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BORROWERS DO NOT NEED A DOWN PAYMENT, THEY NEED PROPER UNDERWRITING

All of you who believe the rhetoric coming from DC and some on Wall Street that the reason we suffered the calamity in our housing market had to do with a lack of down payment, the following is for your consideration;
90% of all VA borrowers put ZERO down on their homes. AND YET THEY HAVE THE LOWEST DEFAULT OF ALL LOAN PROGRAMS…PERIOD!

VA loans closed Q4 2012 with a foreclosure inventory rate of 2.08%, just ahead of prime loans 2.10% and FHA loans 3.85% and prime ARMs 6.68%. Sub-Prime loans with borrowers with low FICO scores, meaning based on proven metrics they WILL NOT pay their bills on time and who were told to make up income to put down in their applications for a home loan, by no surprise have a default rate above 20%.

In the book; Financial Sense To White Picket Fence, I discuss the traditional Four “B’s”; Budgeting, Borrowing, Buying and Beyond. The State of California published this book and I/HELP receive ZERO from any sales as required by law. The book is available on Amazon.com for about twenty bucks and will assist any homeowner or future homeowner in ways that are simple, but profound.

VA applies the same concept that I address in the book. It’s called a BUDGET! If you use your VA eligibility and obtain a VA no down payment loan, you have to prove you have enough residual income in order to survive. They factor where you live and how large of a family you have and require you have enough money left over at the end of each month to account for the little emergencies we all must deal with.

Buy the book and give it to someone you know could benefit. If you do, you’re not only supporting California’s Community Colleges Real Estate Education Center, you may be helping a future buyer or current homeowner from future challenges that you’ll have to pay for!

http://www.amazon.com/Financial-Sense-White-Picket-Fence/dp/0692013261/ref=sr_1_1?ie=UTF8&qid=1366987682&sr=8-1&keywords=financial+sense+to+white+picket+fence

 

Banks are walking away from thousands of vacant properties after starting and then refusing to complete the foreclosure process because they do not want to pay for maintaining the homes.

The result: hundreds of thousands of homes are being withheld from the market, raising questions about whether the recent run-up in housing prices is artificial.

Meanwhile, former homeowners that have already left the property with the belief they lost the home to foreclosure are ending up on the hook for the unpaid debt, taxes and repairs.

Consumer advocates say the largest mortgage servicers are blatantly ignoring Federal Reserve guidance that require borrowers be notified if a foreclosure is initiated and then abandoned.

“We’re seeing more and more, banks getting a judgment to sell a home but not taking it to a foreclosure sale,” says Thomas Fitzpatrick, an economist in the community development department at the Federal Reserve Bank of Cleveland. “Banks speak more openly about how if it’s not in their economic interest to foreclose, they’re not going to foreclose. It may cost more to cure the back taxes and bring the property up to code than they could ever get from selling the property itself.”

Bank “walkaways” used to be extremely rare, but they have ballooned in the past year or so, resulting in a large number of homes stuck in foreclosure, sometimes for years.

More than 300,000, or 35%, of the roughly 1 million homes currently in the process of foreclosure are vacant and the servicer has not taken title to the home, according to new data from RealtyTrac, the Irvine, Calif., data firm.

The national mortgage settlement includes an anti-blight provision requiring that servicers either release the lien on a property or complete a foreclosure sale, but that rule sets no specific time limit. Therefore, it appears they are not following this rule by their lack of action.

Many cities have ordinances that require maintenance of abandoned homes. But if a servicer has not taken title to the property, cities instead end up tracking down the former homeowner to pay for liens, upkeep and taxes. These former homeowners could also be on the hook for overdue homeowner association fees, past-due insurance and the mortgage debt.

No bank just forgives the debt. Part of why you see an increase in abandoned foreclosures is because it’s an accretive problem. Research shows that homes that banks walked away from in 2008 are still sitting there.

Housing experts speculate that banks are purposely refusing to take title of abandoned foreclosures as a strategic move to better manage their ballooning portfolios of real estate owned properties. If more properties were put on the market, it would drop values again. So, they do nothing.
Source for post: National Mortgage News

CURRENT REGULATION Z, requires mortgage broker companies that receive compensation from the consumer to pay the loan officers hourly or salaried BUT NOT ON COMMISSION. Thus, mortgage broker companies may not pay a commission to their employee mortgage brokers.

THE NEW RULE EFFECTIVE JANUARY 10, 2014 revises Regulation Z to permit commissions to be paid to loan originators on borrower paid compensation. However, you must wait until January 10, 2014 BEFORE you pay commissions on borrower paid compensation.

All of the provisions implemented by the new rule (12 CFR Part 1026) apply to closed-end consumer credit transactions secured by a dwelling. HOWEVER, the restrictions on mandatory arbitration clauses and financing of credit insurance premiums also apply to an open-end home equity line of credit (i.e., credit subject to § 1026.40) when secured by the consumer’s principal dwelling.

