Jul 2, 2009

Re-Finance Rule Changes – From 105%: Now up to 125% of Home Value !!

Hello Neighbors!

GREAT NEWS from our friends at CNN and CNNMoney! Thanks CNN Teams!

Government driven changes to the home financing markets continue to roll out, and we couldn’t be happier. Home owners can now refinance up to 125% of their home values. Fantastic news for owners underwater due to the huge market shifts we’ve seen since 2006.

Don’t let these rates pass you buy. Although they are no longer in the 4%s, we are still getting great rates in the 5%s. Those of you with adjustable or very bad 2nds can now take advantage of locking into the new lower rates even if we couldn’t help you just a month ago!

If you need help with a re-fi, CALL! You can start with Jim at 916.801.3940.

The full article from CNN is below:

NEW YORK (CNNMoney.com) -- The Obama administration is widening its mortgage refinancing program to allow more borrowers hit hard by falling home prices to take part.

Borrowers whose loans are now worth up to 125% of their home's value are now eligible to refinance their homes under the Obama foreclosure prevention plan announced in February. Previously, the limit was 105%.

"The president's Making Home Affordable plan is already helping far more than any previous foreclosure initiative and with today's announcement we will extend its reach still further," said Donovan.

How many more people will be drawn to the program now, however, remains a question, especially since mortgage rates are on the rise. Administration officials do not have an estimate.

Refinancings Slow to Ramp Up (don't be one of these owners and miss the opportunity!)

Some 20,000 loans have been refinanced so far, according to the Treasury Department.
The initiative waives the requirement that homeowners have at least 20% equity in their home, allowing them to take advantage of today's lower rates. Homeowners must still meet other criteria, including being current on their payments and having loans that are owned or backed by Fannie Mae or Freddie Mac. The administration has set up a Web site, www.makinghomeaffordable.gov, with more information.

Wednesday's expansion means those with homes worth $200,000 and mortgages as large as $250,000 can still qualify. Previously, these borrowers could not have loans exceeding $210,000.

The program, however, has been slow to ramp up. Borrowers have complained that banks are not approving their applications. The Mortgage Bankers Association last week slashed its 2009 forecast of originations because fewer refinancings were being done than they originally expected. The group said only 13,000 were done in the three months after the plan's launch

The administration has projected that 4 million to 5 million mortgage borrowers would be helped. A Treasury official Tuesday said that the figure applied to those who would be eligible, not necessarily those who would participate.

Administration officials do not have an updated figure of how many people would be eligible or participate now that the criteria has been widened.

The recent uptick in mortgage prices has blunted the plan's benefit, as well. The Federal Reserve has been buying mortgage-backed securities and long-term Treasurys in an effort to lower rates.

It worked for a while. Rates hit a low of 4.84% on April 28, but are now at 5.45%, according to HSH Associates.

Since mortgage rates have been in the 6% range in recent years, refinancing to the mid-5% range may not be worth it, said Keith Gumbinger, vice president at HSH Associates. A homeowner with a $200,000 mortgage at 6% would see a savings of about $64 a month if he refinanced at 5.5%, and that's before closing costs.
"Are interest rates low enough to warrant getting into the process?" he said.
The administration's announcement comes on the same day as an industry group reported that the demand for refinancing dropped 30% last week. In addition to higher rates, rising unemployment is contributing to the decline.

Borrowers with Freddie Mac loans who refinance through their current servicer can apply right away, but those who want to go through a different lender must wait until Oct. 1. Those with Fannie Mae mortgages must use their current lenders and wait until Sept. 1.

A second part of the program lets eligible borrowers who are in default -- or at risk -- lower their monthly payments to no more than 31% of their pre-tax income. This can help those who are not making as much at their jobs or who have monthly payments they can't handle. Homeowners, servicers and mortgage investors can receive incentives to entice them to participate in the program.

Banks have extended more than 200,000 trial modification offers, according to the Treasury Department. Homeowners must make three monthly payments on time before the modification is made permanent.

Call to start the re-fi process now!

- Jim