In the last two years, FHA introduced several loan modification plans and mortgage relief programs, like FHASecure and Hope for Homeowners and today they announced a third attempt with a new FHA loan modification program.These past FHA home loan modification performed well because they never really got off the ground with the participating FHA mortgage lenders. At press time, FHA mortgage rates remained at record low levels.
Most of you will remember how FHASecure was pushed out by the Bush Administration in an effort to salvage homeowners stuck in an ARM that was about to reset to a higher interest rate.This FHA loan program was intended to enable delinquent borrowers a mortgage refinancing option with low fixed FHA rates. FHA Loan Pros discussed it in a recent article; HUD claims that “FHASecure has helped more than 100,000 borrowers remain in their property, but the reality was only 3,800 delinquent homeowners received specific aid from the FHASecure program in 2008.
Then late last year, FHA announced the lending savior, Hope for Homeowners that was designed to do what FHASecure was not able to accomplish.The press ate it up and FHA was the home financing talk on airwaves for months. Unfortunately as of June 30th for the Hope for Homeowners program could account for 949 mortgage applications but only 1 Hope for Homeowner loan could be documented. FHA remains determined to extend a loan modification to distressed homeowners, so hopefully this new FHA initiative will succeed.
The New FHA Loan Modification Program
oFHA announced their new mortgage relief program to help distressed FHA borrowers.
oThe FHA home loan is refinanced and 30% of the FHA mortgage is placed into an interest-free second mortgage that must be paid back when the home is sold or refinanced.
oBorrowers can qualify with ratios of 31/55. The first ratio says that up to 31% of the individual’s monthly income can be used for housing costs and that 55% can be used for housing costs plus other monthly debts.
oThe homeowners must be able to document a hardship (ie. an income change, loss of employment etc.) and it must be deemed as a long term hardship.
An industry group lowered their forecast for 2009 home loan originations by more than 25% as higher FHA mortgage rates stifle mortgage refinancing activity.The Mortgage Bankers Association estimates that lenders will make $2.03 trillion in new home loans this year, down by more than $700 billion from its forecast in March.The Washington-based group attributed $84 billion to reduce mortgage lending on home purchases.The rest of the decline would be from fewer FHA refinance loans and “very low” volumes on an affordability loan program overseen by mortgage agencies FHA, Fannie Mae and Freddie Mac, MBA said in a statement.
FHA mortgage rates have risen from record lows since the MBA’s prior forecast as have Treasury yields, which spiked amid a flood of debt issuance needed to fund federal rescue programs.
In March, the MBA boosted its forecast of mortgage originations by more than $800 billion but reversed most of that expected increase with Monday’s revision.Average 30-year loan rates have slipped from recent peaks but at 5.38 % last week remain well above the record low 4.78 % set in April, Freddie Mac reported on Thursday.The higher mortgage rates have quelled home refinancing demand.The MBA’s index of mortgage refinancing applications in the week ended June 5 sank to 2,605.7 after hovering between about 5,100 and 6,800 from the March 20 week through the end of April.
Estimates of home loans moving through the Home Affordable Refinance Program, using Fannie and Freddie, have also fallen short.According to Jay Brinkmann, MBA’s chief economist, “While generally accepted estimates were that around 1.5 to 2 million borrowers might avail themselves of this FHA loan program, with many more potentially eligible, to date only about 13,000 loans have been completed according to press reports.”
Though the FHA home loans created under this program should increase, volume is unlikely to come near forecasts, he said.FHA home purchase loans are also expected to be less than expected in March. Falling prices mean lower loan sizes, and homes bought in foreclosure and by investors are often done for cash, the trade group said.
The MBA expects total existing home sales in 2009 to drop 1.2 % from last year to 4.8 million units. New home sales will slump about 27 % to 352,000 units, the group said.”Median home prices for new and existing homes will likely continue to fall, dropping by about 10 % from 2008 levels, but leveling off in 2010 as the economy improves,” Brinkmann said.