EFFECTIVE JANUARY 10, 2014 the DEFINITION OF A “LOAN ORIGINATOR” IS EXPANDED TO INCLUDE A PERSON WHO, IN EXPECTATION of direct or indirect compensation or other monetary gain or for direct or indirect compensation or other monetary gain, PERFORMS ANY OF THE FOLLOWING ACTIVITIES:

takes an application; offers, arranges, assists a consumer in obtaining or applying to obtain, negotiates, or otherwise obtains or makes an extension of consumer credit for another person; or through advertising or other means of communication represents to the public that such person can or will perform any of these activities.

The Rule expressly includes in the definition of a loan originator any person referring a consumer to any person who participates in the origination process as a loan originator. Referring includes any oral or written action directed to a consumer that can affirmatively influence the consumer to select a particular loan originator or creditor to obtain an extension of credit when the consumer will pay for such credit.

The exception is for persons who provide loan originator or creditor contact information to a consumer in response to the consumer’s request (as opposed to providing customer information to a loan originator or creditor). This definition is not only for purposes of determining who is subject to the restrictions on compensation, but also for the qualification requirements.

The definition of loan originator does not include bona fide third-party advisors such as accountants, attorneys, registered financial advisors, housing counselors, or others who do not receive compensation for engaging in loan origination activities.

The Rule exempts a person who does not take a consumer credit application or offer or negotiate credit terms available from a creditor, but who performs purely administrative or clerical tasks on behalf of a person who does engage in such activities. However, managers, administrative and clerical staff, and similar individuals who are employed by (or a contractor or an agent of) a creditor or loan originator organization and take an application, offer, arrange, assist a consumer in obtaining or applying to obtain, negotiate, or otherwise obtain or make a particular extension of credit for another person are loan originators. The Rule includes examples of activities that, in the absence of any other activities, will not render a manager, administrative or clerical staff member, or similar employee a loan originator for these purposes, including persons who:

• At the request of the consumer provides an application form to the consumer;
• Accept a completed application form from the consumer;
• Deliver an application to a loan originator or creditor without assisting the consumer in completing the application, processing or analyzing the information, or discussing specific credit terms or products available from a creditor with the consumer;
• Provide general explanations, information, or descriptions in response to consumer questions;
• As employees of a creditor or loan originator, provide loan originator or creditor contact information in response to the consumer’s request, provided that the employee does not discuss particular credit terms available from a creditor and does not refer the consumer, based on the employee’s assessment of the consumer’s financial characteristics, to a particular loan originator or creditor seeking to originate particular credit transactions to consumers with those financial characteristics;

• Describe other product-related services;
• Explain or describe the steps that a consumer would need to take to obtain an offer of credit, including providing general guidance on qualifications or criteria that would need to be met that is not specific to that consumer’s circumstances.

Again, The New Rule EFFECTIVE JANUARY 10, 2014:
• Allows mortgage brokerage companies receiving compensation from consumers to pay their employees commissions, as long as the commissions are not based on the terms of the loans that they originate;
• Permits loan originators to reduce their compensation to bear the cost of unforeseen pricing increases in a very narrow set of circumstances;
• Establishes steps to determine when a factor is a proxy for loan terms; and
• Permits compensation to loan originators that is based on profits within specified parameters. Source: Herman Thordsen

The following information is not to be construed as legal or tax advice. It is only the opinion of the author. All readers should consult with their own tax professional to determine their own individual tax benefits or burdens with respect to homeownership.

Now, with that disclaimer out of the way…

With April 15 right around the corner and many predicting this incredible ride of never before seen interests’ rates going away in the not too distant future, it is appropriate to recall the most common tax deduction homeowners have and motivate some of you fence sitters to take advantage of this market if you can.

The U.S. tax code is designed to offer incentives to homeowners.

Whether a home is financed via a mortgage, or paid-in-full with cash, there are a multitude of tax-savings opportunities associated with owning a home.

Tax Deduction : Mortgage Interest Paid

Mortgage interest paid to a lender is tax-deductible and, for some homeowners, can provide a large tax break — especially in the early years of a home loan. This is because a standard mortgage amortization schedule is front-loaded with mortgage interest.

At today’s mortgage rates, annual interest payments on a 30-year loan term exceed annual principal payments until loan’s 10th year.
Mortgage interest tax deductions are extended to second mortgages, too. Interest paid on refinances, home equity loans (HELOAN) and home equity lines of credit (HELOC) is tax-deductible as well. However, restrictions apply on homeowners who raise their mortgage debt beyond their property’s fair market value.

In addition, the Internal Revenue Service (IRS) imposes a $1 million loan size cap. Loans for more than one million dollars are exempt from this tax deduction.

Tax Deduction : Discount Points

Discount points paid in connection with a home purchase or a refinance are also tax-deductible. By way of definition, a discount point is a one-time, at-closing fee which gets a borrower access to mortgage rates below current “market rates”.

For example, if the market mortgage rate is 4 percent, paying 1 discount point may get you access to a mortgage rate of 3.75%. The IRS treats discount points as “prepaid mortgage interest” which, in turn, makes them tax-deductible in most cases.

When you pay discount points in conjunction with a purchase, the points may be deducted in full in the year in which they were paid. With respect to refinances, discount points are typically amortized over the life of the loan such that 1 point is deducted at 1/30 of its value per tax-calendar year.

