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  • 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?

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    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.

    The Home Affordable Modification Program provides borrowers with the chance of permanently modifying their mortgage to a monthly payment they can afford. Not only that, the program can also help borrowers change their mortgage from a high-risk variable rate loan to a stable fixed-rate loan. However, for you to qualify for a Home Affordable Modification Program you must first complete successfully the program’s Trial Period Plan.

    Many borrowers get confused about the requirements of the Trial Period Plan, fail the trial and lose the chance of saving their mortgage from foreclosure. This article provides information on how to meet the Trial Period Plan requirements. The article is based on information provided by the Departments of the Treasury and Housing and Urban Development through their MakingHomeAffordable.gov website.

    Step 1: Fill in the three documents in the Home Affordable Modification Program Initial Package: 1) Request for Mortgage Assistance Form, 2) Tax Form 4506T-EZ (or Form 4506-T) and 3) the Verification of Income form. These documents can be downloaded by clicking here. Print two copies of each document, one for your mortgage servicer and one for your records.

    If you have trouble understanding the documents and you are not sure how to complete them, call 1-888-995-4673 and request to talk with a housing counselor. This service is free.

    Step 2: Send the documents to your mortgage servicer. You can find the address of your mortgage servicer by visiting this website. This service is provided by the MakingHomeAffordable website and includes all the mortgage providers who are enrolled in the HAMP program. The list of mortgage providers is organized alphabetically and provides the name, phone, address, fax number of all participating mortgage providers.

    Step 3: Check your mortgage provider has received all the forms and documents they need to confirm your eligibility for the HAMP program. Do this as soon as possible because if you are missing a form or have made a mistake in filling the forms you will need to correct the mistake or send the missing document before your trial period ends.

    Step 4: Make all your mortgage payments. This is crucial. Once of the main purposes of the trial period is to check the modified loan is suitable for you. In other words, your mortgage provider and the government want to know if you can afford the new mortgage payments. If you do not pay your monthly mortgage payments regularly during the trial period, you will not be granted a permanent loan modification.

    Applying for a mortgage can be a daunting exercise, especially if you have made financial mistakes in the past and feel that your credit score may interfere with your loan application. This also applies to government subsidized loans through agencies such as the Federal Housing Administration which offers low-cost mortgages to medium- to low-income families. However, if you feel your credit rating will get in the way of your home purchasing dreams, take heart, this is not necessarily the case. Although your credit score is a significant factor when applying for an FHA loan, it is not the only factor. The FHA lending and underwriting rules allow for flexibility with reliable lenders which may have had some credit hiccups in the past.

    So what are the FHA rules on lending? This article provides a brief overview on what the FHA looks at when assessing a loan.

    There are four factors that determine the eligibility of a borrower to a loan: credit history, steady employment, debt-to-income ratio and your payment history in the last 12 to 24 months. This means that if your credit score is low because of a financial problem or mistake you made several years ago, but you score well in the other areas, you may still qualify for an FHA loan. Nevertheless, what constitutes a good or acceptable credit score for the FHA? This depends on the loan, but the FHA does have a general standard for most of its loans.

    The FHA and Credit Scores

    The FHA applies a sliding scale rule on loans depending on the credit score of the borrower. Borrowers with a higher credit score can apply for a higher loan to value percentage of the purchasing price of a property. For example, credit scores between 500 and 579, which would be considered very low by commercial lenders without the insurance of the FHA, can qualify for a maximum of 90 percent of the loan to value rate of the property. If your credit score is higher than 580, you may be eligible for the maximum FHA loan financing, as long as the other areas are also satisfied. If your credit score is below 500, you are not eligible for an FHA loan.

    Therefore, the answer to the initial question of this article, the minimum credit score to be even considered for an FHA loan is 500. Anything less and your application will not even be considered. However, even applicants with credit scores as low as 500 to 600 can qualify for loans as long as the other elements the FHA looks into are above board.

    News of the approval by the House of Representatives of the Emergency Homeowners Loan Program has fed the hopes of those that though the program would never start. Now only the signature of the Senate remains, many unemployed workers who are at risk of losing their homes to foreclosure may again put their hope in a mortgage assistance program that can see them through their temporary financial difficulties until they find work again.

    However, not all states are participants in this unemployed workers mortgage assistance program, up-to-date only 27 states were part of the scheme. These states included Alaska, Arkansas, Colorado, Hawaii, Iowa, Kansas, Louisiana, Maine, Massachusetts, Minnesota, Missouri, Montana, Nebraska, New Hampshire, New Mexico, New York, North Dakota, Oklahoma, South Dakota, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, and Wyoming and Puerto Rico.

