Showing posts with label Low Interest Rate. Show all posts
Showing posts with label Low Interest Rate. Show all posts
Tuesday, June 23, 2009
California running out of $10,000 tax credits
First-time home buyers wanting to take advantage of the state's $10,000 tax credit may have less time than originally expected. California set aside $100 million to help home buyers purchase newly built homes, hoping to jump start the residential-construction market. According to state officials, the tactic has worked well and is helping to entice home buyers into the market. However, there only is approximately 20 percent of the program's funding remaining.The program launched in March, and as of June 3 nearly $24 million in tax credit certificates already had been issued, according to the state's Franchise Tax Board, leaving nearly $76 million in credit available. Many applications still are in the pipeline awaiting approval. If all of the submitted applications are approved, only $17.5 million would remain in the fund. The California state legislature is considering adding another $200 million to the program. However, securing approval may be difficult due to the state's estimated $24 billion budget deficit. A bill to extend the program already has won Assembly approval and now is awaiting activity in the state Senate.
Tuesday, April 21, 2009
Freddie Mac Release a bulletin
Freddie Mac has issued the following Single Family Seller/Servicer Guide Update regarding Bulletin 2009-10
Today we issued Single-Family Seller/Servicer Guide Bulletin 2009-10, which announces important updates to requirements for the Home Affordable Modification program, including new criteria for determining whether a borrower is in imminent default, information and tools for Servicers to perform the required Net Present Value (NPV) test, and other changes to borrower eligibility and underwriting requirements.
Criteria for Determining Imminent Default
The Guide Bulletin provides criteria for determining whether a borrower who is current or less than 31days delinquent, and claims a hardship, is in imminent default. Using the process, requirements, and definitions outlined in our revised Guide Section C65.4, Servicers must consider the borrower for a modification under the Home Affordable Modification program if, after using the screening criteria outlined in this Guide section, the Servicer determines:
The borrower’s Debt Coverage Ratio is less than 1.20 and
The borrower’s cash reserves are less than three times the current monthly PITIA payment.
The Borrower Qualification Worksheet may be used to determine if a borrower, who is current or less than 31 days delinquent, is in imminent default. The updated Freddie Mac Borrower Qualification Worksheet will be available as a secure link on our Home Affordable Modification program Web page on Thursday, April 23. In addition, Freddie Mac is developing an automated solution to assist Servicers with the imminent default evaluation, and it will be available at a later date.
Net Present Value Calculations
All mortgages that meet Home Affordable Modification program criteria must be evaluated using the standardized NPV test that compares the NPV result for a modification to the NPV result for not modifying the mortgage. Today’s Bulletin and newly revised Guide Section C65.6 include detailed requirements for performing this test. These requirements include revisions for determining the amount of principal forbearance that may be permitted in order to achieve the Target Payment.
To assist Servicers, we are also introducing the Net Present Value (NPV) Calculator. The NPV Calculator is available on the Home Affordable Modification Servicer Web page. A user ID and password are required for access to the Servicer Web page. Servicers must complete and submit the HMP Registration Form to obtain a user ID and password.
Additional Updates
With today’s Bulletin, we are also announcing revisions and updates to these and other program requirements:
Revising requirements for verification of income when the Servicer uses stated income to create and send the borrower a Trial Period Plan, along with revising the income documentation requirements.
Revising the timeframe for when a borrower must respond to the Trial Period Plan offer package from 14 days to 30 days, and providing additional guidance if the borrower does not submit the required documents by the specified deadline.
Updating the definition of Interest Rate Cap.
Updating requirements for Servicers to continue to report “full-file” status reports to the four major credit repositories when borrowers enter the Trial Period, with criteria for borrowers who are current and borrowers who are delinquent when they enter the Trial Period.
Revising collateral valuation requirements used for the NPV test and for determining the mark-to-market LTV ratio.
Revising eligibility requirements to allow modifications of FHA, VA, and RHS mortgages, in accordance with guidance issued by the respective agency.
Revising documentation requirements for verifying that eligible mortgages are occupied primary residences.
Updating requirements for verifying installment debt and other expenses that must be included in the calculation of the borrower’s total monthly debt payment-to-income ratio.
Providing further guidance on the Servicer’s “Pay for Success” and Borrower’s “Pay for Performance” incentive fees.
Revising the Hardship Affidavit to now include a section for the collection of government monitoring data.
Adding requirements for reporting data to Fannie Mae in its capacity as Financial Agent.
Adding requirements provided by Freddie Mac, the Compliance Agent for the U.S Department of the Treasury.
Reminders
As a reminder, Servicers should continue to:
Suspend all foreclosure sales on owner-occupied properties for borrowers who may be or are eligible for a modification under the Home Affordable Modification program.
Report weekly Home Affordable Modification activity each Monday using the Program Performance Reporting Spreadsheet.