There are additional qualifications to meet in order to claim discount points. Your accountant can help.

Other Deductions : Property Taxes, Renovations, Home Office
Real Estate Taxes

Homeowners typically pay real estate taxes to local and state entities. These property taxes may be deducted as an expense and income in the year in which they are paid. If your mortgage lender currently escrows for your taxes and insurance, you can expect an annual statement to file along with your federal tax returns.

Home Improvements

For tax-paying homeowners, certain types of home improvement projects may be tax-deductible, too — specifically ones made for medical reasons. For example, if home renovations are made to accommodate a chronically ill or disabled person, and do not add to the overall value of a home, project costs are entirely tax deductible. Repairs made for aesthetic purposes are not eligible.

Home Offices

Homeowners who work from their residence can typically deduct expenses used for maintaining qualified home offices. These deductions include everything from renovations to the cost of utilities. However, there are several conditions for claiming home office space on your tax returns, and the rules can be tricky. Before claiming a home office, speak with an accountant to understand the benefits and potential liability.

Homeowners : Budget For Your Tax Breaks

Homeowner tax deductions reduce the annual costs of homeownership, but they’re far from a qualified reason to buy an actual home. Tax law can (and does) change frequently so consider whatever deductions to which you’re entitled a bonus.

Build your housing budget with the help of a tax preparer, if you’d like. Get a feel for how much home you can afford — before and after accounting for tax breaks. And, as you build your budget, make sure to use legitimate mortgage rates. Source: Dan Green

For those who do not have loans backed by Fannie Mae or Freddie Mac and are in a negative equity position and unable to take advantage of today’s lower interest rates, this pilot program may be coming your way.

The Rebuilding American Homeownership Pilot Program (RAHPP) is a pilot program proposed by US Senator Jeff Merkley from Oregon.

HARP was originally thought to be able to help upwards of seven million homeowners refinance, but to date, only two million have benefitted and HARP is due to expire at the end of this year.

Under the pilot program – RAHPP -eligible homeowners would be able refinance with far easier qualifications than a normal refinance. Further, the loan would NOT have to be backed by Fannie or Freddie, NOR would it have to have been originated prior to May 31, 2009.

The launch date of this pilot program, which will ONLY be available in Multnomah County, Oregon, begins April 1, 2013

The main qualifications for this test program are:
•Your home must be “significantly” underwater
•You must intend to stay in your home for at least 5 years
•You must not own any other residential property
•You must be current on your mortgage

Homeowners will be offered a choice of two mortgage products from which to choose; a 30-year fixed rate mortgage at 5% or a 15-year fixed rate mortgage at 4%.

Homeowners with negatively-amortizing Option ARMs and sub-prime-like loans are eligible, as are homeowners with 30-year fixed rate loans.

Let’s hope this program is successful and will be the precursor of a more robust program for underwater borrowers who have been paying on time, but have been unable to refinance out of their negatively amortizing loan, or other programs that are not backed by Fannie Mae or Freddie Mac.

In a letter to Congress, FHA Commissioner Carol Galante outlined upcoming changes.

Here are a few bullet points from the letter;

Credit scores under 620 will have a cap of 43% on the overall debt to income ratio. Today many borrowers often exceed 53%. Any loan with a back end DTI greater than 43% will require a “manual underwrite” documenting compensating factors such as larger down payment or large reserves the borrower has SAVED on their own in order to justify the approval. This places a great deal of risk and pressure on the lender and the Direct Endorsement Underwriter who today can use the excuse that the Automated Underwriting System approved the borrower so they were allowed to fund the loan. This will stop.

FHA is concerned about lenders advertising and openly soliciting borrowers who had a foreclosure three years earlier. While a foreclosure and a short sale are currently treated the same under FHA guidelines, this too is about to change. Foreclosures will be placed under much stricter criteria.

This is also yet another reason to reach out to struggling homeowners and help them see the merit of a short sale over a foreclosure.

http://www.corker.senate.gov/public/_cache/files/940b16a2-a401-418f-b409-5dca6e176c42/12-18-12_Letter%20from_Carol_Galante.pdf

Beginning April 1, 2013 some FHA-backed homeowners will pay as much as 1.55 percent for annual FHA mortgage insurance, and will pay the FHA MIP for the life of their loan. For others, FHA mortgage insurance terms won’t change.

FHA’s most recent audit shows that it has negative $1.44 for every $100 insured.

FHA-insured homeowners pay mortgage insurance in two parts.

The first part is called “upfront mortgage insurance” (UFMIP) and it’s a one-time payment that is made at closing. UFMIP is traditionally added to your loan size, and is not used in loan-to-value (LTV) calculations for an FHA loan.
The second part of FHA mortgage insurance is known as the annual mortgage insurance premium (MIP). Annual MIP is paid monthly as part of your regular mortgage payment. On a mortgage statement, MIP is sometimes itemized as “HUD ESCROW”.

Unlike upfront mortgage insurance premiums, annual MIP payments vary based on your loan term, your loan-to-value, and your loan size.

If your current FHA-insured mortgage pre-dates June 1, 2009, the FHA will allow to you use the FHA Streamline Refinance program and not require you to pay the new, higher MIP rates.

