Short sales outnumbered foreclosure sales in 12 states in January, indicating that more homeowners are finding an easier way out of a distressed home loan.
Short sales -- which occur when a lender agrees to a home sale for less than what's owed -- were up 33(PERCENT) in January year-over-year, and preliminary February numbers also look strong, according to market researcher RealtyTrac.
Its data underscore lenders' increased willingness to do short sales, which tend to harm neighborhoods less than foreclosures. Homeowners also may regain eligibility for a new mortgage sooner than those who go through foreclosure.
More short sales "is mostly a good thing," says Ira Rheingold, of the National Association of Consumer Advocates. One concern is that homeowners may have to short sell after being denied loan modifications that would have enabled them to stay in homes, he says.
RealtyTrac says foreclosure sales, which occur after a bank has repossessed a property, still outnumber short sales nationwide but the gap is closing.
Earlier this week, Bloomberg News reported that data from mortgage tracker Lender Processing Services show short sales surpassed foreclosures in January for the first time.
RealtyTrac's data shows that occurred in key states at the forefront of the housing downturn, including California, Arizona, Florida and nine others.
Lenders are pricing short sales more aggressively, RealtyTrac adds. In January, the average short sale price was 10(PERCENT) lower than a year earlier, exceeding the drop in U.S. home prices.
Some mortgage servicers started pursuing short sales more aggressively months ago. Bank of America says it did 107,000 short sales last year, up from 92,000 in 2010 and double the 2009 volume.
New measures are also likely to boost short sales.
Freddie Mac and Fannie Mae, which own or guarantee 60(PERCENT) of home loans, will soon require lenders to decide short sale offers within 60 days. Realtors have complained that short sale offers often linger. The recent $25 billion mortgage settlement also encourages short sales.
New rules have slowed foreclosures in many states, increasing short sales, says Florida foreclosure defense attorney Roy Oppenheim.
by Julie Schmit - Feb. 20, 2012 10:42 AM USA TODAY
Pace of short sales increases
Showing posts with label fnma. Show all posts
Showing posts with label fnma. Show all posts
Friday, April 20, 2012
Wednesday, April 11, 2012
Principal forgiveness gains appeal
Fannie Mae and Freddie Mac could save $1.7 billion if they forgave principal on some distressed mortgages, new analysis show.
The Federal Housing Finance Agency-- which regulates the mortgage giants -- may decide in the next few weeks about whether to use principal forgiveness as a foreclosure prevention tactic, said Edward DeMarco, acting director of the FHFA while speaking Tuesday at the Brookings Institution.
The FHFA, and DeMarco, have come under pressure to allow Freddie and Fannie, which own or guarantee 60% of all home loans, to do principal forgiveness.
FHFA's previous analysis has shown that forgiving mortgage debt is no more effective than other loan modification efforts at reducing home loan defaults -- and could cost taxpayers more money since Freddie and Fannie were placed under government control in 2008.
But new incentives from the Treasury Department may change that, FHFA's preliminary assessment shows. With those, Freddie and Fannie could curb losses by $9.9 billion if almost 700,000 homeowners received a mortgage reduction, FHFA says. That's $1.7 billion more than if those homeowners received principal forbearance -- which means they defer payment on a portion of their loan.
DeMarco cautioned that any principal forgiveness would only help the U.S. housing crisis at the "margin," given that 11 million homeowners owe more on their homes than they're worth, based on CoreLogic estimates.
He also warned that some homeowners may stop paying their mortgages to try get a principal reduction. That could wipe out benefits to Freddie and Fannie. Also, Treasury incentives come from taxpayer funds so they'll still be "on the hook," says Anthony Sanders, real estate finance professor at George Mason University.
Principal reduction "is clearly getting more traction" as a foreclosure prevention tactic, says Laurie Goodman, senior managing director of Amherst Securities. The recent $25 billion mortgage settlement requires loan servicers to do at least $10 billion in principal reduction. That doesn't cover Freddie or Fannie loans.
Principal forgiveness supporters say it'll lead to fewer foreclosures and help stabilize housing prices. FHFA's new analysis -- and DeMarco's discussion of it -- signals that a change is likely, says Ira Rheingold of the National Association of Consumer Advocates.
DeMarco is "under enormous heat from the Obama administration" to do so, Rheingold says.
by Julie Schmit - Apr. 11, 2012 08:08 AM USA Today
Principal forgiveness gains appeal
The Federal Housing Finance Agency-- which regulates the mortgage giants -- may decide in the next few weeks about whether to use principal forgiveness as a foreclosure prevention tactic, said Edward DeMarco, acting director of the FHFA while speaking Tuesday at the Brookings Institution.
The FHFA, and DeMarco, have come under pressure to allow Freddie and Fannie, which own or guarantee 60% of all home loans, to do principal forgiveness.
FHFA's previous analysis has shown that forgiving mortgage debt is no more effective than other loan modification efforts at reducing home loan defaults -- and could cost taxpayers more money since Freddie and Fannie were placed under government control in 2008.
But new incentives from the Treasury Department may change that, FHFA's preliminary assessment shows. With those, Freddie and Fannie could curb losses by $9.9 billion if almost 700,000 homeowners received a mortgage reduction, FHFA says. That's $1.7 billion more than if those homeowners received principal forbearance -- which means they defer payment on a portion of their loan.
DeMarco cautioned that any principal forgiveness would only help the U.S. housing crisis at the "margin," given that 11 million homeowners owe more on their homes than they're worth, based on CoreLogic estimates.
He also warned that some homeowners may stop paying their mortgages to try get a principal reduction. That could wipe out benefits to Freddie and Fannie. Also, Treasury incentives come from taxpayer funds so they'll still be "on the hook," says Anthony Sanders, real estate finance professor at George Mason University.
Principal reduction "is clearly getting more traction" as a foreclosure prevention tactic, says Laurie Goodman, senior managing director of Amherst Securities. The recent $25 billion mortgage settlement requires loan servicers to do at least $10 billion in principal reduction. That doesn't cover Freddie or Fannie loans.
Principal forgiveness supporters say it'll lead to fewer foreclosures and help stabilize housing prices. FHFA's new analysis -- and DeMarco's discussion of it -- signals that a change is likely, says Ira Rheingold of the National Association of Consumer Advocates.
DeMarco is "under enormous heat from the Obama administration" to do so, Rheingold says.
by Julie Schmit - Apr. 11, 2012 08:08 AM USA Today
Principal forgiveness gains appeal
Wednesday, March 14, 2012
US Mortgage Restrictions to Increase
The poor fiscal health of the Federal Housing Administration (FHA) is expected to make getting home loans even more difficult as the agency responds to increasing legal costs that stem from loan servicing claims and insuring banks against loan defaults. Prior to the $26 billion mortgage settlement between banks and the government, the FHA had applied for a $688 million loan from the U.S.
