Wednesday, September 24, 2008

Loan Modification FACTS

Explore Loan Workout Options:
If you have an Adjustable Rate Mortgage that is adjusting or have missed mortgage payments which has impacted your ability to refinance, you still have options in this market. Your lender may offer several 'loan workout' options including but not limited to: reinstatement, forbearance or a new repayment plan to suit your situation. When you call your lender directly ask for a supervisor for best result!


FHA Rescue and Secure Plans FHA officially offers a range of options for people needing to get out of ARM loans or who may be in arrears. Not all lenders offer these plans. Even FHA is teetering on risk based pricing hits (translated: higher interest rates) to encourage lenders to fund these loans. Certainly you should speak with an FHA licensed broker or bank about whether you will qualify. Officially the FHA has advised they perfer no FICO score or a minimum of 500. The banks who fund FHA loans have very strict loan limits (by city/county) and very few will fund under 580 FICO scores. Unfortunately, with guidelines tightening on all fronts, alternative credit reports are no longer acceptable in this market.


Mortgage Modification For longer term issues impacting your ability to afford your current mortgage, you are advised to pursue mortgage modification with your current lender. Mortgage modification may work by adding missed payments to your current loan balance (to bring it current) or change an adjustable rate to a fixed rate or by extending the number of years on your loan, thereby lowering the payment within your means.

Mortgage Insurance Loan: If your mortgage is insured (via Mortgage Insurance) you may qualify for a one-time interest-free loan from your MI guarantor to bring your account current and pay it back within a certain time frame. Your lender handles this process since they are essentially the insured party.

Loan Modification Resources: There are many companies out there who will help you work with your lender to modify your loan for a fee. These are legal negotiators whose fees range into the thousands. Your success depends on your circumstances and you ability to negotiate effectively with lenders. Professional modifiers have the inside story with lenders.
In Washington State, our DFI has proposed new rulings that only Licensed Loan Officers and Brokers can offer this service to protect consumers. You should not have to pay more than $500-1000 up front. If they don't get an acceptable result, you should get your money back less an application fee. Most llenders are very motivated to keeping people in homes. They do not want your house back.

Private Options: I've been speaking with several private lenders about options to refinance out of situations.... but they are very strict on minimum credit ratings in this market. Most private lenders want hefty fees up front and interest rates starting at 10% for higher risk loans. Since some ARM loans are already adjusting higher than that, a private lender could be a very decent option if you are in too deep to have your loan modified.

Non Profit Counseling Hotline: For borrowers in arrears or nearing a rate reset they know they cannot afford, call Hope Alliance's hotline. Hope Alliance is a non profit HUD sponsored counseling organization who will help you determine the parameters of your situation. After which , they will petition your existing lender on your behalf. The lender will then respond directly to you, after which you are on your own to negotiate.
Call Hope Alliance 1-800-995-4673  www.995hope.org
The Hope Alliance fee is paid by the lender if successful, so there is absolutely no cost to you.

BUT FIRST If you are not sure how to proceed, the first step is to ask your lender directly about potentially working out a solution.

Before you call, read about your options online at the HUD site.
http://portal.hud.gov/portal/page?_pageid=73,1827467&_dad=portal&_schema=PORTAL

Success to you! Loannetter

Wednesday, September 17, 2008

Housing Bill Promises!

Congress Passes Housing Bill to Assist HomeownersTakes effect January 1, 2009


The newly passed Housing Bill promises more help for homeowners facing foreclosures. What we don't know yet is how Congress is going to get private banks to actually deliver these programs. Much of the legislation is designed to better inform consumers and this is very welcome news to our industry!

Officially, Congress has set aside more money for FHA guaranteed loans and will pump more money into Fannie Mae and Freddie Mac. Since Freddie and Fannie, both Goverment Sponsored Enterprises, or GSE's were placed in conservatorship shortly after the Housing Bill was passed, the new heads have not yet declared if their recent guideline changes (tighter) will continue as planned. In fact, FHA has areadly delared a moratorium on their own risk guidelines so the whole situaiton is very much up in the air. These risk based guidelines translate into higher interest rates and fees for marginal credit or declining values...affecting many many people across the country.

What most people don't understand is that 'government lending' means a percentage of guarantee to the final lender who is going to hold the note. They still have to like your business proposition: i.e., you and your property.

This bill does raise current loan limits -- which means an individual borrower can borrow more than the previous FHA limits for their locale. Reading closer, the new First Time Homebuyer tax credit must be repaid over a fifteen year period. It appears these measures are designed for short term relief.

Risk leveler: The FHA minimum down payment was raised to 3.5% from 3% by the new Housing Bill. The bill has also outlawed 'gift funds' from non profit organizatoins, but family gifts are still allowed. Lenders have become much tougher about keeping your debt to income ratio under 43% and verifying your income. If you don't qualify for an FHA loan your next best option is to have greater down payment funds and work on your credit. If you have 20% down for a convetional loan, you won't need mortgage insurance unless, again the property is in a declining area...so plan on an extra 5%.

Investors are also facing lower limits on how many properties they can mortgage (In some cases, 4 total mortgages). It's a good idea to speak with a financial advisor about setting up a savings plan if you are planning to buy a home in the next year or two!

January 1, 2009 is when these new guidelines come into effect. If you can qualify for a refinance or purchase loan before then and need to make a move before your ARM adjusts--don't wait! Rates, while volatile, appear to be rising. 'FHA Secure' interest rates are currently higher by 1.5 - 3% depending on your risk category. 'FHA Rescue' (the new program) is likely to be even higher.

Do You Know Where Your Money IS? Considering all the bank failures, mergers and buyouts, it's a good time check out your bank and see they how stable they are: Compare bank ratings here:
http://www.bankrate.com/brm/safesound/select.asp?insttype=0 (click or copy and past this link into your browser)


If your bank was doing something risky they have ceased to do so given the new level of FDIC oversight. So while they may be less inclined to lend--this is to protect your deposits also.

Buying a Fixer Upper? When buying your own home, it's easy to add up to $35,000 cash for renovations or $6,000 for energy efficiency improvements through FHA streamline renovation "Green Loans". We also have full construction and renovation loans through our specialist construction lenders. It really is a great time to buy, build or renovate if you are in good shape financially. Check out my Buildnet Blog.

Improve Your Fund-Ability! The most important thing you can do these days to improve your chances of getting a loan is to raise your 'middle' FICO score to 720 or higher (850 is the top).
Having sufficient assets to close is absolutely essential these days.

Remember when the rule of thumb was no more than 25% of your income for your house payment? Those days may be returning. While you are riding your bike to work -- take time to appreciate the scenery. You might find a nice little house you can afford along the way!

Happy shopping! Loannetter
© copyright 2008 susan templeton loannetter