For these “grandfathered” loans, the UFMIP charged is equal to 0.01% of your loan size, or $10 for every $100,000 borrowed.

For new FHA purchase loans, and for refinances of an FHA-backed mortgage from on, or after, June 1, 2009, the federal agency applies a different series of mortgage insurance premiums.

First, the FHA will continue to assess an upfront mortgage insurance premium of 1.75% of the loan size for all new borrowers, or $1,750 for every $100,000 borrowed. This is the same rate at which the FHA currently assesses UFMIP.

Annual mortgage insurance rates, however, are changing.

The annual MIP schedule for newer FHA mortgage varies based on three loan traits : (1) Loan-to-value, (2) Loan term, and (3) Loan size. The annual MIP schedule is as follows :

•15-year loan term, LTV less than, or equal to, 78 percent : 0.45% annually

•15-year loan term, LTV greater than 78 percent, less than 90 percent : 0.45% annually
•15-year loan term, LTV greater than 90 percent : 0.70% annually
•30-year loan term, LTV less than, or equal to, 95 percent : 1.30% annually
•30-year loan term, LTV greater than 95 percent : 1.35% annually

In addition, FHA mortgages for which the loan size exceeds $625,500 are subject to additional MIP.

Loan terms of 15 years or fewer require an extra 0.25 percentage points of annual MIP. Loan terms of more than 15 years, including the 30-year fixed rate mortgage, are subject to a 0.20 percentage point increase.

The new annual MIP rates go into effect for all new FHA loans, beginning April 1, 2013 with the exception of the 15-year loan term with loan-to-value of 78 percent or less. For this lone combination, the new rate goes into effect May 6, 2013.

In addition, the FHA is changing its policy which allows for MIP cancellation.

Currently, the FHA removes the annual mortgage insurance requirement for homeowners who have paid mortgage insurance for at least 5 years, and whose loan size is less than 78% of the lower of a home’s original purchase price or appraised value.

Going forward, the FHA will remove annual MIP after 11 years for homeowners whose beginning LTV is 90% or less. For everyone else, including those making a 3.5% down payment, the FHA will assess MIP for the duration of the loan’s term.

The FHA’s mortgage insurance changes don’t go into effect until Monday, April 1, 2013 and, once your application is underway, you are protected from future changed.

Therefore, if you’ve been considering an FHA mortgage for your next home purchase, or a refinance via the FHA Streamline Refinance program, don’t delay. The longer you wait, the more you will pay in mortgage insurance. Source: Dan Green and HUD

The HARP 2.0/Home Affordable Refinance Program is available to U.S. homeowners as of March 17, 2012.

If you’re underwater on your conforming, conventional mortgage, you may be eligible to refinance without paying down principal and without having to pay mortgage insurance.

What Is HARP & HARP 2.0?

HARP was started in April 2009.

In order to be eligible for the HARP refinance program :
1.Your loan must be backed by Fannie Mae or Freddie Mac.
2.Your current mortgage must have a securitization date prior to June 1, 2009
If you meet these two criteria, you may be HARP-eligible. If your mortgage is an FHA, USDA or a jumbo mortgage, you are not HARP-eligible.
Underwater FHA mortgages can be refinanced via the FHA Streamline Refinance program. Underwater VA mortgages can be refinanced via the VA IRRRL mortgage program (VA Streamline Refinance).

HARP : Questions and Answers

Do these question-and-answers account for the “new” HARP mortgage program?
Yes, everything you are reading is accurate as of today, . This post includes the latest changes as rolled out by the Federal Home Finance Agency on October 24, 2011, and as confirmed by Fannie Mae and Freddie Mac on November 15, 2011. HARP 2.0 was formally released by Fannie Mae and Freddie Mac March 17, 2012.

Is “HARP” the same thing as the government’s “Making Home Affordable” program?
Yes, the names HARP and Making Home Affordable are interchangeable.

How do I know if Fannie Mae or Freddie Mac has my mortgage?
Fannie Mae and Freddie Mac have “lookup” forms on their respective websites. Check Fannie Mae’s first because Fannie Mae’s market share is larger. If no match is found, then check Freddie Mac. Your loan must appear on one of these two sites to be eligible for HARP.

If my mortgage is held by Fannie Mae or Freddie Mac, am I instantly-eligible for the Home Affordable Refinance Program?
No. There is a series of criteria. Having your mortgage held by Fannie or Freddie is just a pre-qualifier.

My mortgage is held by Fannie/Freddie. Now what do I do?
Find a recent mortgage statement and write “Fannie Mae” or “Freddie Mac” on it — whichever group backs your home loan — so you don’t forget. Give that information to your lender when you apply for your HARP refinance.

My mortgage is backed by Wells Fargo. Am I eligible for HARP?
It’s possible that your mortgage is backed by Wells Fargo, but the more likely answer is that Wells Fargo is just your mortgage servicer; the bank that collects your payments. Wells Fargo backs very few of its own loans. Most loans for which payments are sent to Wells Fargo are backed by either Fannie Mae or Freddie Mac.