Getting a home loan is only going to be tougher, as banks tighten standards for Federal Housing Administration (FHA) loans amid rising legal claims.
Analysts at FBR Capital have long been worried that the FHA's poor fiscal health will lead it to deny insurance claims and file lawsuits over servicing and origination of FHA loans.
The FHA insures banks against defaults on loans and has seen its share of the mortgage origination market rise from 3% in 2005 to 24% in 2011 in the wake of the sub-prime crisis. But the high default rate during the crisis has drained its resources.
The latest budget plan found that the FHA might need as much as $688 million from the U.S. Treasury to bridge a shortfall in its reserves. That problem was quickly resolved by the recent $26-billion mortgage settlement between the nation's largest servicers and the 49 states.
Under the settlement, the five banks would have to inject $1 billion into the agency's capital reserves to settle claims related to servicing.
Still, not all legal concerns have been put to rest. Analyst Paul Miller notes that the settlement only covers servicing violations and not origination violations. He cites the example of Flagstar Bancorp(FBC) which recently entered into a settlement with the Justice Department for $133 million related to fraudulent FHA lending practices.
Bank of America
Recent fines also include Citi Mortgage, a subsidiary of Citigroup(C) agreed to pay $158 million to settle a civil complaint by the Manhattan
According to FBR, the fines imposed on banks could be quite severe, in some cases trebling damages for violations of FHA's "highly complicated and technical" rules.
The recent Flagstar settlement might just be a one-off, but the analysts believe that the "damage to lender confidence" has already been done. "We believe that this settlement could result in lenders reexamining their risk with respect to FHA lending and tightening standards for the FHA product. Our major concern is that the tightening credit policies could lead to fewer borrowers being able to qualify for an FHA mortgage," the analysts wrote in a note Monday.
Recent government measures have aimed at providing relief to the troubled borrower, but as the Federal Reservefrequently notes, the credit conditions for those seeking a fresh mortgage are still too tight.
One reason is banks have pulled back from lending to borrowers with riskier profiles because of rising putback claims from Fannie Mae and Freddie Mac.
Now, higher risk borrowers who have so far managed to avail of FHA loans might now find that even this source of credit is drying up.
Currently, less than 25% of all loans being purchased by Fannie Mae have a credit score below 740. Over the past 10 years, borrowers with FICO scores between 620 and 660 have fallen from 12% to less than 2% of loans purchased, while roughly 75% of loans have a FICO score over 740, according to the report.
by Shanthi Bharatwaj NuWire Investor Mar 13, 2012
US Mortgage Restrictions to Increase
Thursday, February 2, 2012
FHFA Takes First Step in Its REO Pilot Initiative | Mortgage News | Daily National and State Headlines
The REO Initiative was developed in conjunction with the U.S. Department of the Treasury, the U.S. Department of Housing & Urban Development (HUD), the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve, Fannie Mae and Freddie Mac. The Initiative was formulated by meetings with stakeholders and a review of more than 4,000 responses to a Request for Information (RFI) seeking input on options for selling single-family REO properties held by the government-sponsored enterprises (GSEs)—Fannie Mae, Freddie Mac—and the Federal Housing Administration (FHA).
“This is an important step toward increasing private investment in foreclosed properties to maximize value and stabilize communities,” said FHFA Acting Director Edward J. DeMarco. “I am grateful for the collaborative effort by the many stakeholders including investors, non-profit organizations, and state and local government officials, who have worked together on this Initiative.”
During the pilot phase, Fannie Mae will offer pools of various types of assets, including rental properties, vacant properties and non-performing loans, for sale with a focus on the hardest-hit areas. The first transaction will be announced in the near-term.
The pre-qualification will require those interested in receiving information regarding specific pilot transactions to meet certain minimum criteria including, but not limited to, (a) financial wherewithal to acquire the assets; (b) sufficient experience and knowledge in financial and business matters to analyze and bear the risks of the investment opportunity; and (c) agreement to keep certain information about the REO and related matters confidential.
Interested investors can register at FHFA’s REO Initiative page to pre-qualify. FHFA is also looking at ways to improve REO sales to homeowners and small investors, enhancing the existing retail sales strategy at the GSEs. Both companies sell the majority of their REO properties to owner-occupants at close-to-market value. The purpose of the pilot phase will be to examine investor interest in various types of assets, including the location, size and composition of pools of assets; the ways in which investors maximize the participation of experienced local firms and organizations that can provide the types of services and support needed to ensure community stabilization; the types of structures and/or financing that improve returns to the sellers as well as home values in impacted markets; and the process by which investors are qualified to and ultimately participate in the sales transactions.
by nationalmortgageprofessional.com Feb 1, 2012
FHFA Takes First Step in Its REO Pilot Initiative | Mortgage News | Daily National and State Headlines
Government Triples Payout to Servicers for Principal Reduction Under Revamp of HAMP | Mortgage News | Daily National and State Headlines
The Making Home Affordable Program deadline will be extended for an additional year, through Dec. 31, 2013. This date conforms to the extended deadline for HARP. The U.S. Department of the Treasury will also triple the incentives provided to investors who agree to reduce principal for borrowers by paying from .18 to .63 cents on the dollar, depending on the degree of change in the loan-to-value (LTV) ratio.
HAMP borrowers who have loans owned or guaranteed by the government-sponsored enterprises (GSEs)—Fannie Mae or Freddie Mac—do not currently benefit from principal reduction loan modifications. To encourage the GSEs to offer this assistance to underwater borrowers, Treasury has notified the GSEs’ regulator, the Federal Housing Finance Agency (FHFA), that it will pay principal reduction incentives to both Fannie Mae or Freddie Mac if they allow servicers to forgive principal in conjunction with a HAMP modification.
"Fannie Mae and Freddie Mac currently have 470,000 permanent HAMP modifications on their books, but also have active another 530,000 non-HAMP modifications since 2009, or roughly one million total," said FHFA Acting Director Edward J. DeMarco. "The GSEs have also completed one million nonmodification foreclosure prevention actions, ranging from forbearance plans to short sales, for
a total of some two million actions that have helped homeowners in trouble avoid foreclosure and,
in most cases, keep their home."
In response to the announcement of the HAMP expansion, FHFA has announced the following with regards to the GSEs:
►Both Fannie Mae and Freddie Mac will extend their use of HAMP Tier 1 as the first modification option through 2013 in line with the Treasury’s HAMP extension.
►Fannie Mae and Freddie Mac will continue in their respective roles as financial agents for Treasury in implementing the changes announced.
►The HAMP Tier 2 option is based on the GSEs’ standard modification that FHFA announced and the enterprises implemented last year under the Servicing Alignment Initiative, meaning Fannie Mae and Freddie Mac will not need to adopt further changes to be in alignment with HAMP Tier 2.
