Below is an update to the Home Affordable Modification Program, better known as HAMP. One of the interesting additions is the eligibility of investor owned homes. Also write downs (reductions in loan amounts) are given a bigger priority.
All of this sounds really good but the problem is this is a volantary program. Lenders don't have to comply. There is a lot of money in servicing loans, processing foreclosures, and related services.
The Obama administration has announced changes to its flagship foreclosure prevention initiative – the Home Affordable Modification Program (HAMP). Among the changes, borrowers who are struggling because of debt beyond their mortgage will be eligible for a secondary evaluation with more flexible debt-to-income criteria, and eligibility will be extended to investor-owned homes that are used as rental properties. The administration is also giving principal reductions a bigger role within the program, tripling incentives for investors that agree to write down an underwater borrower’s principal balance and offering these same incentives to the nation’s two biggest mortgage investors – Fannie Mae and Freddie Mac.
Stay tuned.........
I read this story about Fed chief Ben Bernanke taking a stand on the foreclosure crisis and I had to share it.
Say what you want about the federal reserve and their actions over the last decade. It would be hard to argue their actions have been anything but a complete disaster.
Fed - foreclosure is not the best solution
More than four years into the housing crisis, and after millions of Americans have lost their homes, Federal Reserve Chairman Ben Bernanke is finally taking a stand. Bernanke sent a Federal Reserve paper to the leaders of the House of Representative's Committee on Financial Services arguing that relying heavily on foreclosures to deal with mortgage borrowers that can't meet their obligations is "costly and inefficient" for the housing market because they can lead to deteriorating homes and weigh on the property values in the surrounding community. Instead, the paper encourages lenders to "aggressively" pursue loan modifications and for servicers to be given more incentives to seek alternatives to foreclosure. Foreclosures "can result in 'deadweight losses,' or costs that do not benefit anyone, including the neglect and deterioration of properties that often sit vacant for months (or even years) and the associated negative effects on neighborhoods," the paper said. "These deadweight losses compound the losses that households and creditors already
bear and can result in further downward pressure on house prices."
The paper mirrors findings from regional Fed banks indicating that foreclosures can be detrimental to more Americans than just those who are losing their homes. Properties that are occupied, but in foreclosure, drive down the surrounding property values twice as much as vacant properties, an October study from the Cleveland Federal Reserve found. And with millions of foreclosed properties already in the pipeline, the foreclosure process is already taking longer than in recent memory -- a situation that may only be exacerbated if lenders don't take the Fed's advice. The average foreclosure process now takes 674 days, almost triple the time necessary in 2007.
Let me translate for you. This is the fed saying. We have lowered interest rates, bailed out banks, pumped countless extra dollars into the economy, hurry up and clean up our mess.
Just for fun, here are a few more stellar quotes on housing from Captain Bernanke.
(July, 2005) "We’ve never had a decline in house prices on a nationwide basis. So, what I think what is more likely is that house prices will slow, maybe stabilize, might slow consumption spending a bit. I don’t think it’s gonna drive the economy too far from its full employment path, though."
(October 20, 2005) "House prices have risen by nearly 25 percent over the past two years. Although speculative activity has increased in some areas, at a national level these price increases largely reflect strong economic fundamentals."
(February 15, 2006) "Housing markets are cooling a bit. Our expectation is that the decline in activity or the slowing in activity will be moderate, that house prices will probably continue to rise."
(February 15, 2007) "Despite the ongoing adjustments in the housing sector, overall economic prospects for households remain good. Household finances appear generally solid, and delinquency rates on most types of consumer loans and residential mortgages remain low."
(March 28, 2007) "At this juncture, however, the impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained. In particular, mortgages to prime borrowers and fixed-rate mortgages to all classes of borrowers continue to perform well, with low rates of delinquency."
(May 17, 2007) "All that said, given the fundamental factors in place that should support the demand for housing, we believe the effect of the troubles in the subprime sector on the broader housing market will likely be limited, and we do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system. The vast majority of mortgages, including even subprime mortgages, continue to perform well. Past gains in house prices have left most homeowners with significant amounts of home equity, and growth in jobs and incomes should help keep the financial obligations of most households manageable."
Homes are more affordable today than almost any other time in recent history. Prices are dirt cheap, lower than replacement cost in most cases. Meaning you can’t buy the materials and build a house for what you can buy one for today. Interest rates are at all time lows, and there are “deals” everywhere.