Please read the original bulletin: http://www.freddiemac.com/sell/guide/bulletins/pdf/bll0910.pdf
Today we issued Single-Family Seller/Servicer Guide Bulletin 2009-10, which announces important updates to requirements for the Home Affordable Modification program, including new criteria for determining whether a borrower is in imminent default, information and tools for Servicers to perform the required Net Present Value (NPV) test, and other changes to borrower eligibility and underwriting requirements.
Criteria for Determining Imminent Default
The Guide Bulletin provides criteria for determining whether a borrower who is current or less than 31days delinquent, and claims a hardship, is in imminent default. Using the process, requirements, and definitions outlined in our revised Guide Section C65.4, Servicers must consider the borrower for a modification under the Home Affordable Modification program if, after using the screening criteria outlined in this Guide section, the Servicer determines:
The borrower’s Debt Coverage Ratio is less than 1.20 and
The borrower’s cash reserves are less than three times the current monthly PITIA payment.
The Borrower Qualification Worksheet may be used to determine if a borrower, who is current or less than 31 days delinquent, is in imminent default. The updated Freddie Mac Borrower Qualification Worksheet will be available as a secure link on our Home Affordable Modification program Web page on Thursday, April 23. In addition, Freddie Mac is developing an automated solution to assist Servicers with the imminent default evaluation, and it will be available at a later date.
Net Present Value Calculations
All mortgages that meet Home Affordable Modification program criteria must be evaluated using the standardized NPV test that compares the NPV result for a modification to the NPV result for not modifying the mortgage. Today’s Bulletin and newly revised Guide Section C65.6 include detailed requirements for performing this test. These requirements include revisions for determining the amount of principal forbearance that may be permitted in order to achieve the Target Payment.
To assist Servicers, we are also introducing the Net Present Value (NPV) Calculator. The NPV Calculator is available on the Home Affordable Modification Servicer Web page. A user ID and password are required for access to the Servicer Web page. Servicers must complete and submit the HMP Registration Form to obtain a user ID and password.
Additional Updates
With today’s Bulletin, we are also announcing revisions and updates to these and other program requirements:
Revising requirements for verification of income when the Servicer uses stated income to create and send the borrower a Trial Period Plan, along with revising the income documentation requirements.
Revising the timeframe for when a borrower must respond to the Trial Period Plan offer package from 14 days to 30 days, and providing additional guidance if the borrower does not submit the required documents by the specified deadline.
Updating the definition of Interest Rate Cap.
Updating requirements for Servicers to continue to report “full-file” status reports to the four major credit repositories when borrowers enter the Trial Period, with criteria for borrowers who are current and borrowers who are delinquent when they enter the Trial Period.
Revising collateral valuation requirements used for the NPV test and for determining the mark-to-market LTV ratio.
Revising eligibility requirements to allow modifications of FHA, VA, and RHS mortgages, in accordance with guidance issued by the respective agency.
Revising documentation requirements for verifying that eligible mortgages are occupied primary residences.
Updating requirements for verifying installment debt and other expenses that must be included in the calculation of the borrower’s total monthly debt payment-to-income ratio.
Providing further guidance on the Servicer’s “Pay for Success” and Borrower’s “Pay for Performance” incentive fees.
Revising the Hardship Affidavit to now include a section for the collection of government monitoring data.
Adding requirements for reporting data to Fannie Mae in its capacity as Financial Agent.
Adding requirements provided by Freddie Mac, the Compliance Agent for the U.S Department of the Treasury.
Reminders
As a reminder, Servicers should continue to:
Suspend all foreclosure sales on owner-occupied properties for borrowers who may be or are eligible for a modification under the Home Affordable Modification program.
Report weekly Home Affordable Modification activity each Monday using the Program Performance Reporting Spreadsheet.
Please read the original bulletin: http://www.freddiemac.com/sell/guide/bulletins/pdf/bll0910.pdf
Monday, April 20, 2009
President Barack Obama's ambitious plan to rescue the housing market
At the heart of the President Barack Obama's ambitious plan to rescue the housing market is the conviction that restructuring distressed mortgages will keep struggling borrowers in their homes and help insert a floor beneath plummeting property values. With $75 billion dedicated to reworking troubled loans, that's a big bet—especially considering that a top banking regulator said last December that almost 53 percent of loans modified in the first quarter of 2008 went bad again within six months. But supporters argue that mortgage modifications need to be properly engineered to work—and many early ones weren't. To that end, the Obama administration on Wednesday unveiled fresh details on its plan to restructure at-risk loans and help as many as four million home owners avoid foreclosure. Here are seven things you need to know about Obama's loan modification program.