►FHFA has been asked to consider the newly available HAMP incentives for principal reduction. FHFA recently released analysis concluding that principal forgiveness did not provide benefits that were greater than principal forbearance as a loss mitigation tool.
“HOPE NOW is pleased that the Obama Administration has reviewed its existing HAMP program and decided that expanding it to reach more homeowners and extending it for another year is the appropriate course of action," said Faith Schwartz, executive director of HOPE NOW, a voluntary, private sector alliance of mortgage servicers, investors, mortgage insurers and non-profit counselors. "We have worked very closely with Making Home Affordable since its inception. HAMP has not only helped nearly a million distressed homeowners nationwide, it has established a standardized process for allowing mortgage servicers to determine the proper solution for each individual case, whether it be a HAMP modification, proprietary modification or short term solution."
HAMP has helped more than 900,000 U.S. homeowners permanently modify their mortgage loans, resulting in a median savings of more than $500 every month in most cases. Since December of 2009, 80 percent of proprietary modifications have included reduced principal and interest payments and 60 percent of proprietary modifications have had those payments reduced by 10 percent or more.
"This initiative shows that President Obama’s strong language on the foreclosure crisis and holding bankers accountable during his State of the Union speech is more than mere rhetoric," said Richard L. Trumka, president of the American Federation of Labor and Congress of Industrial Organizations (AFL-CIO). "The expansion of principal reduction alternatives to foreclosure complements the President’s new working group of state and federal officials who are investigating bank wrongdoing in mortgage-backed securities. Homeowners who have been harmed by fraudulent bank practices must receive real relief in the form of meaningful principal reduction on their mortgages."
by nationalmortgageprofessional.com Jan 27, 2012
Government Triples Payout to Servicers for Principal Reduction Under Revamp of HAMP | Mortgage News | Daily National and State Headlines
Sunday, December 18, 2011
SEC charges ex-Fannie, Freddie CEOs with fraud - BusinessWeek
The Securities and Exchange Commission on Friday brought civil fraud charges against six former top executives at Fannie Mae and Freddie Mac, saying they misled investors about risky subprime loans the that mortgage giants held when the housing bubble burst.
Those charged include the agencies' two former CEOs, Fannie's Daniel Mudd and Freddie's Richard Syron. They are the highest-profile individuals to be charged in connection with the 2008 financial crisis.
The federal government has faced criticism for not bringing charges against top executives who may have contributed to the worst financial meltdown since the Great Depression.
Mudd, 53, and Syron, 68, led the mortgage giants in 2007, when home prices began to collapse. The four other top executives also worked for the companies during that time.
The lawsuit was filed in federal court in New York City.
"Fannie Mae and Freddie Mac executives told the world that their subprime exposure was substantially smaller than it really was," said Robert Khuzami, SEC's enforcement director. "These material misstatements occurred during a time of acute investor interest in financial institutions' exposure to subprime loans, and misled the market about the amount of risk."
Fannie and Freddie both entered into agreements with the government on Friday, accepting responsibility for its conduct without admitting or denying the charges. The government-controlled companies also agreed to cooperate with the SEC on the cases against the former executives.
The Justice Department has opened up probes into Fannie and Freddie but has not charged anyone with a crime.
In a statement released through his attorney, Mudd said the lawsuit "should never have been brought" and said the government reviewed and approved all of the company's financial disclosures.
"Every piece of material data about loans held by Fannie Mae was known to the United States government to the investing public," Mudd said. "The SEC is wrong, and I look forward to a court where fairness and reason -- not politics -- is the standard for justice."
Syron's lawyer couldn't be immediately reached for comment.
According to the lawsuit, Fannie told investors in 2007 that it had roughly $4.8 billion worth of subprime loans on its books, or just 0.2 percent of its portfolio. The SEC says that Fannie actually had about $43 billion worth of products targeted to borrowers with weak credit, or 11 percent of its holdings.
Mudd told a congressional panel in March 2007 that Fannie's subprime business represented less than "2 percent of our book." He also said the company held subprime mortgages "very carefully." A month later, he told a separate congressional panel that subprime loans represented less than 2.5 percent of Fannie's books.
Freddie told investors in 2006 that it held between $2 billion and $6 billion of subprime mortgages on its books. The SEC says its holdings were actually closer to $141 billion, or 10 percent of its portfolio in 2006, and $244 billion, or 14 percent, by 2008.
In a May 2007 speech in New York, Syron said Freddie had "basically no subprime exposure," according to the suit.
Fannie and Freddie buy home loans from banks and other lenders, package them into bonds with a guarantee against default and then sell them to investors around the world. The two own or guarantee about half of U.S. mortgages, or nearly 31 million loans.
During the financial crisis, the two firms verged on collapse. The Bush administration seized control of them in September 2008.
So far, the companies have cost taxpayers almost $150 billion -- the largest bailout of the financial crisis. They could cost up to $259 billion, according to its government regulator, the Federal Housing Finance Administration.
Mudd was fired from Fannie after the government took over. He's now the chief executive of the New York hedge fund Fortress Investment Group.
Syron resigned from Freddie in 2008. He's now an adjunct professor at Boston College.
The other executives charged were Fannie's Enrico Dallavecchia, 50, a former chief risk officer, and Thomas Lund, 53, a former executive vice president; and Freddie's Patricia Cook, 58, a former executive vice president and chief business officer, and Donald Bisenius, 53, a former senior vice president.
Lund's lawyer, Michael Levy, said in a statement that Lund "did not mislead anyone." Lawyers for the other defendants declined to comment Friday morning.
Fannie and Freddie had traditionally purchased a small number of subprime mortgage loans, which involved borrowers with credit problems who could not qualify for cheaper prime loans. But starting in the late 1990s many firms started purchasing subprime loans, and Fannie and Freddie followed suit.
Legal experts say the cases, while unusual, might not yield much in penalties against the former executives.
In July, Citigroup paid just $75 million to settle similar civil charges with the SEC. The company's chief financial officer and head of investor relations were accused of failing to disclose more than $50 billion worth of potential losses from subprime mortgages. The two executives charged paid $100,000 and $80,000 in civil penalties.
A federal judge in the case said she was "baffled" by the low settlement.
Fines against executives charged in SEC civil cases can reach up to $150,000 per violation. SEC Chairman Mary Schapiro has asked Congress to raise the limit to $1 million.
Mudd made nearly $4 million in salary and bonuses in 2007, and Syron made more than $18 million, according to company statements.
The SEC has charged more than 80 people, including 40 CEOs and senior executives, with violations stemming from the 2008 financial crisis.
by Derek Kravitz Associated Press Dec 16, 2011
SEC charges ex-Fannie, Freddie CEOs with fraud - BusinessWeek
Those charged include the agencies' two former CEOs, Fannie's Daniel Mudd and Freddie's Richard Syron. They are the highest-profile individuals to be charged in connection with the 2008 financial crisis.
