Congress just passed, and the President signed,
a new law titled Making Home Affordable.
According to their web-site, there are two
separate programs. The Home Affordable Refinance
and the Home Affordable Modification. Details
can be found at www.makinghomeaffordable.gov.
Let's take a look at some of the features.
The Home Affordable Refinance will be available
to 4 million to 5 million homewoners who have a
solid payment history on existing mortgages owned
by Fannie Mae (FNMA) or Freddie Mac (FHLMC).
The targeted homeowners normally would be unable
to refinance because their homes have lost value,
and pushing their current loan-to-value above 80
percent.
Under the Home Affordable Refinance program, many
of them will now be able to refinance to take
advantage of today's lower mortgage rates or to
refinance an adjustable-rate mortgage into a more
stable mortgage such as a 30-year fixed rate loan.
Owner's can refinance up to 105% of the new value
of the home.
This program will end in June 2010.
Eligibility requirements include the following:
1. You are the owner and occupant of a one- to
four-unit home.
2. The loan on your property is owned or secured
by FNMA or FHLMC. To see if FNMA owns your loan try http://www.fanniemae.com/homepath/homeaffordable.jhtml
or 1-800-7FANNIE. For FHLMC use 1-800-FREDDIE or
go to https://ww3.freddiemac.com/corporate/.
3. At the time you apply, you are current on your
mortgage and that you have not been more than 30
days late in the last 12 months.
4. You believe that the amount you owe on your first
mortgage is about the same or slightly less than the
current value of your home.
5. You have sufficient income to support the new
mortgage payments.
The refinance improves the long-term affordability or
stability of your loan. The objective of the Home
Affordable refinance is to provide creditworthy
borrowers who have shown a commitment to paying their
mortgage the opportunity to get into a mortgage with
payments that are affordable today and sustainable
for the life of the loan.
You can contact me to see if you are eligible and
about how this program may work for you
The Home Affordable Modification program will help
up to 3 million to 4 million at-risk homeowners
avoid foreclosure by reducing monthly mortgage
payments to no more than 31 percent of the borrower's
gross monthly income.
Banks and other mortgage providers can begin to
modify eligible mortgages immediately under the
modification program so that at-risk borrowers can
better afford their payments.
Eligibility requirements include the following:
1. The mortgage loans must have originated before
January 1, 2009.
2. They must be first lien loans on owner-occupied
properties with unpaid balances up to $729,750 which
may vary by county.
3. The mortgage payment including taxes, insurance,
and homeowners association dues must be more than
31 percent of your gross monthly income.
4. All borrowers must fully document income. This
would include recent pay stubs, most recent tax
returns, allow for the lender to cross-check the IRS
information, and sign an affidavit of financial
hardship.
5. Property owner occupancy will be verified through
the borrower's credit report and other documentation.
6. Modifications can start from now until December 21,
2012. Loans can be modified only once under the
program.
Be prepared to provide paperwork on the gross monthly
income for all borrowers, information about any
second loans on the home, balances and minimum
monthly payments for car loans, personal loans,
student loans and credit cards.
For information on whether your situation is eligible
for the Home Affordable Modification program, you
will need to contact your existing loan servicing
provider. You should be able find the contact
information on your mortgage statement.
Wednesday, March 25, 2009
Wednesday, March 11, 2009
Adventures In Mortgage Lending
As we have been working our way through loan
approval guidelines becoming tighter over the
last year or so, we are encountering some
interesting processing situations that can
serve as learning experiences.
Paperwork? More Paperwork?
When I meet with a client initially, I do
my best to ask for as much paperwork to support
their loan application as I can foresee.
In most cases this would include paystubs, W-2
forms for the last two years, bank statements,
brokerage statements and retirement statements,
and in some cases tax returns for the last two
years.
One client I worked with recently very computer
savvy, and did not collect paperwork. He made
it clear that pulling those items together was
a chore for him. But I was able to get the
most recent paystubs and statements to get the
file into the processing queue, and work toward
loan approval for him.
Processing times have lengthened as the lenders'
work loads have increased. We were previously
able to process a loan to completion in about
30 days, but now it takes closer to 45 days or
more to conclude.
The lenders are now expecting the file to be
completely up-to-date when it is ready to close.
This means that even after the loan is approved
that the lender wants the paperwork to be the
most recent possible. The last paystub, the
last bank statement, the last brokerage statement
that was received between the initial application
and closing was required.
My borrower was not pleased with the request. He
had borrowed several times in the past, but was
surprised by how stringent the documentation
requirements had become. And since he was not
the type to keep this kind of paperwork readily
available, it became an issue to get his loan
closed before his rate lock commitment was due to
expire.
THE LESSON: Understand that the lending business is
not as forgiving as it has been in the past. The
lender will want every last piece of paper so that
they don't have to assume anything. If a bank or
brokerage statement has a summary page and followed
by 10 pages of detail, the lenders are asking for all
11 pages.