1. Payments, not prices: The plan centers on the belief that struggling borrowers will stay in their homes—even as values decline sharply—as long as they can make their monthly payments. Although not everyone agrees with this, billionaire investor Warren Buffett endorsed the philosophy in his most recent letter to shareholders. "Commentary about the current housing crisis often ignores the crucial fact that most foreclosures do not occur because a house is worth less than its mortgage (so-called “upside-down” loans)," Buffett wrote. "Rather, foreclosures take place because borrowers can’t pay the monthly payment that they agreed to pay."
2. Thirty-one percent: To that end, the administration's plan requires participating loan servicers to reduce monthly payments to no more than 38 percent of the borrower's gross monthly income. The government would then chip in to bring payments down further, to no more than 31 percent of the borrower's monthly income. In lowering the payment, the servicer would first reduce the interest rate to as low as 2 percent. If that's not enough to hit the 31 percent threshold, they would then extend the terms of the loan to up to 40 years. If that's still not enough, the servicer would forebear loan principal at no interest. The plan does not, however, require servicers to reduce mortgage principal, which Richard Green, the director of the Lusk Center for Real Estate at USC, considers a shortcoming. "For underwater loans, if you don't write down the balance to be less than the value of the house, people still have an incentive to default," Green says. "Writing down the principal first instead of last—which is what [the Obama administration is] proposing—makes sense to me."
3. Cash incentives: To encourage participation, servicers will be paid $1,000 for each modification and will get an additional $1,000 payout each year for as many as three years, as long as the borrower continues making payments. Borrowers, meanwhile, can get up to $1,000 knocked off the principal of their loan each year for as many as five years if they make their payments on time. Neither party can receive the cash incentives until the modified loan payments have been made for at least three months.
4. Financial hardship: The Obama administration is pitching its plan as an effort to help responsible homeowners ensnared in the historic housing slump and painful recession—not speculators. As such, only owner-occupied, primary residences with outstanding principal balances of up to $729,750 are eligible. Occupancy status will be verified through documents, such as the borrower's credit report. In addition, the program is designed to target homeowners who are undergoing "serious hardships"—such as a loss of income—which have put them at risk of default. To participate, borrowers will have to sign an affidavit of financial hardship and verify their income with documents. "If we would have had such stringent verification over the last four or five years, we probably wouldn't be in as bad a position as we are in," says Richard Moody, the chief economist at Mission Residential. But while Moody has no objection to such verification, obtaining documents from so many homeowners could be an onerous effort. "It's going to be a very time-consuming process," he says. Only loans originated on or before Jan. 1, 2009, are eligible, and modified payments will remain in place for five years. Now that the administration's plan is out, lenders are free to begin modifying loans.
5. Net present value: To determine if a particular mortgage will be modified, the servicer will perform a so-called net present value test. The test compares the expected cash flow that the loan would generate if it is modified with the expected cash flow it would generate if it isn't. If the modified loan is expected to produce more cash flow for the mortgage holder, the servicer is to restructure the loan.
6. Second liensThe Obama plan also addresses the issue of second liens—such as home equity loans or home equity lines of credit—by offering incentives to extinguish them. But key details on this component of the plan remained unclear.
7. Will it work? Moody argues that while the plan may reduce foreclosures for primary residences, it could lead to a spike in defaults for another group of homeowners. Although he supports the administration's efforts to focus the initiative on primary residences, Moody notes that "it could be the case that a lot of [real estate speculators] have been just hanging on waiting to see exactly what the details are of this [plan]," Moody says. Now that it's clear the Obama plan leaves speculators out, "we could actually see a spike in foreclosures or at least mortgage defaults among this group."
1. Payments, not prices: The plan centers on the belief that struggling borrowers will stay in their homes—even as values decline sharply—as long as they can make their monthly payments. Although not everyone agrees with this, billionaire investor Warren Buffett endorsed the philosophy in his most recent letter to shareholders. "Commentary about the current housing crisis often ignores the crucial fact that most foreclosures do not occur because a house is worth less than its mortgage (so-called “upside-down” loans)," Buffett wrote. "Rather, foreclosures take place because borrowers can’t pay the monthly payment that they agreed to pay."
2. Thirty-one percent: To that end, the administration's plan requires participating loan servicers to reduce monthly payments to no more than 38 percent of the borrower's gross monthly income. The government would then chip in to bring payments down further, to no more than 31 percent of the borrower's monthly income. In lowering the payment, the servicer would first reduce the interest rate to as low as 2 percent. If that's not enough to hit the 31 percent threshold, they would then extend the terms of the loan to up to 40 years. If that's still not enough, the servicer would forebear loan principal at no interest. The plan does not, however, require servicers to reduce mortgage principal, which Richard Green, the director of the Lusk Center for Real Estate at USC, considers a shortcoming. "For underwater loans, if you don't write down the balance to be less than the value of the house, people still have an incentive to default," Green says. "Writing down the principal first instead of last—which is what [the Obama administration is] proposing—makes sense to me."