    Since the news of the approval of the House of Representatives, five more states have announced similar programs which will also receive funding through the Dodd-Frank Act. The Housing and Urban Development Department will also have a monitoring and supervisory role in these programs, although it will delegate most of the management roles to state level agencies (both governmental and non-profit community organizations). These states include Pennsylvania, Maryland, Connecticut, Idaho and Delaware. Although they are not part of the sates that applied for the Emergency Homeowners Loan Program the programs they are now offering their citizens are very similar. Since April 2011, they have accepted applications from unemployed workers who are delinquent on their mortgages. To qualify, an unemployed worker must be at least 3 months behind in his mortgage payments and have received a notice from his lender warning her of the intention of foreclosing on the mortgage.

    Successful applicants will receive bridge loans of up to $50,000 to help them cover late payments, insurance, tax and ongoing mortgage payments for up to 24 months. The programs are restricted to unemployed workers who have a debt to income rate of 55 percent of less. This means the total monthly housing payments must represent less than 55 of their total income. For example, a household with an income of $4,000 a month, must not pay more than $2,200 in mortgage and other housing expenses.

    These five states also have similar assistance programs under their respective housing finance agencies, which has moved the Housing and Urban Development Department to allow them to start accepting applications before the other 27 states which are part of the EHLP.

    Our previous article gave a summary of the new Emergency Homeowner Loan Program; this article will provide more details on this long-awaited and exciting new scheme for unemployed workers struggling with their mortgages. The scheme is funded by the Dodd-Frank Wall Street Reform and Consumer Protection Act. Funds already allotted for the program amount to $1 billion, which analysts from the Department of Housing and Urban Development estimate will suffice to provide assistance to around 30,000 struggling homeowners with loans averaging $35,000.

    The Loans

    The loans provided by the Emergency Homeowner Loan Program will work as as bridge loans to struggling homeowners to help them pay delinquent taxes, arrearages and insurance payments and up to 24 months of mortgage payments, interest and mortgage insurance premiums, as well as taxes and hazard insurance. This program is especially designed to help unemployed workers in states not covered by the Hardest Hit Housing Markets program. The scheme is set to start soon, as soon at is approved by the Senate. Already it is well overdue. It was set to start at the end of 2010 and was only approved by the House of Representatives in March 2011. The states that will benefit from the program include Puerto RIco and 32 other states. Of the 32 states 27 will benefit directly from the scheme and 5 will manage their own versions of the program.


    The Department of Housing and Urban Development will delegate the management of the scheme to non-profit local community agencies and to state housing finance agencies (HFAs), who in most cases already manage similar programs to help struggling homeowners. However, the Department of Housing and Urban Development will still retain monitoring and note management functions over the scheme.


    The funds allocated to the program will be divided among participating states based on their share of unemployed homeowners with a mortgage. California, Florida, Illinois, Ohio, Michigan, Georgia and New Jersey will get the lion’s share of the funds. California is the state that will receive more funds: $476.2 million. Double the amount the second state in the list, Florida, will receive—$238.8 million. Indiana, Tennessee, Alabama, South Carolina, Kentucky, Oregon, Mississippi, Nevada, Rhode Island and Washington DC will all receive less than $100 million. Rhode Island and Washington will only receive $13 million and $7.7 million respectively. 

    The program cannot come soon enough for unemployed workers who see their chances of saving their homes evaporate with every week of unemployment. Thousands of unemployed workers with mortgages rely on this program passing through the Senate to allow them to restructure their mortgage payments and save their home from foreclosure. Who will qualify for this program? We will discuss that in our third and last article of this series on the Emergency Homeowner Loan Program.

    The real estate collapse of the last three years has caused the federal government to come up with regulations designed to avoid this from happening again. Mortgage regulation rules are being presented under the Dodd-Frank Act of 2010. The Dodd-Frank Act is part of the far-reaching financial regulatory reform that sets out to promote financial stability and improve the accountability and transparency of the financial system as a whole. This was a reaction to the list of bail-outs of companies that were “too big to fail” and required on-going hand-outs from taxpayers to stay in business.

