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Archive for the ‘Government Mortgages’ Category

From the first government mortgage bailout to the latest one, it seems that no matter how hard the central planners in Washington attempt to alleviate the suffering of millions of American homeowners, the foreclosure crisis rages on. The failure of every one of these plans so far indicates that, no matter how much money bureaucrats take from one homeowner to give to another, the financial shock that began a year ago will continue at its own pace. While the reasons for any government failure are too numerous to count, here are the top six why the housing bailouts have not helped.

1. Income documentation. Many of the plans, to prevent speculators or liars from cashing in on public welfare for foreclosure victims, require borrowers to verify they have enough income to make reasonable monthly payments. With over half of subprime borrowers expected to have overstated their earnings in order to qualify for higher loan amounts, documenting their real income will instantly disqualify them from any government programs. Both FHASecure and the new Freddie/Fannie bailout package require borrowers to verify their income, which is why foreclosure of liar’s loans and those purchased by speculators are still driving the housing market crisis.

2. Minimum equity requirements. FHASecure and the latest bailout of the Government Sponsored Enterprises require that homeowners have at least three percent equity in their properties in order to refinance to a government guaranteed loan. Either the lenders will have to write down the loan to a lesser amount, or the owners need to make a down payment. The problem is that mortgage companies do not want to take such a large loss on a house when it is just as easy to go through with the foreclosure and attempt to sell on the open market.

3. Second and investment homes excluded. Another problem with many of the government programs is that they are designed only to help with a primary home. Rental or vacation homes are disqualified from any public funds. While this may be a good idea to keep speculators’ hands out of the public cookie jar, it shows a failure to realize that rampant speculation drove the housing bubble — leaving them on their own to suffer now necessarily means that prices will come down and homes losing money for investors will be abandoned.

4. More expensive solution offered by banks. With Project Lifeline and the Hope Now Alliance, lenders were recommended to offer homeowners in trouble a mortgage modification or repayment plan in order to get back on track. Unfortunately for foreclosure rates and borrowers, most banks simply offer a payment plan, doing nothing to modify the terms of the loan to be more affordable. Few homeowners struggling with their current payment are able to pay even more per month to repay the arrears, which is the biggest reason these programs have been utter failures.

5. The problem of second mortgages. For home equity line of credit and second mortgage holders, the options offered by the government amount to one solution: write it off. Understandably, few mortgage companies are willing to do this; although they know there is little chance they will get anything from a sheriff sale, the chances are higher than with simply giving up on the loans. The newest bailout package for Fannie and Freddie is not available to homeowners who can not shake off their second mortgages; while subprime loans, which are foreclosing at the highest rate, were typically made with automatic second mortgages at the time of purchase (80/20 loans).

6. All programs are voluntary. But by far, the biggest problem with all of the programs offered to date by the government is that they are 100% voluntary for lenders to participate in. If the mortgage company believes it will make more money in the end by foreclosing, there is nothing to force it to help homeowners stop foreclosure through any program. In fact, with the Federal Reserve coming to the rescue of the banking system over and over again with hundreds of billions of dollars of free money and loans, it may be in the best economic interests for lenders to let homeowners fail in droves, crying that the banks are the victims of predatory borrowers and lining up for more corporate welfare than homeowners could ever dream of receiving.

Although it is quite noble for neighbors and family members to wish to help out homeowners in distress, requesting government to step in and fix the foreclosure crisis will only produce more failed programs and more empty houses. For an organization that claims on monopoly on the use of force, the federal government has been tellingly reluctant to force banks to assist borrowers when the loans that have driven the economy off the cliff were clearly, for the most part, predatory mortgages. For bureaucrats who have no problem telling foreign countries how to live, manipulating interest rates in the American economy, and spying on every person in the country, they seem not to want to turn their power on the large financial interests. But is that an indication of where the real power lies?

The Mortgage Modification Requirements to Avail of the Loan Modification Program

If you want to take advantage of the government loan stimulus program, you have to meet the loan modification program requirements. This modification program is one way Americans can be helped if they are on the verge of home foreclosure. But this help is not just being handed out to anyone.

Even if it is a given that millions of American homeowners are able to use the budget of $75 billion for the program allotted by the government, it is not applicable to everyone. If anyone promises you approval walk away.

This is because financial institutions and banks still need to receive some money rather than getting a negative figure on an individuals home loan and this is where approved companies that are part of this program can help you.

There are four basic requirements which you should possess in order to meet the criteria.