It helps if we look at as a puzzle. The underwriter
is putting together a lot of pieces to paint the
picture of an approved loan. If there is a piece
missing, or incomplete, it keeps them from putting
the picture together. And, in the end, we need to
get them what they need to finish the picture.
I Didn't Mention It, But That Was Really Important
To Me!
I recently closed a refinance for a client. Through
the process, the borrower actually skips a formal
payment to the old lender or the new lender. But
the interest that was owing for the month in which
it closes is divided between the payoff of the old
loan for a portion of the month, and prepaying the
interest on the new loan to the first of the next
month.
My borrower had refinanced in the past and knew
the mechanics of how this worked. In his previous
transactions, he was able to finance the month's
interest, so he was able to keep the monthly
payment in his checking account.
This time however, he was reaching the maximum
loan in relation to the value of the home. The
loan amount was just sufficient to pay off his
existing loan and cover his closing costs, so
there was no room to finance the month's interest.
As we approached the closing, and again had a
time limit due to the rate lock expiration, we was
asked to deposit the month's interest into the
escrow so that they could close the transaction.
He looked at this as a "last-minute" surprise,
because he had assumed that the loan amount would
work out as it had before, and he could keep the
payment in his pocket.
After we had an opportunity to discuss it, he
understood what had happened and he was able to
pull the funds together and close the transaction.
THE LESSON: There can never be too much communication
about what is important to you. And, don't assume
what has worked before will work again in this
environment.
I prefer to have my clients ask as many questions
as they can early in the process, and I try to
ask probing questions to find out what is important.
It is always an uncomfortable situation to deal with
unexpected developments late in a transaction. Make
a list of mortgage-related questions and make sure
you get satisfactory answers as early as possible.
approval guidelines becoming tighter over the
last year or so, we are encountering some
interesting processing situations that can
serve as learning experiences.
Paperwork? More Paperwork?
When I meet with a client initially, I do
my best to ask for as much paperwork to support
their loan application as I can foresee.
In most cases this would include paystubs, W-2
forms for the last two years, bank statements,
brokerage statements and retirement statements,
and in some cases tax returns for the last two
years.
One client I worked with recently very computer
savvy, and did not collect paperwork. He made
it clear that pulling those items together was
a chore for him. But I was able to get the
most recent paystubs and statements to get the
file into the processing queue, and work toward
loan approval for him.
Processing times have lengthened as the lenders'
work loads have increased. We were previously
able to process a loan to completion in about
30 days, but now it takes closer to 45 days or
more to conclude.
The lenders are now expecting the file to be
completely up-to-date when it is ready to close.
This means that even after the loan is approved
that the lender wants the paperwork to be the
most recent possible. The last paystub, the
last bank statement, the last brokerage statement
that was received between the initial application
and closing was required.
My borrower was not pleased with the request. He
had borrowed several times in the past, but was
surprised by how stringent the documentation
requirements had become. And since he was not
the type to keep this kind of paperwork readily
available, it became an issue to get his loan
closed before his rate lock commitment was due to
expire.
THE LESSON: Understand that the lending business is
not as forgiving as it has been in the past. The
lender will want every last piece of paper so that
they don't have to assume anything. If a bank or
brokerage statement has a summary page and followed
by 10 pages of detail, the lenders are asking for all
11 pages.
It helps if we look at as a puzzle. The underwriter
is putting together a lot of pieces to paint the
picture of an approved loan. If there is a piece
missing, or incomplete, it keeps them from putting
the picture together. And, in the end, we need to
get them what they need to finish the picture.
I Didn't Mention It, But That Was Really Important
To Me!
I recently closed a refinance for a client. Through
the process, the borrower actually skips a formal
payment to the old lender or the new lender. But
the interest that was owing for the month in which
it closes is divided between the payoff of the old
loan for a portion of the month, and prepaying the
interest on the new loan to the first of the next
month.
My borrower had refinanced in the past and knew
the mechanics of how this worked. In his previous
transactions, he was able to finance the month's
interest, so he was able to keep the monthly
payment in his checking account.
This time however, he was reaching the maximum
loan in relation to the value of the home. The
loan amount was just sufficient to pay off his
existing loan and cover his closing costs, so
there was no room to finance the month's interest.
As we approached the closing, and again had a
time limit due to the rate lock expiration, we was
asked to deposit the month's interest into the
escrow so that they could close the transaction.
He looked at this as a "last-minute" surprise,
because he had assumed that the loan amount would
work out as it had before, and he could keep the
payment in his pocket.
After we had an opportunity to discuss it, he
understood what had happened and he was able to
pull the funds together and close the transaction.
THE LESSON: There can never be too much communication
about what is important to you. And, don't assume
what has worked before will work again in this
environment.
I prefer to have my clients ask as many questions
as they can early in the process, and I try to
ask probing questions to find out what is important.
It is always an uncomfortable situation to deal with
unexpected developments late in a transaction. Make
a list of mortgage-related questions and make sure
you get satisfactory answers as early as possible.
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