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  • 2015 FHA Programs

     President Obama released the details on a plan for a new lower cost FHA Mortgage Insurance Program. The Plan that President Obama announced last week was to reduce premiums charged by the Federal Housing Administration (FHA).President Obama will seek to address the ongoing housing problem, with a new program that will begin Jan. 26, 2015 and will reduce costs significantly of struggling Americans who pay FHA mortgage insurance payments. This plan will assist many Americans, through providing low insurance rates on federally issued mortgages to first time home purchases, minority Americans and struggling us citizens. This plan, while modest, will produce savings of $900 a year for each home-buyer. The best part of this is it, doesn’t require congress’s approval since lowering FHA fees is under the control of President Barack Obama and the HUD Secretary.

    The FHA program is designed to insure loans made to mortgage borrowers who make down payments that are as small as 3.5% of the value of a house. This is the key that makes the FHA program popular among first time home buyers who may not have a lot of money saved up (or liquidity in current properties). The FHA currently charges 1.35% per year in mortgage insurance fees. The new rate will reportedly be 0.85% per year, a full 0.5% reduction. This will be the equivalent of a 0.5% reduction in interest rates for FHA mortgage holders and could mean savings of up to thousands of dollars per year, there is no doubt that this will be a boon to FHA loan holders and to potential home buyers.

    Other options that Sellers are using to help first time home buyers navigate through the FHA loan program is that to assist the buys with a variety of costs There are a variety of costs that you can pay for your buyer when they choose a FHA  mortgage. FHA has a higher limit to the percentage of the seller credit in comparison to the conventional mortgage, which only allows for a 3 percent seller concession. FHA loans allow a 6 percent seller concession with certain restrictions.

    The seller can pay for discount points to bring the buyer’s interest rate down or closing costs themselves.

    Any other costs that are credited will affect the buyer’s loan amount. These charges include moving costs, costs to repair the home or any other costs in connection with the condition of the home. If you decide to contribute to these costs, the dollar amount of the buyer’s mortgage will go down accordingly. For example, if you give a $500 credit for a home repair, $500 will be deducted from the loan amount, affecting the overall LTV.

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    At Present, FHA mortgage insurance on most 30 year fixed FHA loans is at a rate of 1.35% per year, which is still really good.. With the new guidelines, the mortgage insurance rate will be 0.85% per year. On a $200,000 FHA loan, that is a savings of $84 per month, or about $1000 per year.

    However small, this move by the president shows just how hard it is to recharge the housing sector since the 2008 mortgage crisis. President Obama’s plan  should start a process that could rope 250,000 new house buyers in the real estate market across the US. This will  lower refinancing costs for an estimated 800 thousand home buyers, Federal Government officials said. This is just a minute fraction of the  over  2.5 million homes that go to first-time home buyers a year in a healthy market, but it is for a segment of the population that requires this help. While housing usually leads the country out of recession, this time, it is an anchor, the hope is with rising employment, more buyers on the edge that could afford will be tempted to come back into the housing market.

     

    US Federal government Administration officials are not as down on the housing market as many media pundits say, they have some good facts to back them up their opinions too.,

    • In most markets home prices have risen 30 percent from their recession lows.
    • Of the roughly 13 million underwater homeowners, around 10 million have since come up from under water
    • More than 8 million homeowners have been able to refinance their mortgages, through the Obama’s (HAMP) or because of industry standards set by the program.
    • 3 million homeowners have been helped by the sister program of Home Affordable Refinance Program (HARP).

    FHA Loans for those with poor credit

    The mortgage borrower’s credit score is important in the actual amount of the down payment required for your FHA Mortgage. Typically, if your credit score is higher than 580, a borrower will only be required to put down 3.5 percent of the house price. If your credit score hovers between 500 and 580, the mortgage down payment requirement is increased to 10 percent, which can be hard for some borrowers. These are FHA guidelines that are strictly enforced by the FHA and might be increased depending on the lender that you decide to use. Lenders have their own system in how much they want as a down payment on a loan in order to decrease the risk of foreclosure.

    The president’s F.H.A. move is aimed at the key problem, first-time home buyers, s typically, such buyers account for 40 percent to 45 percent of home purchases.

     

    Home Affordable Refinance Program Extended

    The Obama Refinancing Program: or HARP Refinance

    The government’s Residence Affordable Refinancing Program (HARP) was scheduled to expire at the end of Apr – until last full week. The Obama administration’s program to aid upside down borrowers, who arHarp Refinance Extendede present-day with their mortgage loan payments, re-finance at lower interest rates was extended an additional two years last full week. Regulators introduced last Thursday, April 11th, that HARP will probably now run till 2015, providing additional relief to homeowners.