The federal government has faced criticism for not bringing charges against top executives who may have contributed to the worst financial meltdown since the Great Depression.
Mudd, 53, and Syron, 68, led the mortgage giants in 2007, when home prices began to collapse. The four other top executives also worked for the companies during that time.
The lawsuit was filed in federal court in New York City.
"Fannie Mae and Freddie Mac executives told the world that their subprime exposure was substantially smaller than it really was," said Robert Khuzami, SEC's enforcement director. "These material misstatements occurred during a time of acute investor interest in financial institutions' exposure to subprime loans, and misled the market about the amount of risk."
Fannie and Freddie both entered into agreements with the government on Friday, accepting responsibility for its conduct without admitting or denying the charges. The government-controlled companies also agreed to cooperate with the SEC on the cases against the former executives.
The Justice Department has opened up probes into Fannie and Freddie but has not charged anyone with a crime.
In a statement released through his attorney, Mudd said the lawsuit "should never have been brought" and said the government reviewed and approved all of the company's financial disclosures.
"Every piece of material data about loans held by Fannie Mae was known to the United States government to the investing public," Mudd said. "The SEC is wrong, and I look forward to a court where fairness and reason -- not politics -- is the standard for justice."
Syron's lawyer couldn't be immediately reached for comment.
According to the lawsuit, Fannie told investors in 2007 that it had roughly $4.8 billion worth of subprime loans on its books, or just 0.2 percent of its portfolio. The SEC says that Fannie actually had about $43 billion worth of products targeted to borrowers with weak credit, or 11 percent of its holdings.
Mudd told a congressional panel in March 2007 that Fannie's subprime business represented less than "2 percent of our book." He also said the company held subprime mortgages "very carefully." A month later, he told a separate congressional panel that subprime loans represented less than 2.5 percent of Fannie's books.
Freddie told investors in 2006 that it held between $2 billion and $6 billion of subprime mortgages on its books. The SEC says its holdings were actually closer to $141 billion, or 10 percent of its portfolio in 2006, and $244 billion, or 14 percent, by 2008.
In a May 2007 speech in New York, Syron said Freddie had "basically no subprime exposure," according to the suit.
Fannie and Freddie buy home loans from banks and other lenders, package them into bonds with a guarantee against default and then sell them to investors around the world. The two own or guarantee about half of U.S. mortgages, or nearly 31 million loans.
During the financial crisis, the two firms verged on collapse. The Bush administration seized control of them in September 2008.
So far, the companies have cost taxpayers almost $150 billion -- the largest bailout of the financial crisis. They could cost up to $259 billion, according to its government regulator, the Federal Housing Finance Administration.
Mudd was fired from Fannie after the government took over. He's now the chief executive of the New York hedge fund Fortress Investment Group.
Syron resigned from Freddie in 2008. He's now an adjunct professor at Boston College.
The other executives charged were Fannie's Enrico Dallavecchia, 50, a former chief risk officer, and Thomas Lund, 53, a former executive vice president; and Freddie's Patricia Cook, 58, a former executive vice president and chief business officer, and Donald Bisenius, 53, a former senior vice president.
Lund's lawyer, Michael Levy, said in a statement that Lund "did not mislead anyone." Lawyers for the other defendants declined to comment Friday morning.
Fannie and Freddie had traditionally purchased a small number of subprime mortgage loans, which involved borrowers with credit problems who could not qualify for cheaper prime loans. But starting in the late 1990s many firms started purchasing subprime loans, and Fannie and Freddie followed suit.
Legal experts say the cases, while unusual, might not yield much in penalties against the former executives.
In July, Citigroup paid just $75 million to settle similar civil charges with the SEC. The company's chief financial officer and head of investor relations were accused of failing to disclose more than $50 billion worth of potential losses from subprime mortgages. The two executives charged paid $100,000 and $80,000 in civil penalties.
A federal judge in the case said she was "baffled" by the low settlement.
Fines against executives charged in SEC civil cases can reach up to $150,000 per violation. SEC Chairman Mary Schapiro has asked Congress to raise the limit to $1 million.
Mudd made nearly $4 million in salary and bonuses in 2007, and Syron made more than $18 million, according to company statements.
The SEC has charged more than 80 people, including 40 CEOs and senior executives, with violations stemming from the 2008 financial crisis.
by Derek Kravitz Associated Press Dec 16, 2011
SEC charges ex-Fannie, Freddie CEOs with fraud - BusinessWeek
Sunday, November 27, 2011
Details of refinancing eligibility trickling in
Many Arizona homeowners underwater with their mortgages are anxiously awaiting more information on how they can lower their interest rates and payments through the expansion of the government's Housing Affordable Refinance Program.
But details on the program have been delayed. Information on which homeowners are eligible and how to apply was supposed to be released by now but will likely come out next week. However, government mortgage giants Fannie Mae and Freddie Mac have begun providing lenders information on how to handle the expansion of HARP. Only homeowners with loans held by those entities are eligible to refinance, no matter how much more they owe on their home than its actually worth.
From the new information sent to lenders, it's now clear not all borrowers with Fannie Mae and Freddie Mac mortgages are eligible. A loan-to-value ratio of 105 percent is still in effect for borrowers with mortgages that have longer terms than 30 years or adjustable-rate mortgages with terms of five years or higher.
While some borrowers can start applying to refinance as soon as Dec. 1., others with loan-to-value ratios above 125 percent will have to wait until at least February of next year.
Some questions and answers:
Q: Phoenix-area homeowner Marla Griggs knows she's not eligible for the refinancing program but is coming up on the end of the five-year point of her option-adjustable mortgage. The loan is not owned by Fannie Mae or Freddie Mac, and she wants to know her options for keeping her home by refinancing and lowering her payment.
"Many people are not eligible for this program. Why can't it be applied to all mortgages?" she asks.
A: The federal government hasn't been able to make privately owned lenders readily participate in its programs, including loan modifications, to help homeowners avoid foreclosure. When U.S. Department of Housing and Urban Development Secretary Shaun Donovan talked to The Arizona Republic a few weeks ago, he was well-aware that the refinancing program wouldn't help everyone. He said the government has to do what it can do to help the most homeowners now, and then hope the plans will catch on with lenders.
Jay Luber of Phoenix-based Galaxy Lending said early instructions from Fannie and Freddie show it won't be until March when the refinancing programs to help many metro Phoenix borrowers will likely be available.
Sorry, Marla, that doesn't help you. But housing advocates say to call Arizona's foreclosure hotline at 877-448-1211.