Many people can qualify for a mortgage but are struggling to come up with a good-sized down payment. With the much stricter loan qualification standards in effect today compared to times past, borrowers are often required to put down at least 20 percent of the purchase price to obtain a home loan.
Fortunately, first-time homebuyers who have IRAs (individual retirement accounts) may have more money available for a down payment than they realize. Ordinarily, the money in an IRA can't be withdrawn before age 59.5 without incurring a 10 percent income tax penalty.
However, there is a special exemption for first-time homebuyers. They can withdraw up to $10,000 in IRA funds to purchase a first home without paying the penalty. A married couple can each withdraw $10,000, giving a total of $20,000.
Whenever money is withdrawn from a traditional IRA, it must be reported as income and regular income tax paid on it. This applies to withdrawals for buying a first home. However, this rule does not apply to Roth IRAs.
Like traditional IRAs, Roth IRAs are tax deferred. Unlike traditional IRAs, however, contributions to Roth IRAs are not tax deductible. Instead, withdrawals are tax free after age 59.5.
Are taxes due on the withdrawal?
So long as the Roth IRA has been in existence for at least five years, withdrawals up to $10,000 for a first-time home purchase are completely tax free -- neither income tax nor a penalty tax need be paid.However, if the Roth IRA is less than 5 years old, income taxes may have to be paid on the withdrawal, but no penalty tax.
Who is a first-time homebuyer?
The good news is that a person can qualify as a first-time homebuyer for these purposes even if he or she has owned homes in the past. For IRA purposes, you're a first-time homebuyer so long as you, or your spouse, did own a principal residence at any time during the previous two years.
The two years are measured from the time the new home is acquired. This is the date a binding sales contract is signed or building or rebuilding has begun.
What can the money be used for?
The IRA withdrawal can be used to help pay for any costs involved in buying, building, or rebuilding a home. It may also be used for reasonable settlement, financing, or other closing costs.
Moreover, the money can be given to a child, grandchild, parent, or other ancestor to buy a first home so long as that individual qualifies under the rules.
The money must be used to pay these costs within 120 days after it is withdrawn from the IRA account. If the home purchase is canceled or delayed, no taxes will be due so long as the money is put back into the account within 120 days of its withdrawal.
Personal circumstances vary greatly. As always, you should seek advise from qualified professionals before making any financial decisions.
First off the program only applies to borrowers whose loans are held by Fannie Mae and Freddie Mac. The good news is Fannie and Freddie hold a huge number of loans in the Reno Sparks area. You can look up Fannie Loans here http://www.fanniemae.com/loanlookup/ and Freddie Loans here www.freddiemac.com/mymortgage The loans must have been sold to one of the two corporations prior to April 1, 2009. After that, though, the rules have been relaxed considerably.
The old HARP was limited to borrowers whose homes were worth no less than 125% of what they owe on their mortgages. Now, beginning Dec. 1, that restriction has been removed, so there is no ceiling whatsoever, at least for loans with traditional 30-year fixed-rate mortgages and even less common 15-year fixed loans.
For everyone else, there are still ceilings on the loan-to-value ratio. For fixed-rate loans with a term greater than 30 years, the maximum LTV is 105%. Ditto for adjustable-rate mortgages with initial fixed-rate periods of five or more years or ARMs with terms longer than 30 years.
Beyond that, you can’t have been late with your house payment at any time during the previous six months and late no more than once in the previous seven to 12 months. Also, to be eligible, borrowers must benefit in the form of lower monthly mortgage payments or a more “stable” loan product, such as moving from an adjustable-rate mortgage to one with fixed payments. But if your payment increases by more than 20%, you must re-qualify for the new loan under the following rules: You must have a credit score of at least 620 and your debt-to-income ratio cannot exceed 45%. Also, lenders are required to verify your income and assets.
Another important change: The standard waiting period has been removed for borrowers who declared bankruptcy or have a foreclosure blotting their credit records.
Zillow.com has a great HARP eligibility tool you might want to check out. You can try it here http://www.zillow.com/mortgage-calculator/harp-eligibility/
No it’s not Dave Letterman’s nightly list. There are some lists you just don’t want to end up on. The list Reno Sparks finds itself on, falls into that category. Foreclosure web site RealtyTrac recently published a list of “Top 10 Short Sale Markets” and Reno Sparks landed right in the middle at number 5.
