Monday, July 30, 2012

Have you heard about Rebuilding American Homeownership?

For underwater homeowners, there may be new refinance help on the horizon. A new refinance plan was floated in Congress this week. The program would toss a lifeline to underwater homeowners who fall outside HARP and FHA Streamline Refinance guidelines, for example, but whom are otherwise "model homeowners".

Proposed : "Rebuilding American Homeownership"

There are several ways by which today's underwater homeowners can access the market's low mortgage rates. Unfortunately, each requires that the homeowner's mortgage is backed currently by a government agency.
  • For Fannie Mae- and Freddie Mac-backed loans, there's the HARP Refinance
  • For FHA-insured loans, there's the FHA Streamline Refinance
  • For VA-insured loans, there's the VA IRRRL program
  • For USDA-insured loans, there's the USDA Streamline Refinance
There are millions of U.S. homeowners, though, from Silicon Valley, California to Manhattan, New York, whose mortgages are not backed by one of the above four agencies. Rather, these homeowners' mortgages are backed by private lenders and smaller banks.
Under the proposed refinance program, all homeowners who are current on their existing mortgage and who meet "ordinary underwriting criteria" would be eligible for new, prescribed mortgage rates -- either for a 15-year fixed rate mortgage or a 30-year fixed rate mortgage.
The HARP-like program is titled "Rebuilding American Homeownership".

RAH : Self-Funding And "Probably Profitable"

To fund its mortgages, the Rebuilding American Homeownership program would rely on a Refinance Trust, backed by the U.S. government and funded via bond sales. The prescribed mortgage rates of the RAH program would be sufficiently low to reward refinancing borrowers, and sufficiently high to mitigate default risk.
The RAH proposal calls for a 2% spread between bond yields and consumer mortgage rates.This spread would render the program profitable under all but the most stressed of financial scenarios.
The RAH trust is expected to pay for itself and turn a profit without have to use U.S. taxpayer dollars.

RAH Endorsed By Economists, NAR

The proposed Rebuilding American Homeownership program has been endorsed by the National Association of Realtors and several well-known economists. The appeal is obvious, too -- RAH would bestow mortgage payment relief upon low-risk homeowners without using a dime of taxpayer money.
It's unclear whether the Rebuilding American Homeownership plan will come to fruition -- especially with HARP 3 getting traction in Congress and with the White House. However, should RAH pass, it would give millions of underwater homeowners access to lower mortgage rates and lower monthly payments.

Wednesday, July 25, 2012

HARP 2 Changes Increase Program Market Share

After 2 years and 2 months, the Home Affordable Refinance Program (HARP) is finally making an impact on U.S. homeowners. The FHFA reports that 1 in 5 refinances made through Fannie Mae and Freddie Mac between January - May 2012 used the HARP refinance program.
At 20% of all refinances, this is the largest market share for HARP since the program's March 2009 launch.

HARP 2 Changes Increase Program Market Share

HARP was first launched in March 2009. Its goal was to help 7 million U.S. homeowners get access to the day's low mortgage rates.
HARP's main feature was that it waived mortgage insurance requirements for refinancing homeowners whose current mortgages required no such thing -- even if their home's new valuation pushed them over the 80% limit. With HARP, you could refinance into an LTV over 80% and not pay mortgage insurance.
It's easy to see the program's appeal.
However, the government placed an LTV limit of 125% on all HARP borrowers and, after 2 years, the HARP refinance program was falling well short of its 7 million household target. That's when the government made changes to the "underwater mortgage" program, allowing for unlimited loan-to-value among other changes.
Not surprisingly, beginning with the launch of HARP 2, HARP mortgage applications soared.

FHFA Reviews HARP 2 Statistics

HARP 2 launched in late-2011. Refinance activity has been strong in the months since. Recently, the FHFA released data on this year's first batch of HARP refinances. A few key trends emerge :
  • Freddie Mac handled 45% of HARP refinances but just 35% of all refinances overall, January-May 2012
  • Nevada, Michigan and Arizona have the highest ratio of HARP refinances to all refinances, January-May 2012
  • HARP refinances are 30-year fixed rate mortgages twice as often as they're for 15-year or 20-year terms
Most importantly, though, the removal of the 125% loan-to-value limit doesn't appear to be changing the distribution of closed HARP mortgages.
In May, mortgages with LTV in excess of 125% accounted for just 4.4% of the overall HARP total. The majority of loans are still written in the 80-105% LTV range. This data suggests that, despite looser lending guidelines with the new HARP 2.0 program, mortgage lenders are choosing to keep high-risk loans off their books.
If you've been turned down for HARP because of high LTV, it's likely "lender choice" as opposed to HARP guidelines. Consider applying again with a different mortgage lender. You may get different results.

Tuesday, July 24, 2012

Now FHA 203k Loans For Real Estate Investors?

FHA 203k Loans For Real Estate Investors

16 years ago, the FHA changed its "construction loan" program, making it available for owner-occupied properties only. Real estate investors and owners of vacation homes were locked out.
Today, there's talk of restoring 203k access. HUD says it intends to re-open 203k loans to investors sometime soon, although no specific date has been announced.
The 203k : An FHA Construction Loan

The FHA 203k mortgage is similar to a bank construction loan. Homeowners submit construction plans to the lender and the lender makes a loan based on the expected value of the home post-repair.
The FHA 203k has minimum eligibility standards :

oHomes must have fewer than 4 units and must be at least 12 months old
oPlanned repairs must meet local zoning and building codes
oIf new living units are planned, they must be attached to the original structure
In addition, standard FHA underwriting requirements apply including minimum FICO scores for applicants and the meeting of minimum debt-to-income ratios.
FHA 203k loans can be used for foreclosures and fixer-uppers at the time of purchase, and may also be used for homes which you already own. 203k loans can be a less expensive way to finance home construction.