Q: Bruce Robinson asks, "What about all of us poor souls out here with FHA (insured) mortgages? We represent a huge portion of the outstanding mortgage market, and yet I read nothing indicating that the administration is doing anything for us.
"FHA's existing 'Streamline' refinance program is nothing more than a hollow promise. First, the fees are incredible, with FHA requiring a whole new up-front guarantee fee. Then, FHA is charging monthly 'mortgage insurance,' which is more than double that which is charged on most existing loans. Many mainstream national mortgage lenders appear to be simply avoiding 'Streamline' since it is so disadvantageous to most FHA borrowers."
A: I am hearing the same issues from many FHA borrowers. But mortgage brokers are beginning to report more success with the streamlines, partially due to more government focus on the program. The big issue is you have to stay in your home several years after the streamline for the additional fees to make sense. Donovan mentioned that some changes could be made to the FHA program, as well. I will write about those as soon as information is available.
by Catherine Reagor The Arizona Republic Nov. 26, 2011 12:00 AM
Details of refinancing eligibility trickling in
But details on the program have been delayed. Information on which homeowners are eligible and how to apply was supposed to be released by now but will likely come out next week. However, government mortgage giants Fannie Mae and Freddie Mac have begun providing lenders information on how to handle the expansion of HARP. Only homeowners with loans held by those entities are eligible to refinance, no matter how much more they owe on their home than its actually worth.
From the new information sent to lenders, it's now clear not all borrowers with Fannie Mae and Freddie Mac mortgages are eligible. A loan-to-value ratio of 105 percent is still in effect for borrowers with mortgages that have longer terms than 30 years or adjustable-rate mortgages with terms of five years or higher.
While some borrowers can start applying to refinance as soon as Dec. 1., others with loan-to-value ratios above 125 percent will have to wait until at least February of next year.
Some questions and answers:
Q: Phoenix-area homeowner Marla Griggs knows she's not eligible for the refinancing program but is coming up on the end of the five-year point of her option-adjustable mortgage. The loan is not owned by Fannie Mae or Freddie Mac, and she wants to know her options for keeping her home by refinancing and lowering her payment.
"Many people are not eligible for this program. Why can't it be applied to all mortgages?" she asks.
A: The federal government hasn't been able to make privately owned lenders readily participate in its programs, including loan modifications, to help homeowners avoid foreclosure. When U.S. Department of Housing and Urban Development Secretary Shaun Donovan talked to The Arizona Republic a few weeks ago, he was well-aware that the refinancing program wouldn't help everyone. He said the government has to do what it can do to help the most homeowners now, and then hope the plans will catch on with lenders.
Jay Luber of Phoenix-based Galaxy Lending said early instructions from Fannie and Freddie show it won't be until March when the refinancing programs to help many metro Phoenix borrowers will likely be available.
Sorry, Marla, that doesn't help you. But housing advocates say to call Arizona's foreclosure hotline at 877-448-1211.
Q: Bruce Robinson asks, "What about all of us poor souls out here with FHA (insured) mortgages? We represent a huge portion of the outstanding mortgage market, and yet I read nothing indicating that the administration is doing anything for us.
"FHA's existing 'Streamline' refinance program is nothing more than a hollow promise. First, the fees are incredible, with FHA requiring a whole new up-front guarantee fee. Then, FHA is charging monthly 'mortgage insurance,' which is more than double that which is charged on most existing loans. Many mainstream national mortgage lenders appear to be simply avoiding 'Streamline' since it is so disadvantageous to most FHA borrowers."
A: I am hearing the same issues from many FHA borrowers. But mortgage brokers are beginning to report more success with the streamlines, partially due to more government focus on the program. The big issue is you have to stay in your home several years after the streamline for the additional fees to make sense. Donovan mentioned that some changes could be made to the FHA program, as well. I will write about those as soon as information is available.
by Catherine Reagor The Arizona Republic Nov. 26, 2011 12:00 AM
Details of refinancing eligibility trickling in
Sunday, November 13, 2011
More Arizonans can refinance for underwater mortgages under new plan
Many homeowners will be able to find out next week how to seek refinancing, no matter how underwater they are on their mortgages.
A federal mortgage program announced by President Barack Obama three weeks ago will smooth the refinancing process and overcome hurdles that so far have blocked many in Arizona and elsewhere from lowering their interest rates and mortgage payments.
In an interview with The Arizona Republic on Thursday, Department of Housing and Urban Development Secretary Shaun Donovan said full details of the program will be released Tuesday.
Donovan said officials are working to cut fees associated with refinancing by half or more and creating much less stringent requirements for qualifying, including eliminating credit checks.
The program's main intent is to assist homeowners who want to refinance to current mortgage rates. On a $250,000 mortgage, a switch from a 6 percent rate to the current rate of about 4 percent would cut the monthly payment by $300.
But many metro Phoenix homeowners have been unable to refinance because of plunging home values. In a typical deal, a bank would not issue a new loan unless the home's current value was enough to cover at least the amount of the loan. Since 2009, a federal program has allowed some homeowners to refinance for as much as 125 percent of their home's value.
But in metro Phoenix, where values have dropped more than 60 percent since 2007, many homeowners still couldn't qualify.
Estimates show nearly half of Arizona's mortgage holders are underwater.
The new program, as laid out by the president, would be open only to homeowners who are current on their payments or have missed no more than one in the past year.
It applies only to those with mortgages backed by government-owned mortgage giants Fannie Mae and Freddie Mac, but the two entities back more than half of all mortgages, meaning many homeowners are likely eligible.
Refinancing to lower payments could prevent more homeowners underwater on their mortgages from walking away and adding to the foreclosure crisis.
"We continue to work on the foreclosures problem, but we want to make sure to help those people paying their mortgages, even when they owe so much more than their is home is valued at," Donovan said.
Donovan was in Phoenix, just two days after Treasury Secretary Timothy Geithner visited the region, to talk to government and housing leaders about programs within Obama's American Jobs Act, which was voted down in the Senate.
The HUD secretary spent part of the morning touring a south Phoenix neigborhood that received federal Neighborhood Stabilization funds. Donovan was promoting Project Rebuild, which was part of the job bill.
He said Project Rebuild could create thousands of jobs and rehab almost 9,000 homes statewide.
U.S. Rep. Ed Pastor, D-Phoenix, said neighborhood assistance is key in the area.
"When you have foreclosures, what happens is it not only hurts families, but it has an effect on the neighborhood, on the schools, on the businesses around it," Pastor said.
After the tour, Phoenix Mayor Phil Gordon noted the region needs as much as anywhere in mitigating the effects of the housing crash.
"Phoenix got hit as hard or harder than anyone," he said.
The refinancing plan is an expansion of the Home Affordable Refinancing Program, which previously allowed refinancing up to only 125 percent of a home's value.
On Thursday, Donovan laid out five hurdles the government had to overcome to expand HARP.