#1. The home under discussion should be your primary living residence. This loan modification program should not be used for homes that are secondary, rental or vacation homes. This is because the budget is dedicated to rescue the homes of the many American families in need and not help people pay multiple mortgages.

#2. The next criteria is that the applicant must be encountering a monetary hardship due to a loss of work, lowered salary, hospital bills, or an increase in the payment of mortgage. Once you are encountering a hardship, you are then likely to qualify and should apply for the loan modification program.

#3. In addition, if the value of your home has dropped more than 15%, it has a higher possibility of being approved of the modification program. Aside from the mentioned criteria, if you have already asked for this programs help or filed for bankruptcy, you are not qualified to apply anymore.

#4. Lastly, mortgage lenders must make sure that the loaned amount after the modification is applied should not be over 31% of the homeowners income. To avoid this, mortgage rates and loan terms can be changed if they are deemed necessary to make sure you can pay it back.

This last point is only covered by companies that are part of this program and this is to stop companies giving you a loan you cannot possibly afford.

When you have determined that you meet the requirements mentioned above, you must consult with your lender or one who is part of the program in order to apply for the government loan modification program. Beforehand, you should prepare your financial documents that will give proof to your current financial hardship. Such documents are your income statement, bank statement, pay slip and the other documents.

The Federal Government has set aside $75 billion dollars to help struggling homeowners with a loan modification program so they can avoid foreclosure. The goal is to help 5 to 6 million families get a lower mortgage payment so they can afford to stay in their home. This plan is not for everyone-find out if you may qualify for help by learning the formula your bank will use.

Who qualifies for this loan modification program? Here are some general guidelines for eligibility:

Homeowners must live in the property as their primary residence Loan must have been originated prior to January 1, 2009 Not required to be delinquent on payments, but must demonstrate financial hardship now or in the near future Must be able to provide proof of income and have a current mortgage payment that is greater than 31% of your gross monthly income Loan amounts of $729,750 or less for 1 unit properties-higher for 2-4 units

What are the primary features that will be offered to qualified homeowners to arrive at an affordable payment based on 31% of their gross monthly income?

Reduce interest rates to as lower as 2% Extend loan terms to 40 years Principal reduction with the Government sharing in the costs with lenders

What is the formula the lenders will use to determine who qualifies?

Arrive at a target payment by multiplying the gross monthly household income by 31% Subtract the monthly costs for homeowners insurance, property taxes, and any homeowners dues = the new principal and interest payment Using the current loan amount, reduce the interest rate to as low as 2%, extend the term to 40 years and if necessary defer or forgive some principal balance to achieve the target payment If the target payment can be reached using the standard methods of modification, then the homeowner is a good candidate for assistance.

While this loan modification program is voluntary, most lenders and servicers are expected to participate. The Federal government is offering financial incentives in the form of $500 payments to servicers and $1500 to mortgage holders that offer a loan modification program to their borrowers as well an annual payments. In addition, homeowners who stay current on their new modified loan will be given a monetary incentive for each year they remain current, for a total of $5000 at the end of 5 years.

A successful homeowner will understand what paperwork will be needed to submitted to their lender and, just as importantly, how to complete their paperwork properly so the loan modification application is processed quickly. You can use the very same formula your lender will use to pre-qualify yourself and adjust your budget before the bank reviews your application. Do you know how to figure your own debt ratio and determine your new target payment? This is critical so that you can make any necessary adjustments to your monthly budget in order to fit into the approval guidelines.

If you feel like you would like some help to make certain that you have prepared your application correctly, take advantage of a software program designed to mimic the federal guidelines. All you have to do is input your own monthly income and monthly expenses and all the calculations are done for you automatically. Your debt ratio, target payment, new interest rate, disposable income and all the other critical figures are immediately calculated. This helps you to fine tune your application so that you have the best chance of qualifying for assistance with your mortgage. Avoid mistakes and save hours of time and frustration-get it right the first time.

Nationwide news channels are filled with reports on the Obama stimulus plan and focused mostly on the 75 billion allocated by Obama’s administration for Mortgage Relief. Obama’s plan focuses on keeping up to 9 million people from foreclosure. Helping these homeowners avoid foreclosure is vital to stabilizing home prices and ultimately the economy.

The plan is pretty simple, give incentives to mortgage lenders for getting out of their seat and helping homeowners facing foreclosure. Something they should of done a long time ago. Many homeowners facing foreclosure have become drenched in debt, their debt to income ratio has far exceeded the guidelines for getting a mortgage in the first place. This can be attributed to predatory lending at which time the loan was originated, however; most homeowners are dealing with lower income due to job loss. Mortgage payments are typically the bulk of a homeowners debt.