    The HARP refinancing program was developed for property owners who must pay back more on their house than it is valued at due to dropping real estate rates to be able to take advantage of lower rates of interest and refinancing. Highlights and some common lender recommendations on the HARP / Obama refinancing program include:
    Here I will discuss the conditions borrowers have got to meet to be able to take advantage for the HARP extension:

    1. Fannie Mae or Freddie Mac needs to have sold the mortgage loan to a borrower no later than May 31, last year.
    2. Borrowers who already took advantage of HARP to refinance can’t do so again unless Fannie Mae refinanced their prior HARP loans between March 1st and Could 31, ’09.
    3. Borrowers should must pay back more than eighty percent for the existing worth of the house.
    4. Borrowers are unable to have missed any mortgage loan payments for the last 6 months and has to have a history of on-time payments, with the exception of one late disbursement by no more than 30 days within the last year.

    Who Owns Your Bank loan?

    For you to be suitable for the Obama remortgage / HARP program, your mortgage loan needs to be financed by Fannie Mae or Freddie Mac. Both have tools on his or her websites to see if they own your loan. To see if either one holds your property finance loan, you can inspect Fannie Mae. If they don’t have your home loan there, then check out Freddie Mac.

    Even though the government and lending institutions are usually at opposite sides of the table when it comes to decision-making about regulatory issues and programs that assist borrowers, the good news about the extension of HARP is that both the government and the industry are on the same web page. Fannie Mae and Freddie Mac are ultimately responsible for losses on home loan defaults, so their financial risk decreases when borrowers have ways to prevent go into default and better manage their payments. In the following way, everyone is aligned; borrowers, regulators, and lenders are motivated to make refinancing, at today’s relatively reduced house loan rate, a reality.
    Around 2.2 million property owners have refinanced using the 4-year-old HARP, and borrower advocates are extremely happy with the extension. Quicken Loans, an on the web financial institution, estimates that 2.7 million property owners are upside down and remain entitled for HARP loans. The online loan provider also claims that the typical savings from re-financing through HARP is about $200 per thirty day period with a home finance loan rate decrease in approximately 1.75%.

    Obama Re-finance: How To Save MoneyThe single best way to save money when thinking about contributing in the Obama refinancing program is to shop multiple financial institutions. Shopping multiple loan providers may ensure that you have the best possibility to acquire the best rate and lender service fees and close your mortgage in the shortest possible timeframe. If you shop around, you may be surprised at exactly how much dollars you could save from one loan company to the next. Just a number of for the bigger loan providers who may give you a quote include Bank of The states, Wells Fargo and virtually any quantity of smaller loan providers who may also aid you with the HARP program.

    Most loan companies may require that for you to do a HARP refinancing, you will need to benefit from it in one of many following ways:

    * Cut in the monthly principal and interest disbursement
    * Reduction in the rate of interest

    * Reduction in the amortization term
    * Move to a more stable product, e.g. Adjustable rate mortgage to Fixed-Rate

                 Troubled Asset Relief Program: Help for Struggling Homeowners

    In March of 2010, President Obama released a series of programs known as the Troubled Asset Relief Program aimed at helping financially struggling homeowners.  In response to the nearly 25% of American homeowners who found themselves underwater, or what is termed as being “upside down” in their mortgages, the President’s plan lowers payments through refinancing and loan modification programs with new government-backed mortgages. The government is offering initiatives for loan providers and banks to write off some principal amounts due on loans for homeowners through these modification programs, rather than just lowering interest rates.  These plans are expected to help three to four million struggling property owners over the next few years.

    The government emphasized that no taxpayer money will be spent on these programs, and that the monies needed for the plan would be instead taken from $50 billion set aside for the Troubled Asset Relief Program.

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     US Bank Home Mortgage Assistance Programs; Relief Programs for Homeowner

    One of the top lenders in the country, US Bank is now offering mortgage help for homeowners who are struggling to make ends meet, missing mortgage payments, or who owe more on their property than it is worth.  Some, such as HARP and HAMP are government sponsored while other options are unique to US Bank.

    The first option, a US Bank Repayment plan, allows a homeowner who has missed payments in the past to pay these past due amounts in monthly installments.  The US Bank Repayment plan is a viable option if the homeowner has extra funds at the end of each month and can apply these funds towards the mortgage plus the repayment amount.  US Bank offers an online link to determine what repayment plans are available, and which is best for the homeowner.