Here’s the write up.
5) RENO-SPARKS, NV
About 60 percent of homeowners in Reno owe more on their house than the house is worth; making the short sale market in Reno huge.
Pre-foreclosure sales alone accounted for nearly 30 percent of all sales in the second quarter of 2011, according to RealtyTrac. Buyers paid only $156,664 on average for a Reno short sale (less than it costs to build a new house), and the 702 short sales in Reno during the second quarter represented a 50 percent increase from the previous quarter.
On the upside every short sale means one less foreclosure on the market.
A little more than a week ago, President Obama announced an expansion of the HARP (Home Affordable Refinance Program) which would eliminate the current maximum LTV of 125%. This means you could be up to 25% upside down on your mortgage. The program is being looked at as a way to reward those homeowners who have been good payers of their mortgages but, because of declining home values, they could not take advantage of today’s lower interest rates.
While the actual details on the program will not be released until next month, here’s some of the details being talked about.
The government is already on the hook for these loans thru Freddie and Fannie. By lowering the payments (by offering lower rates), they will likely help these loans to continue to perform and make it less likely for the underwater homeowner to walk away.
This is great news for the Reno Sparks area where estimated show nearly 60% of mortgage are "under water."
Stay tuned; as soon as more concrete details become available we will pass them on.
Over the next few days temperatures in the Reno Sparks area are going to take a nose dive. Snow is expected later in the week.
Now is the time to prepare and protect your home from the harsh winter elements. Here are a few items you should check.
#1 Make sure your sprinklers are turned off and drained.
#2 Disconnect your outdoor hoses from their faucets.
#3 Close crawl space air vents around the outside of your home.
#4 Drain and cover evaporative (swamp) coolers.
#5 Disconnect and cover central AC compressor.
#6 If you have a programmable thermostat, make sure it is programmed for colder weather.
#7 Check your furnace for proper operation and change the filter.
#8 Check and test smoke detectors for proper operation. Now would be a good time to change batteries.
Taking care of these items now can save a bunch and money and aggravation down the road.
Financially distressed homeowners with Freddie Mac mortgages will have a new option for loan modifications beginning next month.
The new option, called a Standard Modification, is designed for borrowers who are ineligible for a Home Affordable Modification Program (HAMP) loan modification or have previously defaulted on a HAMP or other loan mod. For those who are approved, the program reduces a borrower's mortgage principle and monthly payment by at least 10 percent each, thereby making the payments more affordable.
To qualify, homeowners must be at least 60 days past due on their mortgage, that is, having missed at least two monthly payments. Those who are not at least 60 days past due can qualify by proving they are in imminent danger of default, through demonstrating an eligible hardship and providing verification of income.
Mortgages that are modified will have their interest rates set to 5 percent and the amortization period (time required to pay off the mortgage) extended to 40 years from the time of the modification. Lenders approving such modification will receive cash incentives of up to $1,600 per homeowner approved.
Borrowers approved for the program must undergo a three-month trial period during which they must keep up with their new payment schedule before the loan modification is finalized and made permanent, similar to HAMP. Lenders will have incentives to encourage them to finalize borrower's status within two months of the end of the trial period.
Lenders may begin trial modifications for approved homeowners under the program as soon as Oct. 1, 2011. As of Jan. 1, 2011, all borrowers seeking a loan modification of any type on a Freddie Mac-supported mortgage must be evaluated for eligibility under the program.
The new Standard Modification replaces an existing type of Freddie Mac loan modification called a Debt Coverage Ratio, which now is being referred to as a Classic Modification. The government's HAMP loan modification will continue to be available as well.
More info. here.
http://community.nasdaq.com/News/2011-09/freddie-offers-new-loan-mod-option.aspx?storyid=94347
The Dream Makers Program offers grants for down payments to first-time military homebuyers of modest means who valiantly work to protect our country’s national security.
You can apply the grant to a mortgage from any financial institution.
Do You Qualify?
You're eligible for a Dream Makers grant if:
You can click here for income limits for Reno Sparks.
You can get more info. on the program here
http://www.pentagonfoundation.org/site/PageServer?pagename=dream_index