The Obama plan would temporarily approve Fannie Mae and Freddie Mac to provide mortgage refinancing that they own or guarantee with loan-to-value ratios (LTV’s) of as much as 105% without appraising the property or requiring additional mortgage insurance.That means that first and second mortgage loan balances can be 5% greater than the property’s appraised value.This is good news for thousands of homeowners who recently found themselves upside-down with mortgage balances that exceeded that home values. Because of the lack of home equity, these homeowners were previously unable to qualify for traditional or FHA refinance loan.
Borrowers who don’t have mortgage insurance on their current home mortgages will not need it under the plan, Lockhart said.Without new appraisals, the loan-to-value ratios could be far higher than 105%, masking the companies’ true risk, said Paul Miller, an analyst at FBR Capital Markets in Arlington, Virginia.“They’re a public policy arm of the federal government right now,” Miller said of Fannie and Freddie. “They aren’t being run for profitability.”
FHA home loans will be the only opportunity for non-prime refinancing, but even the FHA loan guidelines are tighter in 2009.HUD requires 2 full URAR appraisals for FHA cash out refinance loans that exceeds 85% loan to value.Borrowers can still use FHA loans for cash refinancing up to 95%, but two appraisals slows the process down and increases the closing costs as well.Many FHA lenders are reporting minimum credit score requirements implemented for higher risk FHA home mortgages.FHA mortgage rates for purchase or refinance are being reported with fixed rates as low as 4.5% on thirty year home mortgages.
Metro Housing of Flint is a non-profit agency. If you’re about to refinance, they suggest waiting until Wednesday before locking in your mortgage rates. “It’s going to be an impact day, and you’re going to see the interest rates hover and loan officers remain excited because of the significant amounts opportunity for home refinancing. It’s going to be a big day,” Crews predicted. If you have bad credit, or if your mortgage balance is greater than what your house is actually worth, qualifying for a refinance loan will be impossible.Mortgage rates are low, but lending guidelines are tighter than ever.Mortgage refinancing can be tricky, but not impossible. “Every time there’s a strategy. What happens is we don’t want to do the strategy, and we want to do it now, but we have to take the steps and get there,” Crews advised.
To ease the confusion, Metro Housing is offering free seminars titled “Know Your Loan, Save Your Home.”“We need to know what your rates are. We need to be able to look at your credit, and what the recapture period is. Then we can figure out what products can get you back to a safe place,” Crews explained.If mortgage rates drop again on Wednesday, there’s no way of knowing just how long they will remain that low. Metro Housing’s best advice is to get your act together now, before you miss your opportunity and it’s too late.“Know your mortgage. If you don’t take action, it will pass you by,” Crews said.
Why the Fed Meeting Matters so Much… Former Dallas Fed President Gerald O’Driscoll talks about what to expect from the next Federal Reserve meeting.
“This is the worst housing crisis of our lifetime, and we’re in a recession as a result of it,” said Senator Chris Dodd (D-CT), Chairman of the Senate Committee on Banking, Housing, and Urban Affairs, the author of the legislation. “Property values decline sharply when a home in the neighborhood is foreclosed upon. In order to stabilize neighborhoods, we must take actions to prevent foreclosures. This proposal will help provide much-needed relief for people on the brink of foreclosure, keeping families in their houses and neighborhoods financially stable.”
The Bush administration rolled out the new FHA HOPE for Homeowners Loan on October 1, 2008. It’s the Department of Housing and Urban Development’s new mortgage insurance program. The new insurance, offered through the Federal Housing Administration (FHA), will allow qualifying homeowners to refinance with fixed-rate mortgages, said Brian Sullivan, who works for HUD in Washington, D.C. This program is called the HOPE for Homeowners Act of 2008 and is part of the Housing and Economic Recovery Act. It begins on October 1, 2008 and ends in September 2011. The Federal Housing Administration (FHA) would insure the program up to $300 billion.