    One of the changes proposed under this Act is to force mortgage lenders to take 5 percent of the credit risk of mortgages pooled in securities if the mortgages do not meet certain requirements. These are mortgages that are put together as an investment unit and which can be bought or sold in a similar way to stocks in a company. One of these requirements, which is making mortgage lenders unhappy, is that borrowers must pay at least 20 percent of the home’s purchase price as down payment. The idea behind this rule is to stop borrowers from buying homes they can’t afford just because loans are available. According to some analysts, cheap and available loans were one of the reasons house prices increased artificially and later crashed when the market came to its senses and corrected itself. Canada has a similar down payment requirement as part of their comparatively stricter financial regulatory system, which may have had a lot to do with why Canada was not affected as seriously by the real estate driven recession of 2009.

    Critics of the 20 percent down payment rule claim this will price out many borrowers who can’t afford to come up with 20 percent of a home’s purchase price. Figures from 2010, seem to support this claim. Around 39 percent of home buyers in 2010 put a down payment of less than 20 percent, according to a poll by CoreLogic. The question, of course, is if the low down payments are because people can’t afford to pay 20 percent or because they are not required to do so? Additionally, even if many buyers can’t afford the 20 percent rule, is that necessarily a problem? Could it be argued that buyers who can’t afford to pay 20 percent of their mortgage are simply not in a position to buy and should focus their efforts on saving for a down payment? Of course, the real estate mortgage industry claims it is time for the government to stimulate the mortgage industry not weigh it down with restricting regulations. How do you feel? Is this regulation a much needed protection against another crash, or is it an example of federal government choking the growth the real estate industry so desperately needs?

    Have you heard about the new federal mortgage help program? We are talking about the Emergency Homeowners’ Loan Program (EHLP) managed by HUD. Although this program is still in the development stages, it could prove to be such a huge help for borrowers we feel you should know what information HUD has provided up to now about this exciting new program.


    The goal of the Emergency Homeowners’ Loan Program is to to help homeowners who are struggling to pay their mortgages due to a drop in their income of at least 15 percent because of unemployment or underemployment due to no fault of their own. This means that unemployed workers who were laid off due to lack of work or whose hours were reduced may receive help with their mortgage payments.

    How Will The Program Work?

    The main tool the EHLP will use to assist homeowners is to grant eligible homeowners with a bridge loan of up to $50,000 to pay for up to 24 months of monthly payments, as well as delinquent mortgage, tax and insurance payments.

    Under this program, borrowers must use 31 percent of their income to pay for their mortgage and the EHLP will pay the balance. However, the minimum payment for any homeowner is $25. The program will cover for arrearages and monthly payments for up to 24 months or until the loan reaches $50,000, whatever happens first.


    The beauty of this program is you do not have to repay the 5-year term loan, just as long as you regularly pay your monthly mortgage payments. Every year the balance of the loan drops by 20 percent, so by the end of the five years the balance will be extinguished if the borrower has followed the mortgage payments schedule.

    Which States Will Qualify?

    The EHLP program will be exclusive for states with a high unemployment who are not benefiting from funds by the Treasury’s Innovation Fund for Hardest Hit Housing Markets. This includes the following 32 states:


















    New Hampshire


    New York

    North Dakota



    Puerto Rico

    South Dakota






    West Virginia





    The next article will look into the eligibility criteria of the EHLP program as specified by HUD. Notice that this program is still in development and the program’s terms could change at any moment.

    The main state government housing agency in New Mexico is the New Mexico Mortgage Finance Authority. This Agency cares for all housing departments and programs, including state and federal housing programs. One of the goals of this Agency is to help homeowners avoid foreclosure and protect their homes.

    In these difficult financial times homeowners are struggling more than ever to make their mortgage payments. The MFA has provided specific advice for New Mexico households which includes a set of steps you can follow to avoid foreclosure. None of these steps are, sadly, fail-proof. In some cases, homeowners can no longer afford buying a home and must look into alternative ways of dealing with their mortgage and look for other sources of housing. The MFA can help whether you think can save your mortgage or whether you need help finding the most graceful and financially efficient way out of your mortgage.

    Step 1. The first think you should do is contact your lender. Your lender is ultimately the agency which will approve or deny a loan modification, refinance or other type of mortgage settlement. The sooner you contact your mortgage provider the more options you will have. Some mistakenly believe that talking to your lender will accelerate a foreclosure process. The opposite is true. Mortgage providers will start their foreclosure procedures as soon as you are late for your payments. If you contact them before this happens you may receive the help you need so you never have to fall behind in your mortgage payments.