    Another US Bank mortgage relief program is the Hardship Loan Modification.  US Bank will combine all overdue interest and principals due because of missed payments and add them to the term of the loan, thus extending the loan.  A 30 year loan, for example, might be extended to a 30 year four month term if the mortgage payments are four months behind.  This is more appropriate for a homeowner who doesn’t have extra money at the end of the month but can cover mortgage payments and applicable fees.

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    In Alabama, during financially difficult times , it has come as a help to balance the budget that there has been a national settlement of $25 billion with five big mortgage companies .The settlement may even be instrumental in helping low income families to become home owners.

    $25·3million from the settlement is to go to the office of Alabama Attorney General Luther Strange. This money does not come in a lump sum but is slowly being received in the office and $19·3 million from the total is to be used during the years 2013 through 2015 to fund the attorney general`s office and the district attorneys `offices throughout the state. According to Arthur Orr, R-Decatur (Senate budget committee Chairman) this will mean that money that would have had to be used by these offices from the state General Fund budget can now be released to support other programs. The amount of the settlement when compared with the $1·68 billion of the state`s General Fund budget for the fiscal year starting Oct.1, may seem small he said,” but that helped the overall budget picture”.

    State officials are being approached by two advocacy groups for the poor of Alabama, they are The Arise Citizens` Policy Project and the Low Income Housing Coalition of Alabama, who want the remaining $6 million to be used to give housing to those in need. Jim Cames who is the spokesman for Arise Citizens said that when the Legislature voted last month to set up the Housing Trust Fund it opened up the way to providing affordable housing for low income residents but was unable at that time to put any money into it due to the state`s budget problems. Now that there is mortgage settlement money available it could be that the project can be started off.

    Joy Patterson, the attorney general`s spokeswoman, says that the attorney general would be happy to look into the suggestion although no decision has been made yet as to how the money will be used.

    The $25 billion agreement in February was reached by the federal government along with 49 state attorneys general including Alabama`s attorney general Strange. The five large mortgage companies were accused of improper handling of mortgages including employees signing foreclosure paperwork without reading it. They were Ally (formerly GMAC), Bank of America Corp., Citi, J .P .Morgan Chase & Co., as well as Wells Fargo & Co.

    The total estimated share for Alabama is $106 million and in addition to the amount to be provided to the attorney general`s office Alabama`s borrowers are expected to receive nearly $30 million for loan term changes and other help. Those borrowers who lost their homes due to foreclosures between 2008 and 2011 and who suffered servicing abuse are expecting $20million in payments while those borrowers who`s mortgages are under water are to have refinanced loans said to be worth almost $30 million.

    The amount to be received by the attorney general`s office may be used to help the people who have been hurt most by the nation`s housing crisis.

    Who qualify for FHA´s HECM reverse mortgages? 

    Homeowners over 62 years old with a low mortgage balance or who own the property outright and who live in the home. Successful applicants are required to receive consumer information (this service is provided for a small fee or free from a HECM counselor and prior to the loan) Whether you bought your home with an FHA-insured mortgage or not you may still apply for a HECM. The home you own has to be a single family home or a 2-4 unit home –one unit must be occupied by the borrower. Also eligible are HUD approved condominiums and manufactured homes meeting FHA standards.

    About repayment 

    A normal second mortgage or home equity loan is one where you would need adequate income in order to qualify because you have to make the monthly payments on the principle as well as on the interest. This is different from a reverse mortgage in which you don’t have to repay the loan until you no longer use the house as your primary residence or if you fail to meet the obligations of the mortgage. There are no monthly principal and interest payments, however, you have of course the responsibility of paying real estate taxes, utilities, and hazard and flood insurance premiums. When you sell the home or it is no longer used as a primary residence then you have to repay the cash, the interest, and other HECM finance charges. This is important for those borrowers who are concerned about leaving an estate to their heirs because any equity remaining after these payments are made can be transferred as an inheritance and no debt will be passed down to the heirs.

    Concerning The Amount That You Need To Borrow

    The amount you borrow from a reverse mortgage will depend on what you need the money for. Maybe you want more financial security, you have a sudden medical emergency or maybe you need to make some home improvements. Whatever the circumstances the HECM is a product that could work for you.

    Your age has a bearing on the amount you may borrow as does the current interest rate. Another consideration here is whichever is the lesser appraised value—the HECM FHA mortgage limit of $625,500 or the sales price. The Initial Mortgage Insurance Premium is a factor too.

    You can opt for HECM Standard or HECM SAVER. If you choose the HECM Standard you can borrow more capital. In fact the older you are and the lower the interest rate, the more you can borrow. Sometimes there is more than one borrower and if that is the case the amount you may borrow depends on the age of the younger of the borrowers. In order to get an estimate of the amount you could borrow you could go to the HECM Home Page and select a calculator. It is definitely better not to use a fee charging service to be referred to an FHA lender.