1. Find a market for mortgages with loan-to-value ratios above 125 percent, the old limit on the program.
Currently, most loans are bundled together as securities and resold to investors, who make money off homeowners' interest payments.
But the market doesn't currently deal with loans that are underwater from the beginning. Donovan said the federal government will either create new securities to sell to investors or add a portfolio to hold the loans in.
2. Cut the cost of refinancing.
Donovan said federal officials will approve automated appraisals so they don't cost homeowners. They also are negotiating with title firms to cut their fees by at least half.
3. Prevent second mortgages from stalling the process.
Currently, banks that issue second mortgages can object to a refinancing deal on the original loan. Donovan said many second-lien holders have held up refinancings by trying to gain some leverage or cash in the deal.
Federal officials negotiated with lenders, Donovan said, persuading the top five U.S. lenders, which hold 60 percent of the nation's second mortgages, to allow the deals on first loans so the refinancing program will work.
"In some cases, lenders agreed purely out of self-interest," he said. "If borrowers have smaller payments on their first mortgage, they have more funds to pay their second mortgages."
4. Reduce the risk for lenders.
Fannie Mae and Freddie Mac help lenders issue more mortgages by buying up those mortgages after they are written. But recently, the mortgage giants have attempted to force banks to buy back problematic loans. Under the new program, Fannie Mae and Freddie Mac will agree not to force such buybacks except in cases of fraud. This will also make the refinancing program more competitive. Lenders can seek new business through refinancing without taking on a new liability.
5. Reduce the risk for mortgage insurers.
The program will allow for mortgage insurers to transfer a policy from the borrower's old loan to the newly refinanced loan easily and with little or no fee.
The final guidelines for the program will be out next week, which will tell homeowners how to apply.
While much government mortgage aid has intentionally tried to exclude investors and landlords, the new program also will be open, in some cases, to people who have a mortgage but don't live in the home.
People who now rent out their homes because they couldn't afford the payments or had to move for a job will also be eligible, Donovan said.
Still, he made it clear that investors, who bought homes solely to use them for rental or investment income, won't qualify.
Homeowners can check to see if their loan is backed by Fannie Mae or Freddie Mac by going to www.makinghomeaffordable.gov.
The program is available to borrowers with loans backed by Fannie Mae or Freddie Mac in 2009 or earlier.
Borrowers don't have to refinance through their original lender and could likely get offers from others.
Donovan made clear it doesn't matter if a homeowner is 100 percent underwater or 200 percent underwater because Fannie and Freddie are already carrying that risk on their books. He said what is important is that the borrower has been paying and deserves to be rewarded for it.
Full credit checks won't be run on eligible borrowers because they have been making their payments, another move that will save costs. In some cases, lenders might call a borrower's employer to see if he or she still has a job, he said.
"We want this program to spread beyond Fannie and Freddie loans," he said "Now, we are talking to lenders about refinancing underwater borrowers on loans the federal government isn't involved in."
by Catherine Reagor and Maria Polletta The Arizona Republic Nov. 11, 2011 12:00 AM
More Arizonans can refinance for underwater mortgages under new plan
A federal mortgage program announced by President Barack Obama three weeks ago will smooth the refinancing process and overcome hurdles that so far have blocked many in Arizona and elsewhere from lowering their interest rates and mortgage payments.
In an interview with The Arizona Republic on Thursday, Department of Housing and Urban Development Secretary Shaun Donovan said full details of the program will be released Tuesday.
Donovan said officials are working to cut fees associated with refinancing by half or more and creating much less stringent requirements for qualifying, including eliminating credit checks.
The program's main intent is to assist homeowners who want to refinance to current mortgage rates. On a $250,000 mortgage, a switch from a 6 percent rate to the current rate of about 4 percent would cut the monthly payment by $300.
But many metro Phoenix homeowners have been unable to refinance because of plunging home values. In a typical deal, a bank would not issue a new loan unless the home's current value was enough to cover at least the amount of the loan. Since 2009, a federal program has allowed some homeowners to refinance for as much as 125 percent of their home's value.
But in metro Phoenix, where values have dropped more than 60 percent since 2007, many homeowners still couldn't qualify.
Estimates show nearly half of Arizona's mortgage holders are underwater.
The new program, as laid out by the president, would be open only to homeowners who are current on their payments or have missed no more than one in the past year.
It applies only to those with mortgages backed by government-owned mortgage giants Fannie Mae and Freddie Mac, but the two entities back more than half of all mortgages, meaning many homeowners are likely eligible.
Refinancing to lower payments could prevent more homeowners underwater on their mortgages from walking away and adding to the foreclosure crisis.
"We continue to work on the foreclosures problem, but we want to make sure to help those people paying their mortgages, even when they owe so much more than their is home is valued at," Donovan said.
Donovan was in Phoenix, just two days after Treasury Secretary Timothy Geithner visited the region, to talk to government and housing leaders about programs within Obama's American Jobs Act, which was voted down in the Senate.
The HUD secretary spent part of the morning touring a south Phoenix neigborhood that received federal Neighborhood Stabilization funds. Donovan was promoting Project Rebuild, which was part of the job bill.
He said Project Rebuild could create thousands of jobs and rehab almost 9,000 homes statewide.
U.S. Rep. Ed Pastor, D-Phoenix, said neighborhood assistance is key in the area.
"When you have foreclosures, what happens is it not only hurts families, but it has an effect on the neighborhood, on the schools, on the businesses around it," Pastor said.
After the tour, Phoenix Mayor Phil Gordon noted the region needs as much as anywhere in mitigating the effects of the housing crash.
"Phoenix got hit as hard or harder than anyone," he said.
The refinancing plan is an expansion of the Home Affordable Refinancing Program, which previously allowed refinancing up to only 125 percent of a home's value.
On Thursday, Donovan laid out five hurdles the government had to overcome to expand HARP.
1. Find a market for mortgages with loan-to-value ratios above 125 percent, the old limit on the program.
Currently, most loans are bundled together as securities and resold to investors, who make money off homeowners' interest payments.
But the market doesn't currently deal with loans that are underwater from the beginning. Donovan said the federal government will either create new securities to sell to investors or add a portfolio to hold the loans in.
2. Cut the cost of refinancing.
Donovan said federal officials will approve automated appraisals so they don't cost homeowners. They also are negotiating with title firms to cut their fees by at least half.
3. Prevent second mortgages from stalling the process.
Currently, banks that issue second mortgages can object to a refinancing deal on the original loan. Donovan said many second-lien holders have held up refinancings by trying to gain some leverage or cash in the deal.
Federal officials negotiated with lenders, Donovan said, persuading the top five U.S. lenders, which hold 60 percent of the nation's second mortgages, to allow the deals on first loans so the refinancing program will work.