My mortgage is backed by Bank of America. Am I eligible for HARP?
Bank of America does back some of its own loans, but the more likely answer is that Bank of America is your mortgage servicer; the bank that collects your monthly mortgage payments. Bank of America backs very few of its own loans. For most loans for which payments are sent to Bank of America, Fannie Mae or Freddie Mac are the actual loan-backers.

My lender won’t do HARP. Can I use HARP with another lender?
Yes. You can do HARP with any participating lender. This is a major change from the original HARP program. The government is trying to get as many people access to the program as possible.

My mortgage is serviced by Cenlar or someone else who does not do mortgages. Am I eligible for HARP?
Cenlar is a mortgage servicer. It does not offer new mortgages — even for HARP. However, that has no bearing on your ability to get a HARP refinance. You can work with any participating lender in the country so reach out to your favorite bank and get started from there.

What if neither Fannie Mae nor Freddie Mac has a record of my mortgage?
If neither Fannie nor Freddie has record of your mortgage, your loan is not HARP-eligible. However, you may still be eligible for a “regular” refinance to lower rates. If your mortgage is insured by the FHA, use the FHA Streamline Refinance program. The FHA Streamline Refinance helps underwater homeowners, too.

I have a jumbo mortgage. Can I use HARP 2.0?
No, HARP 2.0 is not meant for jumbo mortgages. It’s for mortgages backed by Fannie Mae or Freddie Mac only. There is talk of a HARP 3 program. HARP 3 would likely include loan types not covered by today’s program guidelines.

I have an Alt-A mortgage. Can I use HARP 2.0?
No.

I have an interest only mortgage. Can I use HARP 2.0?
If your current mortgage is interest only, you may be able to use HARP. If your interest only mortgage is a conforming loan backed by Fannie Mae or Freddie Mac, you should be HARP-eligible. Otherwise, your loan may be an Alt-A or sub-prime mortgage in which case you will not be HARP 2-eligible.

I have a balloon mortgage. Can I use HARP 2.0?
If your current mortgage is a balloon mortgage, you may be able to use HARP. It depends on whether your loan is conforming, and whether it’s backed by Fannie Mae or Freddie Mac.

What is HARP 3?
HARP 3 is the next iteration of HARP. It’s currently in talks in Congress, and sometimes referred to as “#MyRefi”. There is no expectation for when, or if, it will be passed. HARP 3 is rumored to include all of the loan types and borrowers who are specifically excluded from HARP 2.

Does HARP work the same with Fannie Mae as with Freddie Mac?
Yes, for the most part, the program is the same with Fannie Mae as with Freddie Mac. There are some small differences, but they affect just a tiny, tiny portion of the general population. For everyone else, the guidelines work the same.

My bank sent me a HARP rate quote. It looks like a high interest rate. Should I shop it around?
Yes, you should always shop HARP mortgage rates because they vary so widely from bank-to-bank. You may save a lot of money just by getting a second opinion.

Am I eligible for the Home Affordable Refinance Program if I’m behind on my mortgage?
No. You must be current on your mortgage to refinance via HARP.

I’ve been told by my bank that I’m not eligible for HARP. I think my bank is wrong. Can I get a second opinion?
If you’ve been turned down for HARP but believe that you’re eligible, apply with a different bank and see what happens. Different banks are using different variations of the program. The edits are subtle, but they’re enough to cause some people to get denied who should otherwise have been approved.

My lender denied my HARP mortgage because my LTV is too high. What do I do?
Different banks are using different variations of the program. If you’ve been turned down for HARP 2.0, just try with a different bank.

What is the mortgage rate for a HARP refinance?
Mortgage rates for the HARP mortgage program are the same as for a “traditional” refinance. There is no “premium” for using the HARP program.

Will the Home Affordable Refinance Program help me avoid foreclosure?
No. The Home Affordable Refinance Program is not designed to delay, or stop, foreclosures. It’s meant to give homeowners who are current on their mortgages, and who have lost home equity, a chance to refinance at today’s low mortgage rates.

What are the minimum requirements to be HARP-eligible?
First, your home loan must be paid on-time for the prior 6 months, and at least 11 of the most recent 12 months. Second, your mortgage must have been sold to Fannie or Freddie prior to June 1, 2009. And, third, you may not have used the program before — only one HARP refinance per mortgage is allowed.

My home is not underwater. Can I still use HARP 2.0?
Yes, you can use HARP even if you’re not “underwater”.

Will HARP 2.0 “forgive” my mortgage balance?
No, HARP does not forgive your mortgage balance, nor does it reduce your principal owed.

My mortgage was securitized shortly after the HARP deadline of May 31, 2009. Can I get a waiver or exception?
No, there are no “date exceptions” for HARP. If your loan was not securitized on, or before, May 31, 2009, you cannot use the program.

My mortgage closed in May 2009 but wasn’t securitized until after the June 1, 2009 cutoff date. Can I get a waiver or exception for HARP 2?
No, there are no “date exceptions” for HARP.

Why was the date May 31, 2009 chosen as the HARP deadline?
There’s no official answer for this one but, in March 2012, a Fannie Mae representative said that May 31, 2009 was selected as the HARP cut-off date because that those who financed a home with a mortgage prior to May 31, 2009 may not have been aware of the rapidly changing mortgage market.