203k For Investors Can Help Neighborhoods, Communities

When HUD opens the FHA 203k mortgage program to real estate investors, it will help buyers who choose to renovate and resell. Currently, these buyers pay cash for homes and finance construction via personal funds. With the ability to leverage a bank's money, investors will likely buy more foreclosures and renovate more homes.

Access to the FHA 203k program helps investors, but it also helps communities hard-hit by foreclosures and the economy. Real estate investors have the experience and ability to buy and repair homes at a rapid pace as compared to individual buyers.
HUD 203(k): No Official Decison Yet

The HUD 203k mortgage program facilitates the purchase, repair and occupancy of vacant homes. And, although there's no timetable for making 203k available to investors, the real estate community eagerly awaits the change.

If you're a home buyer or home owner looking to use the 203k for construction, get started with a rate quote. As mortgage rates have dropped overall, 203k mortgage rates have, too. It's an inexpensive time to finance a project.

Thursday, July 19, 2012

Housing heating up?


Multiple-Offer Situations : More Common Nationwide

The housing market is in recovery. This much is clear. Little-by-little, sector-by-sector, data proves what today's home buyers are learning the hard way -- there's competition for right-priced homes and competition is driving home prices higher.
Multiple-offer situations aren't just relegated to San Francisco, California; or, Brooklyn, New York, either. Now, they're extending into markets including Dallas, Texas; Chicago, Illinois; and, Miami, Florida.
Home values won't recover to pre-crash levels soon, but there's a lot about which to get excited in housing.

Stimulus Plans Unlocked Housing, Led To Gains

If you want hear about the housing recovery, talk to an active home buyer in today's market. You'll hear that low mortgage rates make homeownership attractive -- if only there were more homes to buy. Supplies remain limited and few new homes are coming online.
However, if you want to see the data behind what buyers tell you, consider :
  • Existing home sales are up nearly 10% over one year ago.
  • Home builder report more buyer foot traffic than at any time in the past 5 years.
  • New home construction of 1-unit homes is higher in 4 straight months and higher by 25 percent since June of last year.
  • The Case-Shiller Index reports higher home sale prices in half of its 20 tracked cities as compared to last year.
  • New homes are selling at the fastest pace since April 2010, the last year of that year's federal home buyer tax credit.
There's no secret about why housing has recovered. A series of stimulus programs late last decade put the recovery into motion and now, today, low mortgage rates are pushing home affordability to record levels nationwide.
Homeownership is affordable to more U.S. households than at any time in history.

Get A Rate Quote For Mortgage

If you're shopping for a mortgage or just curious about what today's low mortgage rates could do for your household budget, be sure to ask for a rate quote. It's free and there's no obligation whatsoever.
With mortgage rates scraping 3.500%, you're going to like what you see.

Tuesday, July 17, 2012

FHA help for first time buyers?

FHA Mortgage Insurance To Fall For First-Time Buyers? Earlier this year, the FHA raised upfront mortgage insurance premiums to 1.75% of the amount borrowed, due at closing; and raised annual mortgage insurance premiums to as high as 1.25% per year. For homeowners in high-cost areas such as Orange County, California with mortgages in excess of $625,500, the FHA tacks on another 0.25% in MIP per year. What was once considered an "affordability product" has suddenly become quite expensive -- especially for first-time home buyers. This is one reason why Representative Karen Bass, D-California has introduced a bill (H.R. 5884), which is sponsored by Representative Robert J. Dold, R-Illinois and Luis V. Gutierrez, D-Illinois, and which is meant to help make FHA mortgages more affordable for first-time home buyers. The bill is listed in Open Congress as : H.R.5884 - To establish a 1-year pilot program to reduce up-front premiums on FHA mortgage insurance for first-time homebuyers who complete a homeownership counseling program and thereby help to reduce default rates on residential mortgages. To qualify, first-time buyers would only have to complete a home ownership counseling program. The reward would be lower FHA mortgage insurance rates. FHA Mortgage : 3.5% Downpayment Allowed The FHA has gained market share this decade, in part, because it offers one of the few, true low-downpayment mortgage programs. The FHA only requires a 3.5% downpayment at the time of closing, so long as the amount borrowed does not exceed local loan limits. It's an advantage that the FHA has over comparable loan programs from Fannie Mae or Freddie Mac which are typically 5% down, at minimum, and often 10% or more. One reason that the FHA can afford to take "risks" on low downpayments is because it's a self-funded organization. FHA-backed borrowers pay mortgage insurance to the FHA, and the FHA uses those premiums to stay in business. Unfortunately, as the number of FHA loans in default has climbed, so have FHA mortgage insurance rates. Today's rates can be 3 times as high as what they were in 2008. Back then, a homeowner in Loudoun County, Virginia may have paid 0.5% annually to the FHA for mortgage insurance -- $500 per $100,000 borrowed. Today, that same homeowner's annual MIP could be as high as 1.50%. Priming The FHA Pump For Housing H.R. 5884 is not the first FHA-related bill to come through Congress. There's also talk of a HARP 3 program, and the FHA is believed to play a big role in its rollout. And, because the FHA can recapitalize itself via mortgage insurance, it's likely that the FHA's name will come up time and again as housing gets back on its feet. For first-time buyers, though, the FHA may offer a chance a mortgage "on the cheap". As everyone else's mortgage insurance rates go up, for first-time buyers, FHA mortgage insurance rates could go down.