It was the mortgage of last resort when home sales were booming. Buyers balked at the paperwork. Sellers hated the home-repair rules. FHA lenders are anxiously awaiting the government to roll out the new FHA mortgage loans.The Federal Housing Administration (FHA) mortgage guarantee program, long considered a backwater, has garnered newfound respect in industry and policy circles. President Bush made it the centerpiece of his mortgage relief plan.
The Federal Housing Administration, the once-viewed-as-antiquated, irrelevant Great Depression-era government agency, is suddenly emerging as the centerpiece of government efforts to bolster the U.S. housing market, reported The Wall Street Journal.
The FHA loan options have become the cheapest, and in many cases, the only alternative for borrowers who can make only a small down payment and the agency is rapidly gaining market share.
Home buyers and mortgage refinancing owners nationwide took out nearly 530,000 FHA loans in the first half of the year, 160 percent more than in the corresponding months last year. Many of the new local FHA home loans this year are FHA refinancing loans. But even in this market, where home sales are falling precipitously, FHA mortgages for new purchases jumped 170 percent.“Now, it’s almost automatic that it’s FHA,” said Keith L. Cross, a real estate agent with Century 21 Downtown in Baltimore.
Fewer than 10 percent of mortgage applications were for government-insured loans in July 2007, the Mortgage Bankers Association said. This July, it was nearly 30 percent.“Suddenly, we’re a good option and perhaps the best option,” said Meg Burns, FHA’s director of single-family program development. She sees parallels to the early days of the agency, which was founded during the Depression to keep financing flowing to Americans after banks failed.
FHA Changes
Starting October 1, the minimum will increase to 3.5 percent from 3 percent. Seller-funded down payment assistance also becomes a thing of the past as of October 1. This includes nonprofit groups whose assistance to buyers is funded by sellers.FHA also says it will raise its fees come Oct. 1. Most borrowers will pay upfront mortgage insurance premiums of 1.75 percent of their loan amount rather than 1.5 percent and annual premiums of 0.55 percent rather than 0.5 percent.
The economic-stimulus bill passed by Congress and signed by President Bush earlier this year raised the ceiling on the size of loans the FHA can insure to $729,750 in the highest-cost areas, up from a previous cap of $362,790. The new limits are due to expire at the end of this year, and the new limits under the Housing and Economic Recovery Act of 2008 are lower. The new loan limits set by this Act will be $625,500.
If you’re looking to buy or refinance through FHA, now is the time to do it before these changes take place. Fill out the free loan quote request form on this page or call us toll-free.
Home mortgage applications dropped last week as purchases and refinance loan volume slowed and mortgage interest rates likely rose slightly, according to a weekly report published Wednesday morning by the Mortgage Bankers Association. The MBA’s market composite index lowered to 621.6 for the week ended May 16, a drop of 7.8% from one week earlier.
The home loan application index is calibrated to March 16, 1990; a reading of 621.6 means that application activity was roughly 6.2 times greater than when the index was first established.Refinancing activity, usually the driver of overall application volume, fell 8.7% as mortgage rates appeared to have inched higher; the MBA said that average rates on a 30-year fixed rate mortgages rose 8 basis points during last week. Purchase application activity — usually used by economists to predict the direction of the housing market — feel 6.9%.
Surprisingly, FHA loan application activity took a sharp dip as well, falling 6.8%; the drop was one of the few weekly decreases posted for FHA applications so far this year.The share of variable-rate mortgages as a portion of overall application activity continued to rise as well, hitting its first double-digit total this year at 10.0%, the MBA said.For more information, visithttp://www.mortgagebankers.org
With FHA, cash out refinancing is available to 95%. FHA streamline refinance loans, rate and term refinancing and home purchase loans are available to 97.5% loan to value.
Refinance and Avoid a Foreclosure
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