"In some cases, lenders agreed purely out of self-interest," he said. "If borrowers have smaller payments on their first mortgage, they have more funds to pay their second mortgages."
4. Reduce the risk for lenders.
Fannie Mae and Freddie Mac help lenders issue more mortgages by buying up those mortgages after they are written. But recently, the mortgage giants have attempted to force banks to buy back problematic loans. Under the new program, Fannie Mae and Freddie Mac will agree not to force such buybacks except in cases of fraud. This will also make the refinancing program more competitive. Lenders can seek new business through refinancing without taking on a new liability.
5. Reduce the risk for mortgage insurers.
The program will allow for mortgage insurers to transfer a policy from the borrower's old loan to the newly refinanced loan easily and with little or no fee.
The final guidelines for the program will be out next week, which will tell homeowners how to apply.
While much government mortgage aid has intentionally tried to exclude investors and landlords, the new program also will be open, in some cases, to people who have a mortgage but don't live in the home.
People who now rent out their homes because they couldn't afford the payments or had to move for a job will also be eligible, Donovan said.
Still, he made it clear that investors, who bought homes solely to use them for rental or investment income, won't qualify.
Homeowners can check to see if their loan is backed by Fannie Mae or Freddie Mac by going to www.makinghomeaffordable.gov.
The program is available to borrowers with loans backed by Fannie Mae or Freddie Mac in 2009 or earlier.
Borrowers don't have to refinance through their original lender and could likely get offers from others.
Donovan made clear it doesn't matter if a homeowner is 100 percent underwater or 200 percent underwater because Fannie and Freddie are already carrying that risk on their books. He said what is important is that the borrower has been paying and deserves to be rewarded for it.
Full credit checks won't be run on eligible borrowers because they have been making their payments, another move that will save costs. In some cases, lenders might call a borrower's employer to see if he or she still has a job, he said.
"We want this program to spread beyond Fannie and Freddie loans," he said "Now, we are talking to lenders about refinancing underwater borrowers on loans the federal government isn't involved in."
by Catherine Reagor and Maria Polletta The Arizona Republic Nov. 11, 2011 12:00 AM
More Arizonans can refinance for underwater mortgages under new plan
Fannie Mae loss widens, asks taxpayers for $7.8B
WASHINGTON - Mortgage giant Fannie Mae is asking the federal government for $7.8 billion in aid to covers its losses in the July-September quarter.
The government-controlled company said Tuesday that it lost $7.6 billion in the third quarter. Low mortgage rates reduced profits and declining home prices caused more defaults on loans it had guaranteed.
Fannie has received $112.6 billion so far from the Treasury Department, the most expensive bailout of a single company.
The government rescued Fannie Mae and sibling company Freddie Mac in September 2008 to cover their losses on soured mortgage loans. Since then, a federal regulator has controlled their financial decisions.
Taxpayers have spent about $169 billion to rescue Fannie and Freddie, the most expensive bailout of the 2008 financial crisis. The government estimates that figure could reach up $220 billion to support the companies through 2014 after subtracting dividend payments.
Fannie's July-September loss attributable to common shareholders works out to $1.32 per share. That compares with a loss of $3.5 billion, or 61 cents per share, in the third quarter of 2010.
Last week, Freddie requested $6 billion in extra aid -- the largest request since April 2010 -- after it reported losing $6 billion in the third quarter.
Washington-based Fannie and McLean, Virginia-based Freddie own or guarantee about half of all mortgages in the U.S., or nearly 31 million home loans. Along with other federal agencies, they backed nearly 90 percent of new mortgages over the past year.
Fannie and Freddie buy home loans from banks and other lenders, package them with bonds with a guarantee against default and sell them to investors around the world.
The companies nearly folded because of big losses on risky mortgages they purchased between 2005 and 2008.
When property values drop, homeowners default -- either because they are unable to afford the payments or because they owe more than the property is worth. Because of the guarantees, Fannie and Freddie must pay for the losses.
The Obama administration unveiled a plan earlier this year to slowly dissolve the two mortgage giants. The aim is to shrink the government's role in the mortgage system, remaking decades of federal policy aimed at getting Americans to buy homes. It would also probably make home loans more expensive.
Exactly how far the government's role in mortgage lending would be reduced was left to Congress to decide. But all three options the administration presented would create a housing finance system that relies far more on private money.
by Derek Kravitz Associated Press Nov. 8, 2011 03:56 PM
Fannie Mae loss widens, asks taxpayers for $7.8B
The government-controlled company said Tuesday that it lost $7.6 billion in the third quarter. Low mortgage rates reduced profits and declining home prices caused more defaults on loans it had guaranteed.
Fannie has received $112.6 billion so far from the Treasury Department, the most expensive bailout of a single company.
The government rescued Fannie Mae and sibling company Freddie Mac in September 2008 to cover their losses on soured mortgage loans. Since then, a federal regulator has controlled their financial decisions.
Taxpayers have spent about $169 billion to rescue Fannie and Freddie, the most expensive bailout of the 2008 financial crisis. The government estimates that figure could reach up $220 billion to support the companies through 2014 after subtracting dividend payments.
Fannie's July-September loss attributable to common shareholders works out to $1.32 per share. That compares with a loss of $3.5 billion, or 61 cents per share, in the third quarter of 2010.
Last week, Freddie requested $6 billion in extra aid -- the largest request since April 2010 -- after it reported losing $6 billion in the third quarter.
Washington-based Fannie and McLean, Virginia-based Freddie own or guarantee about half of all mortgages in the U.S., or nearly 31 million home loans. Along with other federal agencies, they backed nearly 90 percent of new mortgages over the past year.
Fannie and Freddie buy home loans from banks and other lenders, package them with bonds with a guarantee against default and sell them to investors around the world.
The companies nearly folded because of big losses on risky mortgages they purchased between 2005 and 2008.
When property values drop, homeowners default -- either because they are unable to afford the payments or because they owe more than the property is worth. Because of the guarantees, Fannie and Freddie must pay for the losses.
The Obama administration unveiled a plan earlier this year to slowly dissolve the two mortgage giants. The aim is to shrink the government's role in the mortgage system, remaking decades of federal policy aimed at getting Americans to buy homes. It would also probably make home loans more expensive.
Exactly how far the government's role in mortgage lending would be reduced was left to Congress to decide. But all three options the administration presented would create a housing finance system that relies far more on private money.
by Derek Kravitz Associated Press Nov. 8, 2011 03:56 PM
Fannie Mae loss widens, asks taxpayers for $7.8B
Tuesday, October 25, 2011
Arizona underwater homeowners to get refinance help
More Arizona homeowners may soon be able to refinance to current low mortgage-interest rates, no matter how far underwater they are in their homes.
The Obama administration on Monday announced long-awaited details of an expansion of a program that helps homeowners refinance to reduce their payments.