3. Cash incentives: To encourage participation, servicers will be paid $1,000 for each modification and will get an additional $1,000 payout each year for as many as three years, as long as the borrower continues making payments. Borrowers, meanwhile, can get up to $1,000 knocked off the principal of their loan each year for as many as five years if they make their payments on time. Neither party can receive the cash incentives until the modified loan payments have been made for at least three months.
4. Financial hardship: The Obama administration is pitching its plan as an effort to help responsible homeowners ensnared in the historic housing slump and painful recession—not speculators. As such, only owner-occupied, primary residences with outstanding principal balances of up to $729,750 are eligible. Occupancy status will be verified through documents, such as the borrower's credit report. In addition, the program is designed to target homeowners who are undergoing "serious hardships"—such as a loss of income—which have put them at risk of default. To participate, borrowers will have to sign an affidavit of financial hardship and verify their income with documents. "If we would have had such stringent verification over the last four or five years, we probably wouldn't be in as bad a position as we are in," says Richard Moody, the chief economist at Mission Residential. But while Moody has no objection to such verification, obtaining documents from so many homeowners could be an onerous effort. "It's going to be a very time-consuming process," he says. Only loans originated on or before Jan. 1, 2009, are eligible, and modified payments will remain in place for five years. Now that the administration's plan is out, lenders are free to begin modifying loans.
5. Net present value: To determine if a particular mortgage will be modified, the servicer will perform a so-called net present value test. The test compares the expected cash flow that the loan would generate if it is modified with the expected cash flow it would generate if it isn't. If the modified loan is expected to produce more cash flow for the mortgage holder, the servicer is to restructure the loan.
6. Second liensThe Obama plan also addresses the issue of second liens—such as home equity loans or home equity lines of credit—by offering incentives to extinguish them. But key details on this component of the plan remained unclear.
7. Will it work? Moody argues that while the plan may reduce foreclosures for primary residences, it could lead to a spike in defaults for another group of homeowners. Although he supports the administration's efforts to focus the initiative on primary residences, Moody notes that "it could be the case that a lot of [real estate speculators] have been just hanging on waiting to see exactly what the details are of this [plan]," Moody says. Now that it's clear the Obama plan leaves speculators out, "we could actually see a spike in foreclosures or at least mortgage defaults among this group."
Monday, April 13, 2009
C.A.R. launches mortgage protection plan for first-time home buyers
The CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) today launched the C.A.R. Housing Affordability Fund Mortgage Protection Program (C.A.R.H.A.F. MPP), for first-time home buyers.Through the Housing Affordability Fund Mortgage Protection Program, first-time home buyers who lose their jobs due to layoffs may be eligible to receive $1,500 per month, for six months, to help make their mortgage payments. A qualified co-buyer also can participate in the program, and receive a monthly benefit of $750 per month for up to six months. Program benefits also include coverage for accidental disability and a $10,000 death benefit. C.A.R.’s Housing Affordability Fund is dedicating $1 million toward its Mortgage Protection Program, and estimates that as many as 3,000 families will benefit from the program this year. To qualify for the Mortgage Protection Program, applicants must:· Be a first-time home buyer – someone who has not owned a home in three or more years· Open escrow April 2, 2009, or later, and close on or before Dec. 31, 2009· Use a California REALTOR® in the transaction· Purchase the property in California· Be a W-2 employee (cannot be self-employed) To apply for the program, home buyers must request an application for the H.A.F. Mortgage Protection Program from their REALTOR®. This week’s Mortgage Update contains information about mortgage rates; mortgage refinancing and how to get the best refinancing deal.Mortgage rates drop to record lowRates on 30-year, fixed-rate mortgages averaged 4.85 percent for the week ending March 26, following an announcement by the Federal Reserve that it is launching a new effort to assist the U.S. housing market. The rate marked a record low in the history of the Freddie Mac survey. The previous low was 4.96 percent set during the week of Jan. 15.Get the best refinancing dealThe recent declines in interest rates on 30-year, fixed-rate mortgages have resulted in many homeowners seeking to refinance. Due to the large number of requests to refinance, some homeowners are experiencing difficulty in trying to reach their lender. According to Fannie Mae’s chief economist, it may take as long as three months for the mortgage industry to start working at full capacity. To ensure they receive the best refinancing deal possible, consumers should be patient and follow a few tips from industry experts: First, consumers should recognize there is opportunity for significant savings by refinancing. Rates currently are hovering around 4.6 percent, but historically hover around 8 percent. Second, homeowners should be aware that Fannie Mae and Freddie Mac have increased their fees, so borrowers could be paying extra fees of 1 percent or more of the total loan amount. To qualify for the best rates, most borrowers must have at least 20 percent equity in their homes and FICO scores of 720 or higher.
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