", and help them come to their own conclusion.

 

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Info about the author:

George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com

The Homeowner Affordability & Stability plan was released by the Obama administration on Wed March 4th.  There were two major parts of this plan that affect the Mortgage Industry.  The first part of the plan is a modification program that Servicers will offer to borrowers with high debt-to-income ratios or who are at risk of foreclosure.  The second part of the plan is a refinance program for existing Fannie Mae or Freddie Mac loans.

While our Executive Vice President at McCue Mortgage, Kim Neilson and others are still assessing the details of the Fannie Mae/Freddie Mac plan to determine our next steps, they have summarized it to a point that would make it more understandable to rest of us, and I will sharing this in two blogs.

The first part of the plan that as I stated above is the modification program that Servicers will offer to borrowers with high debt-to-income ratios or who are at risk of foreclosure, which states that:

• Existing mortgage must currently be a Fannie Mae or Freddie Mac loan.
  
• The mortgage loan is delinquent, or is expected to go into default soon.
  
• Borrowers must occupy property as primary residence
  
• Borrowers must provide hardship documentation.
  
• Borrowers must provide income documentation and evidence the monthly mortgage payment (housing ratio) is greater than 31%
• If the housing ratio is more than 31%, the Servicer will modify the terms of the loan, to reduce the housing ratio to 31% by:
  1. Lowering the interest rate, but the minimum rate (floor) is 2%.  The adjusted rate will be in effect for the first 5 years following modification, and then will increase by a 1% annually until it reaches the original rate.
  2. Extending the term up to 40 years.
  3. Provide principal forbearance which will later be paid back in the form of a balloon payment that will be due upon the earliest of the following:
     
     • Sale of property
       
     • Payoff of the loan
     • Maturity of the loan.
• Servicers will receive compensation of $1000 or $500 for each completed modification.
  
• A borrower whose monthly payment is reduced by six percent or more and make on time payments will receive $1000 principal reduction for up to five years.

I will end this post by stating that while I am sharing this information about the provisions that are contained in the Homeowner Affordability & Stability plan that became effective March 4th., that it does not mean that I am in favor of this, or believe that it will help us get out of this mess that we are in, because I don't believe that. I think that this plan just like all the others before it will help very few if any, and is more smoke and mirrors then anything else.  But I have provided this information so that those of you reading this can have a better understanding of it, and help you come to your own conclusion.

I will cover the second part of the plan that I stated above "refinance program for existing Fannie Mae or Freddie Mac loans" in my next post.

 

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Info about the author:

George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com

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