    Step 2. Steps 2 and 3 work together. As soon as you have contacted your lender and explained your situation, the lender’s loss mitigation department will start to analyze your financial situation and what is the best option for you and the lender. You should do the same. Find out what programs you qualify for and what you need to qualify. The main federal program for the protection from foreclosure is the Making Home Affordable program.

    Step 3. Talk to a certified mortgage counseling agency. The federal government sponsors these agencies to provide free or low-cost advice to struggling householders. We include a list of the mortgage counseling agencies currently available , their service area and contact details. Notice that the MFA works with the United South Broadway Corporation and the ILRC Housing Division.

    Clovis Housing Authority 

    Curry County

    Waymon Dowdy



    Community Action Agency of Southern New Mexico – 

    Las Cruces   

    Dona Ana, Grant, Hidalgo, Luna, Otero and Sierra Counties
    Shelly Almaguer

    Kena Carriere



    Eastern Plains Housing Development Corporation  

    Chaves, Curry, DeBaca, Eddy Guadalupe, Harding,  Lea, Quay, Roosevelt & Union Counties   

    Sandra Hidalgo

    Monica Moncada



    HOME New Mexico (MFA Helping Hand Loans)   

    Bernalillo, Sandoval and Valencia Counties – may also be able to serve other areas   

    Elena Gonzales

    Elaine Leal




    Rio Arriba, San Miguel, Santa Fe and Taos Counties   

    Michele Lis



    Las Cruces Affordable Housing, Inc.   

    Dona Ana County– may also be able to serve other areas  

    Virginia Bell



    Navajo Partnership for Housing  

    Bernalillo, Cibola, McKinley and San Juan Counties   

    Lavera Thompson



    Southwest Neighborhood Housing Services, Inc.  

    Bernalillo, Sandoval and Valencia Counties – may also be able to serve other areas   

    Robert Garcia



    Region VI Housing Authority

    Chaves, Eddy, Lea, Lincoln and Otero Counties   

    Kelly Leflar

    575-622-0881 ext. 25


    Santa Fe Community Housing Trust  

    Santa Fe County    

    Nellie Martinez

    Ron Chavez



    Tierra Del Sol Corporation   

    Dona Ana County   

    Art Marrujo



    United South Broadway Corporation 

    Bernalillo, Sandoval, and Valencia Counties   

    Tim Gardener



    YWCA – Consumer Credit Counseling Service  

    Dona Ana and Otero Counties   

    Dolores Rosell


    The New Mexico Mortgage Finance Authority is the main agency responsible of improving access to housing for low to moderate income households in New Mexico. Although not run directly by any government agency, it is an agency of its own which uses both taxes and alternative sources for its everyday management, it is responsible as the state’s official housing agency for over 35 programs, which provide help and assistance to homeowners, the homeless and families that need help finding their first mortgage.

    The New Mexico Mortgage Finance Agency was first created in 1975 by the state legislature as a tool to distribute affordable mortgages to low and moderate income families. The funds for these mortgages, or more accurately the insurance for these mortgages, was generated by the sale of tax-exempt bonds. However, since 1997, the New Mexico Mortgage Authority also became the state’s housing agency, which brought under the same roof all housing departments in New Mexico. Now the MFA is responsible for all housing programs including section 8 and other federal projects. The Agency continues to be managed without any funds from the state, although it does manage programs which rely on federal taxes for funding.

    The growth of the MFA from its humble beginnings in 1976 is noteworthy. When it started in 1976, the MFA had two employees, in 2008 it had 66. It started selling $20 million in bonds a year, now it sells over $214 million.

    The services offered by the New Mexico Mortgage Finance Authority include:

    First-Time Home Buyers Loans.

    The Agency offered $221 million to over 1,700 first-time buyers in New Mexico in 2008. These loans allow low to moderate income households to qualify for loans to finance their first home.

    Down Payment Assistance

    The Agency also helps households find the funds to pay for down payments and other mortgage expenses. In 2008, the MFA distributed $4.6 million in down payment assistance and grants. The difference between a grant and assistance is grants do not have to be paid back as long as certain requirements are met by the borrower.

    Construction of Homes

    The MFA does not only provide funds for mortgages, it also gets involves in the construction of rental and homeownership homes. In 2008, the organization invested $53 million in the construction and maintenance of over 1,400 homes.

    Rent Programs

    Households who cannot at this time afford to buy a home can also receive help to pay for rental expenses. In 2008, the MFA granted over $22 million towards rental assistance programs in over 5,400 rental units.

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