Mortgage rates have fallen to record lows, and many homeowners would save hundreds of dollars a month if they could reduce the amount of interest they pay. But the housing crash has created a huge barrier.
A refinanced loan typically requires the home have enough value to cover the entire amount of the new loan. But plunging home values means many owners owe far more on their loans than their homes are worth. An estimated 40 percent of metro Phoenix homeowners are currently underwater.
The federal Home Affordable Refinancing Program has allowed certain loans to be refinanced if the borrower owed up to 125 percent of the home's value. But many underwater borrowers in Arizona owe more.
The plan announced Monday would lift the value requirement completely, allowing some borrowers to refinance no matter how much their home's value has dropped, if their mortgage is backed by one of the two largest federal mortgage agencies and they meet other requirements.
Borrowers can start to apply as soon as December, according to the few details released Monday, and the program would run through the end of 2013.
Speaking on a temporary stage in a Las Vegas neighborhood, Obama touted the plan as a way to allow struggling homeowners to save money.
"Probably the single greatest cause of the financial crisis and this brutal recession has been the housing bubble that burst four years ago," he said. "And as long as this goes on, our recovery can't take off as quickly as it would after a normal recession."
The plan
The HARP program has helped about 900,000 homeowners nationally to refinance. Arizona figures aren't available.
The plan described by Obama and the Federal Housing Finance Agency on Monday would expand HARP by changing the rules and costs associated and extending the time period in which borrowers can apply.
Among the key elements:
- Refinancing will be available to homeowners with loans backed by Fannie Mae or Freddie Mac in 2009 or earlier.
As with the current refinancing program, the option would be open only to borrowers with mortgages backed by the two largest federal mortgage agencies. Borrowers whose banks hold their loans privately would not qualify. Still, federally backed loans make up a majority of the existing mortgages in the state and the country.
The federal government did not give an official count of how many people will be able to refinance, but U.S. Housing and Urban Development head Shaun Donovan estimated 4 million families could be eligible.
Current federal programs have encouraged lenders to refinance such loans or modify loan-payment amounts for borrowers in financial trouble, but the banks that handle the payments in many cases have been slow to respond. Obama said the new program will allow other lenders to compete to make the new loans.
"Some lenders, frankly, just refuse to refinance," he said Monday. "So, these changes are going to encourage other lenders to compete for that business by offering better terms and rates, and eligible homeowners are going to be able to shop around."
The program is designed to help borrowers who took loans before the housing crash, and only applies to loans backed by the federal agencies on or before May 31, 2009.
Market-watchers say the key will be to see whether banks and the mortgage giants actually follow through.
"The new refinancing program sounds like a good idea, but it has to have teeth," said John Smith, president of the Mesa-based non-profit Housing Our Communities, which counsels homeowners on avoiding foreclosure. "The government has to make Fannie and Freddie go through with these deals."
- Refinancing will be available to homeowners who are current on their mortgage payments.
To qualify, homeowners must not have missed more than one payment in the past year.
The plan differs from other programs that were meant to help borrowers who could no longer afford their mortgages. The federal loan-modification program was open only to borrowers who were already late on making their payments.
Instead, the refinancing is open to borrowers who have made their payments.
Although it could help some people who have struggled to make those payments avoid foreclosure, it also could simply help other homeowners free up more money each month.
- Refinancing will be available no matter how much the home is currently worth.
The loan simply must be backed by Fannie or Freddie and be within standard sizes - for example, oversize "jumbo" loans will not qualify.
Borrowers who meet the financial requirements could refinance no matter how much the amount of the loan exceeds the home's current value, known as the loan-to-value ratio.
The previous HARP plan called for a 105 percent loan-to-value ratio, meaning homeowners who owed 5 percent more than their houses were worth could refinance under the plan. That ratio was quickly criticized for helping few in the hardest-hit housing markets of Arizona, California, Nevada, Florida and Michigan. It was raised to 125 percent but still wasn't enough for many homeowners who bought during the past decade in metro Phoenix.
"If the limit is lifted completely, then that will make a big difference for Arizona," said housing analyst Michael Orr, who publishes an online daily analysis of metro Phoenix's housing market called the "Cromford Report." "Many people have a loan-to-value of over 200 percent."
- Refinancing will cost less.
The changes announced Monday would also limit fees associated with refinancing, in hopes of making the move more affordable. Homeowners who qualify don't have to pay additional excessive fees for an appraisal or processing.
Jay Luber, president of Phoenix-based Galaxy Lending, knows many homeowners who will qualify for this program.
He believes it could "accelerate the stabilization of values in metro Phoenix by decreasing foreclosures and short sales."
The doubts
Housing advocates point to past programs that have garnered bad reputations.
The Housing Affordable Modification Program, HAMP, was announced in conjunction with the original refinancing program two years ago.
Tens of thousands of homeowners in Arizona alone were promised loan modifications and put in trial programs. These borrowers made the trial payments for more than a year in some cases only later to be denied a permanent modification.
Overall, the federal housing plan called for helping 7 million to 9 million homeowners. Fewer than 2.5 million have been helped with all of the plan's programs.
Phoenix real-estate agent Kevin Kaufman is skeptical of the new plan.
"I'm honestly very, very pessimistic about any government program actually helping people," he said. "Having been in the trenches for four years now and seen so many empty promises. I don't believe the government will actually help."
Too late?
When Obama unveiled federal efforts to stem foreclosures two years ago, he traveled to Mesa to make the announcement. At the time, foreclosures were surging.
Today, foreclosures have been steadily slowing in metro Phoenix. So the latest move has been criticized as coming too late.
Also, many market observers note that for many homeowners, the real problem is not just their monthly payment but the fact that they will still owe so much more than their houses are worth, making them unable to sell or move.
The Obama administration is hinting about more aid for people who have lost homes to foreclosure and neighborhoods with many empty foreclosure homes.
But this expansion of HARP does help the homeowners who continued to pay as others walked away.
Tom Schroder was turned down for a refinance last year because he owes at least 40 percent more than his Scottsdale home is worth. He said he is angry because he feels like he's being penalized for other people's foreclosures and bad decisions.
"I keep paying my mortgage on time and watching others buy homes at 5 or now even 4 percent (interest rates)," he said. "The changes to the refinancing program sound good. I just want to see some action on it from lenders and fast."
Patricia Garcia Duarte, president of the Phoenix-based non-profit homeownership counseling service Neighborhood Housing Services, said the new refinancing plan rewards homeowners with good credit who have not missed many payments.
"Owing more on a property than it is worth is still problematic for many in Arizona," she said. "Revamping HARP is a good thing, not the entire solution."
by Catherine Reagor The Arizona Republic Oct. 25, 2011 12:00 AM
Arizona underwater homeowners to get refinance help
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