Obama’s plan focuses on cutting mortgage payments to acceptable levels, which they have designated as 31% of the homeowners total income.

The other part of the plan would help homeowners which have a mortgage owned or guaranteed by Fannie Mae or Freddie Mac. Homeowners that are upside down on their mortgage, owing more than their home is worth, can refinance with a special program. Normally equity or LTV (Loan to Value) is a major factor in refinancing. The bank or lender is willing to take more of a risk if you have equity in your home. They believe homeowners are going to fight tooth and nail to keep their mortgage if it has 15-20% equity. Homeowners that are upside down on their mortgage currently have no options for refinancing into a lower mortgage rate. Their mortgage rates in many cases have adjusted and they are stuck with an inflated mortgage payment and declining home values. Removing these restrictions is estimated to help up to 5 million homeowners reduce their mortgage payments.

Keeping mortgage rates low for homeowners that can refinance and new homebuyers is key to stimulating the economy and keeping banks afloat. Mortgage rates may be reduced another .5 percent to a new historic low of 4% for a 30 year fixed mortgage. Overall the mortgage relief plan is solid, but it is not very clear how deep this crisis runs. The government has funneled billions of dollars into banks such as Bank of America, but they know little about the damage done to their balance sheets. From the sign of the banks declining market value and need for more bailout money it is safe to say the government may be in for a big surprise when they get a in depth look into the banks they have been assisting.

Waiting on mortgage relief for foreclosure relief from the government is not something recommended by most in the financial industry. If you are struggling paying your mortgage now you should see foreclosure help immediately.

Obama’s government has come up with home refinance stimulus package and loan modification programs to help all the needy owners in avoiding foreclosure. This program is designed specifically for all the borrowers who are facing financial hardships as they are not in a condition to repay the loan. The home refinance stimulus package and loan modification would cover as much as 9 million mortgages and the government would spend $75 billion for helping the homeowners.

Obama’s Stimulus Package has 2 main components:

1. Refinance

2. Loan Modification

Let us discuss each one of these components in detail:

1. Home Refinance Stimulus Package

The Obama government understands that the home-owning people of the country are facing a crisis. Therefore, they are offering a mortgage help from government to one and all to overcome foreclosure blues. This would allow them to retain their homes and help them in their struggle to pay their loans. This government program is called Making Home Affordable. It aims at helping home owners modify their loan structure in a feasible manner to assure that they continue to possess their homes.

The recession had brought down many companies and had resulted in people losing their jobs. This had led to many home owners fearing that the homes that they have paid for so long would be foreclosed for non-payment of dues on time. This is where the Home Affordable Refinance Program (HARP) and Home Affordable Modification Program (HAMP) come into effect. These programs are basically mortgage help to the home owners to modify and refinance their loan in a manner to make it more affordable. These mortgage help from government programs are described here.

The Home Affordable Refinance Program

The Home Affordable Refinance Program or HARP as it is known is a mortgage help from government. It is designed with an aim to help all the creditworthy home owners who have been committed in paying all their mortgages on their home. HARP aims to help them refinance their mortgage to make their loan affordable. There are some eligibility criteria to be fulfilled to be eligible for this program. The following are the eligibility criteria for HARP:

* The home that you have taken on a loan has to be the primary residence.
* It can be a maximum of a four-unit premise.
* The loan that you have taken must be conforming and guaranteed by Fanny Mae or Freddie Mac (both are government-sponsored institutions).
* The EMI must have been paid regularly and has to be up-to-date.
* The mortgage taken in the beginning should not be more than 125 percent of the current market value of the home against which the loan has been taken.
* The final check is that the buyer must be able to pay the refinanced mortgage loan without hassles.

Home Affordable Modification Program (HAMP)

This mortgage help from government program aims at helping the eligible home owners to modify the mortgages they have taken and try to make them affordable to pay.

The program is primarily meant to take care of those people who have been affected by the recession in some manner. For example, their income has reduced or some other issues, which have increased their expenses so much that paying their EMIs has become a problem. The eligibility criteria for HAMP are as follows:

* The home that you have taken on a loan has to be the primary residence.
* The loan must have started before January 1, 2009.
* The initial loan taken should be less than certain amounts (specified in the website mentioned) for different sizes of house (in units).
* The EMI payment being made should be more than 31 percent of the total family.