If I refinanced with HARP a few years ago, can I use it again for HARP II?
No. You can only use the HARP mortgage program one time per home. If you used HARP 1, you cannot use HARP 2.0.

Is there a loan-to-value restriction for HARP?
No. All homes — regardless of how far underwater they are — are eligible for the HARP program.

“LTV doesn’t matter, but my bank turned me down for HARP because my loan-to-value was too high.”
That’s normal, actually. Not every bank will underwrite HARP loans to the letter of the guidelines. Loans with high LTVs can be risky to a bank. Therefore, some banks will limit their business to loans under 125% loan-to-value, for example. Remember — just because one bank turned you down doesn’t mean that every bank will. Apply somewhere else to get a second opinion.

My home is gaining value as the housing market improves. Will this hurt my ability to use HARP to refinance my home?
In general, no. As your home increases in value, its loan to-value decreases. So long as your loan-to-value remains above 80 percent, you should remain HARP-eligible.

If I refinance with HARP using an ARM, do I still get “unlimited LTV”?
No, if you use an ARM for HARP 2.0, you are limited to 105% loan-to-value. Only fixed rate loans get the unlimited LTV treatment.

Why does my bank say I’m limited to 105% LTV with my HARP refinance? I want a fixed-rate loan.
Not all banks are honoring the HARP 2.0 mortgage guidelines as they are written and one common “edit” is to change the maximum allowable LTV. You may want to get a HARP rate quote from another bank — one that won’t restrict your loan size.

Will my home require an appraisal with the HARP mortgage program?
Sort of. Although your home’s value doesn’t matter for the HARP mortgage program, lenders will run what’s called an “automated valuation model” (AVM) on your home. If the value meets reliability standards, no physical appraisal will be required. However, your lender may choose to commission a physical appraisal anyway — just to make sure your home is “standing”.

My current bank says that they’re the only ones who can do my HARP Refinance. Is that true?
No.

My current mortgage is with [YOUR BANK HERE] and I don’t like them. Can I work with another bank?
Yes.

Can I refinance my HARP mortgage into a shorter term? I want a 15-year fixed rate mortgage — not a 30-year.
Yes, you can shorten your loan term via HARP. You must still qualify for the mortgage based on payments, though. If the “payment shock” of switching to a 15-year fixed rate mortgage is deemed too steep, your lender may not approve the loan. Be sure to ask.

I put down 20% when I bought my home. My home is now underwater. If I refinance with HARP, will I have to pay mortgage insurance now?
No, you won’t need to pay mortgage insurance. If your current loan doesn’t require PMI, your new loan won’t require it, either.

I pay PMI now. Will my PMI payments go up with a new HARP refinance?
No, your private mortgage insurance payments will not increase. However, the “transfer” of your mortgage insurance policy may require an extra step. Remind your lender that you’re paying PMI to help the refinance process move more smoothly.

My bank says I can’t refinance with HARP 2.0 because I have PMI. Is that true?
No.

Why does my loan officer tell me I can’t refinance with HARP because my current mortgage has PMI?
Ignorance.

My current mortgage has Lender-Paid Mortgage Insurance (LPMI). Can I refinance via HARP?
Yes.

You’re saying I can refinance with LPMI but my bank says I can’t. Who is right?
With respect to LPMI, different banks have different rules for HARP. There are banks closing HARP loans with lender-paid mortgage insurance attached. That’s a fact. If your bank won’t do loans with LPMI, find one that will.

How do I choose my PMI “coverage” when I refinance a HARP loan that has LPMI?
Your loan officer will know what to do. Just make sure you disclose that your mortgage has LPMI at the time of application so your loan officer knows what to do.

How do I know if my mortgage has Lender-Paid Mortgage Insurance (LPMI)?
To find out if your mortgage has lender-paid mortgage insurance (LPMI), locate your loan paperwork from closing. There should be a clear disclosure that states that your mortgage features LPMI, and the terms should be clearly labeled for you.

I don’t see an LPMI disclosure in my closing package but I think that I have it. How do I know if my mortgage has LPMI?
If there is no LPMI disclosure, first check if your first mortgage’s loan-to-value exceeded 80% at the time of closing. If it did, look to see if you are paying monthly mortgage insurance. If you are not paying monthly PMI, you’re likely carrying LPMI.

I was turned down for HARP because the bank says I have mortgage insurance. I think they’re wrong.
There are different types of private mortgage insurance and not all kinds are paid monthly. One such example is lender-paid mortgage insurance for which your lender pays PMI on your behalf each month. You don’t see the payments made, but you still have PMI. There are banks that will HARP-refinance loans with LPMI. If you bank says no, ask another bank and you may get a different answer.

What’s the biggest mortgage I can get with a HARP refinance?
HARP refinances are limited to your area’s conforming loan limits. In most cities, the conforming loan limit is $417,000. However, there are some cities in which conforming loan limits are as high at $625,500. You can look up your area’s conforming loan limits by clicking here;
https://www.fanniemae.com/singlefamily/loan-limits

Can I do a cash-out refinances with HARP?
No.