    The joint federal-state agreement is a mortgage settlement used by Barack Obama`s Financial Fraud Enforcement Task Force to wage war on financial crime and assist American homeowners. This task force is working hard across the federal executive branch with state and local partners to investigate and prosecute serious financial crimes and to ensure just and effective punishment for the perpetrators as well as to combat discrimination in the lending and financial markets and recover capital to help crime victims.

    In his State of the Union address president Obama spoke of a Blueprint for an America Built to Last and encouraged help for homeowners and their families. He called for relief measures to help servicemembers and veterans and made special mention of those wrongfully foreclosed upon or refused a lower mortgage interest rate. Also looked for were reduced fees for FHA borrowers who need to refinance. Additional help to support those communities hardest hit by the housing crisis even helping families avoid foreclosure were called for.

    Under the agreement between the Federal Government and the 49 state Attorneys General the main servicers are to provide help to thousands of servicemembers and veterans. They are to conduct a review of each servicemember who was foreclosed upon since 2006 and to compensate with a minimum of lost equity plus interest and $116,785 for those who were wrongly foreclosed upon. They must also refund those who were wrongfully denied lower interest rates. Servicemembers who were forced to sell their homes for less than the amount owing on the mortgage due to a Permanent Change in Station will be provided with financial relief. The servicers are obliged to pay $10 million into the Veterans Affairs fund which guarantees favorable terms for veterans as well as extending certain foreclosure protection to servicemembers serving in harm`s way under the Servicemember Civil Relief Act.

    Another aspect of the efforts on the part of the President to lower barriers and costs for refinancing is the announcement that the FHA will cut its fees for refinancing loans that are already insured by the FHA . The Department of Justice`s Civil Rights Division will oversee a review by servicers of sericemembers`s files back to 2006.Any violations of the Civil Relief Act will be compensated. Another review, this time going back to 2008, will check interest charged. Any interest over 6% will be compensated by at least four times the amount wrongly charged. In the case of those forced to sell their homes for less than the amount owed on the mortgage due to a PCS( permanent change in station) they may be compensated for the loss in their home`s value. The benefits of that program will include those servicemembers who bought their homes between July 2006 and December31,2008, or who received a PCS after October 1 2010. Any servicemember who is on active duty is protected from foreclosure unless the servicer procures a court order. Servicemembers stationed away from home who received Hostile Fire or Imminent Danger Pay within 9 months of the foreclosure are protected.

    The new settlement will help reduce the mortgage payments of homeowners.

    The $25 Billion mortgage settlement recently announced and filed in federal court in Washington D.C. is intended to help to relieve those in difficulties with their mortgages.

    The government is expected to monitor closely the banks involved to make sure that the money does in fact reach those borrowers for whom it is intended. The five banks; Bank of America, Citigroup, JP Morgan Chase, Wells Fargo, and Ally Financial are to provide the money which is expected to be instrumental in making readjustments to help about a million house purchasers who are at the moment struggling financially due to the present situation with their mortgages.

    Banks were accused of misleading borrowers who were seeking modifications on their loans as well as of pursuing faulty foreclosures. They have not admitted to having done these things but have agreed to the settlement arranged by the government in order to “remediate” harms allegedly resulting from the alleged unlawful conduct.

    It is likely that in a hearing in which the settlement is to be approved by a judge, the Association of Mortgage Investors will request that the court limit the modifications for investor owned loans. This group feel that those who invested in mortgage-backed securities were not included in the settlement talks but might find that mortgage modifications have financially damaging results for them. The five banks according to the settlement, over a period 3 years, will reduce the amount of mortgage debts and restructure loans in difficulties. Designed to be of some help to about 1 million property owners who are struggling, this settlement has been seen as historical and is being enthusiastically promoted by the Obama administration.

    Also Federal and State governments will be receiving $5 billion of which $1.5 billion is to be used for those whose homes were lost due to foreclosure affording payments of $2,000. Officials of the Obama administration are optimistic about the measure and feel that it could be the start of the housing recovery that everyone is hoping for. An independent monitor will make sure that the new standards for processing mortgage payments are complied with. There will be a sampling process that is described as “very specific”, as well as test questions and error thresholds, the results of which will be reported on publicly. This will mean strong penalties if they don´t follow the directions on how the banks should behave.

    Although the details of the investigations into banking misdemeanors have not been revealed the settlement was filed as one lawsuit and five consent judgments with the banks. There is encouragement for most of the mortgage assistance to be implemented rapidly with a limit of 3.5 years. Relief will be provided to borrowers by cutting the debt. It is expected that banks bring the mortgage payments to 31% of income and with the value of the new loan not exceeding 120% the value of the property.

