Home Affordable Refinance Program (HARP)

The industry’s four largest mortgage servicers all say they will be taking part in the revamped Home Affordable Refinance Program (HARP).

Bank of America, Chase, Citigroup, and Wells Fargo have each expressed their support of the program and the changes that will allow more underwater homeowners to refinance at today’s lower interest rates.

Government officials expect the program’s revisions – particularly the GSEs’ waiver on representations and warranties – to increase competition for mortgage refinancing.
An executive with JPMorgan Chase told the company’s investors this week that HARP 2.0 will facilitate “cross-servicing refinancing” because with the rep and warranty waiver, the new lender is not required to assume responsibility for underwriting deficiencies that may have occurred with the original loan.

Chase explains that HARP may be used to replace an adjustable-rate or interest-only loan with a standard fixed interest rate loan, and typically reduces the borrower’s monthly payment.
Frank Bisignano, CEO of mortgage banking at Chase, estimates that with the new HARP guidelines, thousands of Chase customers could lower their mortgage payments by an average of $2,500 a year.
Citi said in an emailed statement that it “supports the program and expects to participate.”
Wells Fargo, likewise, said in a statement that it “welcomes the addition of the new HARP features.”

Veronica Clemons, a spokesperson for Wells Fargo Home Mortgage, says the company is waiting for specific guidelines and requirements from Fannie Mae and Freddie Mac in order to put the changes into practice.

She adds that once the company’s mortgage servicing team has the guidelines in hand, “it will take us some time – depending on the complexity of the guidelines – to make the necessary systems changes to begin offering the new enhancements to our customers.”

The GSEs’ regulator, the Federal Housing Finance Agency (FHFA), says Fannie and Freddie plan to issue guidance with operational details about the HARP changes by November 15th.

“Since industry participation in HARP is not mandatory, implementation schedules will vary as individual lenders, mortgage insurers, and other market participants modify their processes,” FHFA said.

Bank of America says it will participate in the enhanced Home Affordable Refinance Program announced by the administration, and it expects the new guidelines and eligibility criteria to go into effect after December 1st.

“Despite ongoing economic challenges, nearly 90 percent of our customers remain current on their mortgage,” BofA spokesperson Rick Simon said. “HARP helps these homeowners who remain current on their mortgage with options to lower their monthly payment when, otherwise, conventional funding options are limited.”

The GSEs have removed the 125 percent loan-to-value (LTV) cap under the program. Now any borrower with an LTV ratio above 80 percent is eligible for a HARP refinance, as long as the loan was sold to Fannie or Freddie prior to May 31, 2009, and the borrower is not delinquent on their payments.

Since HARP was launched in 2009, nearly 900,000 loans have been refinanced through the program. Government officials estimate that an additional 1 million homeowners will receive assistance under the new guidelines.

In its announcement of the program changes, FHFA encouraged borrowers to “contact their existing lender or any other mortgage lender offering HARP refinances.”

Copied from DSNews.com

Proposed new mortgage finance rules

You may have seen reports that the federal government is proposing new mortgage finance rules under which only home purchasers who can afford a minimum 20% down payment on a conventional loan would get a shot at the best interest rates and terms. It's true and here are the new guidelines:

Strict mandatory debt-to-income limits. Under the proposal, to get the best mortgage rates, you
would need to spend no more than 28% of your gross monthly income on housing-related expenses, and you couldn't have a total monthly household debt that exceeds 36% of your income. There would be no flexibility to go beyond these ceilings, unlike in today's marketplace in which Fannie Mae and Freddie Mac consider debt-to-income ratios along with other factors through their electronic underwriting systems. At the moment, Freddie Mac has an overall debt ratio limit of 45% of an applicant's stable monthly income.

To refinance your existing mortgage and replace it with one carrying the best interest rate, you'd need no less than a 25% equity stake in your house to qualify. If you sought to take any additional cash through a refinance, you would need 30% equity. Today's requirements are usually not as strict.

Pristine credit standards. For example, if you were 60 days late on any credit account during the previous 24 months, you would be ineligible for a mortgage at the best terms.
These proposals were released at the end of March by banking, securities, and housing regulators, along with the Department of Housing and Urban Development. The agencies were required by the 2010 financial reform legislation to come up with new standards for low-risk conventional mortgages. Under the law, loans that do not meet these strict tests will be pushed into a less-favored, higher-cost category. Banks would need to set aside 5% of loan balances in reserves to cover possible losses from defaults. This extra capital cost would inevitably be passed on to consumers.

While markets like Palo Alto can bear price increases, multiple offers, and a healthy pace of sales, there are several other markets throughout the Bay Area that cannot. In real estate, it is all relative. Each sale needs just one seller and one buyer.

The value is determined by who is selling, the profile and capability of the buyer, the support of the lender, the type of real estate you are buying or selling, inventory, days on the market of the competition, list / sales price of past sales, and whether you are in a negotiating situation or a competitive world fighting against all cash multiple offers. The key to navigating all of this is education. You need to know what market you are selling or buying in and what will it take to get the house sold or to buy one. The rules are not only different in different areas, but they can also change daily based on what is selling and at what price point. Additionally, the media confuses us even more. ZIllow will tell us that home prices fell 3% in the first quarter, the steepest decline since 2008, and Fiserv Inc. is predicting home values still have 5-10% more to decline. Yet, this is not what homebuyers who are trying to buy a home in Palo Alto or the Sunset are experiencing.

So, what does all of this mean? What we can say is that what should be is sometimes, what seems logical is sometimes, and what can be often is just because it can be. We call this latter the emotional approach to value. There are no set rules and the journey is often not the one we expected. In the end, buy in a good location, take out a conservative loan, and wait 5
years. From Palo Alto to Novato, real estate will reward you.

The Market is Healthy in 2011

If you are among the buyers who have been waiting for the bottom of the real estate market, that point has passed you by. Looking at the sales data, posted above, notice that pricing has jumped up quite a bit; due in large to multiple offers becoming common again in San Mateo County, and looking from a personal standpoint, the fact that pricing is the best I have seen in my 20 plus years of selling homes. Buyers are again eager to get into the market. The sampling data is large enough to give us good data, including all sales of single family homes and condominiums in the entire county.

Fannie Mae and Freddie Mac have once again made it even harder to borrow.

I know a young woman who owns a condo. She purchased it back in 2006 when of course it looked like a great deal. No one would have criticized her for the purchase at the time. She is now deeply under water. But she still has her job, and can still make the payments. She wants to buy a house. Houses are now going for less money then she paid for her condo. She wants to walk, but of course if she does that, she won’t qualify for a loan. Who would want to lend to a person who just walked from her obligation?

She can afford to rent the unit out, and her negative would only be 400 a month, seems like a perfect solution, doesn’t it? Rent it out, buy the house, and in time rent will make it a great investment. Trouble is though she has over 100,000 invested in the unit, she has no equity. The new Fannie Mae requirements are that you have a 30% equity in your rental, plus a years lease. So she is in the perfect catch 22, where she cannot hold it (and buy), nor can she walk away and move.