Can I refinance a second/vacation home with HARP?
Yes.

Can I refinance an investment/rental property with HARP?
Yes.

I rent out my old home. Is it HARP-eligible even though it’s an investment property now?
Yes.

How long do I have to stay in my house if I use HARP on my primary residence?
There is no specific timeframe for which you’re required to stay in your home if you use HARP 2.0.

These things I’m reading here… Why, when I call my bank, do they tell me it’s not true?
It’s possible that the call center representative to whom you’re speaking is neither knowledgeable about HARP, nor the actual mortgage underwriting process. This post is researched and cross-referenced against Fannie Mae and Freddie Mac guidelines, and publicly-available reports from the FHFA.

Are condominiums eligible for HARP refinancing?
Yes, condominiums can be financed on the HARP refinance program. Warrantability standards still apply.

My bank says that condos can’t be refinanced via HARP?
That’s not true.

Can I consolidate mortgages with a HARP refinance?
No, you cannot consolidate multiple mortgages with the HARP refinance program. It’s for first liens only. All subordinate/junior liens must be re-subordinated to the new first mortgage.

Is there a HARP program for second mortgages? My second mortgage is at a high rate and I want to refinance it.
No.

What happens to my second mortgage when I refinance my first mortgage using HARP 2.0?
HARP 2.0 is meant for first liens only. Second liens are meant to subordinate. You’ll get to replace your first mortgage and your second mortgage will remain as-is. Just be sure to mention your second mortgage at the time of application so your lender knows to order the subordination for you.

My second mortgage company won’t let me refinance my first mortgage via HARP. Can they do that?
With the HARP refinance program, second liens are meant to subordinate. Second lien holders know this, however, not all second lien holders will agree to it. This is against the spirit of the program, but second lien holders are within their rights to deny the refinance.  As this is reducing thier risk, most will cooperate.

My second mortgage isn’t backed by Fannie Mae or Freddie Mac. Is that a problem?
No, it doesn’t matter if your second mortgage isn’t backed by Fannie Mae or Freddie Mac. Second mortgages are ignored as part of HARP. They can’t be refinanced, and they can’t be consolidated. Second mortgages are a non-factor in HARP 2.0.

I have an 80/10/10 mortgage. Can I use HARP 2.0?
Yes, if you have an 80/10/10 mortgage, you can use HARP so long as you meet the program’s basic eligibility requirements. You cannot combine your two mortgages, however. Nor can you take cash out.

Can I “roll up” my closing costs with a HARP refinance?
Yes, mortgage balances can be increased to cover closing costs in addition to other monies due at closing such as escrow reserves, accrued daily interest, and a small amount of cash. In no cases may loan sizes exceed the local conforming loan limits, however. In most U.S. markets, this limit is $417,000. In certain high-cost areas, including Orange County, California and Fairfax, Virginia, for example, the limit ranges as high as $625,500.

I am unemployed and without income. Am I HARP-eligible?
Yes, you do not need to be employed to use the HARP mortgage program. Applicants do not need to be “requalified” unless their new principal + interest payment increases by more than 20%. If the new payment increases by less than 20%, or falls, there is no requalification necessary.

My lender is asking for income verification. How do I prove income for a HARP loan?
HARP mortgages are underwritten like most other mortgages. When income verification is required, you’ll often be asked to provide 2 years of W-2 statements, the two most recent years of federal tax returns, and a recent paystub.

I cannot verify income for my HARP loan. What are my options?
The HARP program does require verification of income, but some lenders may require it anyway. If you cannot (or will not) verify income with your lender, you may show 12 months of PITI in reserves as a substitute for actual verifiable income. PITI stands for Principal, Interest, Taxes, and Insurance. In short, if you can show that you have 12 months of housing payments “saved up”, HARP will treat those reserves as “income”.

I used HAMP with my current lender. Can I use HARP now?
If you’ve used the HAMP program with your current lender to modify your mortgage, you may not be HARP-eligible. It depends on the terms of your modification. Ask your current servicer if you’re HARP-eligible.

I am now divorced. I want to remove my ex-spouse from the mortgage. Can I do that with HARP?
Yes. With HARP, a borrower on the mortgage can be removed via a refinance so long as that person is also removed from the deed; and has no ownership interest in the home.

Do HARP refinances use Loan-Level Pricing Adjustments (LLPAs)?
Yes, HARP mortgages use loan-level pricing adjustments, but LLPAs are dramatically reduced on a HARP refinance and, in some cases, waived entirely. For example, there are no LLPAs for fixed-rate HARP refinances with terms of 20 years or fewer. For all other loans, loan-level pricing adjustments are capped at 0.75 points.

Does a HARP Refinances require LLPAs for a 15-year fixed rate mortgage?
No, there are no LLPAs for 15-year fixed rate mortgage via the HARP Refinance program.

Is there a minimum credit score to use the HARP program?
No, there is no minimum credit score requirement with the HARP mortgage program, per se. However, you must qualify for the mortgage based on traditional underwriting standards.