    The settlement documents also show that banks are to pay for the alleged defrauding of the government by lenders who sought federal mortgage insurance on risky loans. There were successful negotiations by Ally Financial and the Justice Department reducing the amount they have to pay to $110 million on the understanding that they give good terms when dealing with struggling borrowers in its portfolio. So hopefully the government will continue to strictly oversee the $25 Billion mortgage pact.

    You probably have never heard his name, but if you are having trouble paying your mortgage maybe it is time you learn more about this little known bureaucrat who is creating huge ripples in the mortgage industry.

    We are talking about Edward J. DeMarco, the regulator of Fannie Maeand Freddie Mac. He may not appear on the nine o’clock news but DeMarco is one of the most, if not the most, influential individual in the refinance and loan modification industry Why? Simple. Fannie Mae and Freddie Mac own or insure 60 percent of all American mortgages. This means Fannie Mae and Freddie Mac have the power to grant or encourage the approval for six out of every ten refinance applications. In fact, this is an understatement. Due to their influence in the housing market and their effect on the insurance rates of mortgages, Fannie and Freddie influence the policies that all mortgage providers follow when determining the eligibility of homeowners for mortgage refinances.

    But who is Edward J. DeMarco and where does he stand on the issue of mortgage refinance?

    Depending on who you ask DeMarco is babbling idiot or a hero Rep. Zoe Lofgren, D-Calif. is quoted as saying: Here’s some random idiot who ends up in charge of this agency, who is doing actual damage to the housing industry and its constitutents. On the other hand, Jaret Seiberg, a senior analyst for Guggenheim Partners believes he’s the bravest guy in D.C. agree with him or disagree with him, you’ve got to respect him.

    Why the extreme views? The main reason is the issue of mortgage write-downs. For a long time the Obama administration has been doing its best to push DeMarco toward pressuring banks and other lenders to reduce the balance owed on mortgages as a way of helping underwater homeowners. According to certain economists a reduction in mortgage balances is the best way to stem the tide of foreclosures.

    Republicans don’t agree with that view and feel the additional risk to taxpayers would be unwarranted. In fact, for many conservative analysts DeMarco is not doing enough to protect taxpayers and should close down Fannie Mae and Freddie Mac.

    Democrats tend to feel DeMarco is favoring big business and not pushing lenders toward more generous and efficient mortgage refinance terms, especially in the case of underwater mortgages. Learn in our next post how the forgiving of portions of underwater mortgages helps both owners and lenders.

    The government’s Home Affordable Modification Program is a powerful tool for homeowners who cannot afford their current mortgage payments, but can avoid foreclosure if only their mortgage provider is willing to modify their terms. The program does this by either extending the term of the loan—that is the amount of years you have to pay it—reducing the interest rate, forgiving a chunk of the loan (as you might have guessed this is not so common), by taking a portion of the loan out of the loan and postponing payment till the end of the mortgage term (also known as a balloon payment) or a combination of all the above.

    However, as useful as this program is, it is not for everyone. To qualify you must be able to meet the eligibility requirements of the program, which is designed to filter out homeowners who simply cannot afford a reasonable mortgage payment and help those who do have the financial circumstances to take care of a modified loan. Of course, many people who are able to pay for reasonable priced monthly mortgage payments fall through the cracks of the program because they do not do their homework and provide their mortgage servicers with the information they need to approve their loan modification application. This is often because the homeowner does not understand what is required or the meaning of some of the technical terms used in the literature provided by the HAMP program and the lender. This series aims to bring some clarity to the more complicated terms and processes included in the Home Affordable Modification Program.

    What is Your Net Present Value, or NPV?

    The net present value model is an important tool in the Home Affordable Modification Program. It is an equation (see formula above) that computes the reliability of future cash investments and is used widely in business to determine the profitability of an investment. In the mortgage setting the NPV assesses the likelihood of mortgage lenders profiting from a loan modification.

    Your net present value can be seen as a test which you can either pass or fail depending on if it is positive or negative. Your NPV is positive when the total discounted value of the expected cash flows for your proposed modified loan is higher than the total discounted value of expected cash flows without a loan modification. Wow, that was a mouthful. Put more simply, the NPV test determines whether modifying your loan is beneficial for the lender. If your NPV is negative it generally means your lender is better off not modifying your loan. Borrowers who score a positive NPV are viewed as a good investment to lenders because they are more likely to pay their mortgage and increase the returns on the lender’s investment with a loan modification than without.

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