What are the costs to refinance via the HARP program?
Closing costs for HARP refinances should be no different than for any other mortgage. You may pay points, you may pay closing costs, you may pay neither. How your mortgage rate and loan fees are structured is between you and your loan officer. You can even opt for a zero-cost HARP refinance. Ask your loan officer about it.

What does the term “DU Refi Plus” mean?
“DU Refi Plus” is the brand name Fannie Mae assigned to its particular flavor of the HARP mortgage program. “DU” stands for Desktop Underwriter. It’s a software program that simulates mortgage underwriting. “Refi Plus” is a gimmicky-sounding term that could have been anything. The name has been trademarked, however.

What does the term “Relief Refinance” mean?
“Relief Refinance” is the Freddie Mac equivalent of DU Refi+.

My lender tells me that my loan was denied because of an EA-II Approval. What does that mean?
EA-II (pronounced : Ee Ay Two) is an automated mortgage approval code. It stands for Expanded Approval (Level II) and means that the loan meets the program’s eligibility standards, but that the file’s combined risk is too high to be approved. Some lenders will accept EA-II findings for a HARP loan. Many more will not.

I have a 40-year mortgage. Can I use the HARP program?
Yes.

When does the HARP program end?
If you are HARP-eligible, you must close on your mortgage prior to January 1, 2014.

Lastly, don’t forget! The Home Affordable Refinance Program is not meant to save a home from foreclosure. It’s meant to give underwater homeowners a chance to refinance without paying PMI. If you need foreclosure help, call your current loan servicer immediately and get connected to a HUD Counselor who will assist you at no cost.
This has been authored by Dan Green (NMLS #227607) with modifications by Chris Sorensen.

 

The Expiration of The Mortgage Debt Forgiveness Act

 

One of the questions I continue to get is about the Mortgage Debt Forgiveness Act and its scheduled expiration on 12/31/12.

 

Due to everything going on in DC and elsewhere, it now appears probable that the Act WILL NOT be extended in time. HOWEVER, as in the past, this highly popular Act which boast bi-partisan support, WILL get passed sometime after Jan 1 and when it is passed, it will likely be retroactive to Jan. 1, 2013.

 

Insolvency is still, for many, their best option even though it is not widely understood by most “tax preparation experts”.

 

Seek an expert who understands this area of tax law.  And, please do not confuse Deficiency with Cancelled Debt.

 

A “lender” may give up their rights to seek a deficiency if a borrower cooperates in a short sale, BUT the same lender is required by LAW to send a 1099 to the IRS. So, even if YOUR borrower fails to get a 1099, know that the IRS has a copy on file and will be all too happy to provide your borrower with a copy.

 

This means YOU MUST report the cancelled debt as income using IRS Form 982 and then attempt to offset it with Insolvency (Assuming the Mortgage Debt Forgiveness Act sunsets, or is non-applicable to the borrowers set of circumstances) EVEN THOUGH the lender cannot go after you for the amount a borrower did not pay back via a short sale.

 

Finally, all cancelled debt is a reportable taxable event. Meaning, whether it is credit card, car loans, or home mortgages, any amount the lender does not get paid back, FOR ANY REASON, including short sales, foreclosures or principle reductions, is required to be reported as income to the IRS and state taxing authority.

 

What is Insolvency?; Insolvency is defined by taking the fair market value of ones assets versus the tax payers liabilities, immediately before the discharge of debt (Within 30 days is good), and to the extent ones liabilities are greater than the fair market value of the assets is the amount one is technically insolvent.

 

So, if you have assets worth 400K and liabilities BEFORE the loss of your home of 600K (Including the mortgage), than you are 200K insolvent (This is NOT Bankruptcy). Now, if the lender accepts a short sale in which the loss is going to be 185K, under HAFA, they cannot come after the borrower for deficiency and the borrower through insolvency is able to eliminate their tax liability.

 

In California, we have SB 458 which eliminates all deficiency liability on all one to four units when a seller and the lien holders cooperate and accept short sale proceeds. Through a cooperative short sale all lien holders must accept the proceeds, or lack thereof, as payment in full and forever give up their rights to seek a deficiency balance from the borrower.

 

Share this valuable information with nervous homeowners and anxious agents and remind them that the sooner they begin the healing process, the earlier they may enter the homeownership arena again. Nothing written here is to be construed as legal or tax advice.

As compared to historical averages, mortgage rates are so low today that home buyers are getting an 81% percent increase in purchasing power.

3.32% is incredibly low. Since 1971 — a span of more than 500 months — the 30-year fixed rate mortgage rate has averaged 8.75%. Today, it’s much less than half of that and you can see how purchasing power has improved affected.

Assuming a $2,500 monthly mortgage payment and 20 percent down:

•Historical Average Rate (8.75%) : A $2,500 monthly mortgage payment affords a purchase price of $397,000
•Today’s Average Rate (3.32%) : A $2,500 monthly mortgage payment affords a purchase price of $718,050

You can buy 81% more home in 2012 for the same monthly payment as compared to the average of the last 40 years. Even as compared to one year ago, homebuyer purchasing power is higher by 9.7%.

This is why everyone says it’s such a great time to buy. Never mind recovering home prices — mortgage rates are ridiculous. Source: Dan Green. NMLS – 227607