Underwater Mortgages

Restructured Home Affordable Refinance Program – Is NOT Good Enough

Restructured Home Affordable Refinance Program

Bob Clement

There seem to be a simple truth that slips away from the eyes of the decision makers. The is a need for a better Restructured Home Affordable Refinance Program! There are millions of household that work, pay taxes and try to survive the economic earthquake of 2008. All the financial programs are somehow missing the average Joe and his wife.

People are in deep trouble when their home property is underwater, worth less than the mortgage they still have to pay the lenders. This negative equity is a ticking bomb, as the lenders have just as much to lose, if these underwater properties drown in deep (foreclosure)waters. There are not enough new refinancing options for underwater mortgages, as Former U.S. Rep. Bob Clement writes in the review below.

“Recently, President Obama unveiled the restructured Home Affordable Refinance Program (HARP), one of the only programs assisting homeowners who are “underwater” in their mortgages. The program was set up in 2008 to help homeowners refinance, but the restrictions were too rigid.

HARP reforms are improved but still restrictive. HARP applies only to homeowners with Fannie Mae and Freddie Mac loans. To qualify, they must have paid six consecutive months on time. Closing costs and other fees will be reduced. Income requirements have been waived, and insurance can automatically transfer to the new loan.

Other institutional lenders need to find ways to offer more flexibility in their mortgage requirements. Bankers tell me their hands are tied by new stricter federal definitions of qualified mortgages. Perhaps they can set up special loan categories to help young professionals and promising wage-earners become homeowners in spite of their school debts.

I understand the lending institutions’ caution. I sit on the board of directors for a small bank myself, but standards that are too strict will cause more stagnation in the housing market and compound the problem. I believe we have overcorrected the problem that spawned the bubble burst.

We need home mortgage policies that help ordinary families avoid foreclosure.

The rich can take care of themselves, the poor will be taken care of, but who rallies for the middle class? They continue to pay the taxes, funding the programs for those who can’t and those who won’t. We bailed out Wall Street; it’s time we give the middle class some overdue help.” Read More…

Former U.S. Rep. Bob Clement is president of Clement & Associates, a business development firm (www.bobclementassociates.com) He represented the Fifth District of Tennessee 1988-2003.

I think Former U.S. Rep. Bob Clement has touched the subject in the right aspect. The rich will manage, the poor will be taken care off by others (as it was always) but the working class people with underwater mortgages need refinancing solutions better than the Restructured Home Affordable Refinance Program.

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New Home Underwater Refinancing Options

Homeowners Underwater Refinancing Options

Homeowners underwater refinancing option are very narrow these days. Those who have exceeding mortgage balance of their property, know very well the ineffectiveness of trying to refinance. Refinancing options for underwater mortgages are limited because many lenders require some sort of equity in property. The ideal amount of equity for lenders is at least 20 percent.

Even with such constraints, the borrowers have different options, for example, the “Making Home Affordable” program by the government. Below are some new home underwater refinancing options for the borrowers.

Underwater Refinancing Option #1 HARP

Upon meeting a certain criteria, you can secure refinancing through HARP (Home Affordable Refinance Program). This plan allows the borrowers to secure refinancing loan which is 105 to 125 percent of the total value of the property.

Usually, every underwater loan does not qualify for HARP. If you are on your way to foreclosure, or there are felonious payments in the last 12 months, you will be automatically disqualified from the program.

To secure HARP, you must have a rational payment history, good credit score as well as a buildup of present home financing and detailed lender guidelines. Also, HARP is not meant for everyone, while lenders have closed many HARP loans due to various ineligibility issues by borrowers. According to lenders, if HARP refinancing can escape you $300 to $400 of the monthly mortgage payment, it can give you a difference of either keeping or losing your property.

If your score is less than 700, you may need to improve the FICO score, this can save you thousands of dollars and improve your chances to get a YES from the lender. No lender wants to take today unnecessary risks, improving your score by a few dozen points, can be all you need. This can be done by following a simple ‘clean credit guide’, just like this one.

Underwater Refinancing Option #2 HAMP

You can qualify to secure HAMP (Home Affordable Modification Program) even with underwater mortgage and missed out payments.

In order to qualify, you should prove your financial hardship. Your mortgage must be owned by the lenders who are signed up with the Treasury. For this program, the government finances up to $1,500 to the lenders to process the loan, however, the lenders have got the ultimate right to approve or disapprove the HAMP application. 

HAMP might be a very simple solution for many borrowers, but there are also some very strict HAMP qualification guidelines. Also, the home should be your primary residence, the amount of mortgage should be less than $729,750, your present monthly payments should be more than 31 percent of the present gross income and you must prove the disability or difficulty to make payments. 

Upside Down Mortgage Refinancing -Reality Check

The underwater borrowers, who are unable to qualify for the new home underwater refinancing options, should also, realize the fact that these plans do not always work for everyone. Unfortunately, at present there are no underwater refinancing options  for borrowers backed by the government.

In spite of these barriers, you should not stop negotiating upon loan modification to your mortgage lender. Many lenders are ready to offer different patterns of loan restructuring as a substitute to the foreclosure, however, these are not backed by the government.

Unfortunately, when facing no new home underwater refinancing options, you should inquire about any chances of a short sale. This means that you are ready to sell your house on market price with the remainder amount of loan absolved by the lender.

Tips for Refinancing Investment Property Underwater

Refinance Your Underwater Investment Property

When the housing market in the United States crashed, many people realized the fact that their homes were not as worthy as their mortgages. This was not a new situation in the country; however, today things have changed. Here we will review refinancing underwater investment property.

Unfortunately, many people who are trapped with their mortgages prefer to let the mortgage providing companies go for foreclosure. Alternatively, these people have started to move away from their homes before the procedure starts.

The new and present rules for refinancing investment property underwater allow people to benefit from refinancing underwater loans. Usually, it is impossible to find conventional underwater loan refinance even during the greatest economic boom. Moreover, the banking institutions have revamped the lending practices for prime customers too. The mortgages now only cover up 80 percent of the total value of the property for either a refinance or a first mortgage.

This condition evades most of the refinancing investment property underwater plans, in spite of the well-established credit ratings of the customers. Low credit ratings and late payments make it even more difficult to refinance underwater property. Lately, Federal government has initiated an exclusive program to assist people with refinancing investment underwater plans. This has been incorporated as a part of their financial stimulus plan.

HARP For Refinancing Underwater Property

The HARP (Home Affordable Refinance Program) assists people with underwater refinancing loans when their mortgage balance falls between 105 percent and 125 percent. Practically, not many people will be able to benefit from this program, but they still will be able to at least retain their homes.

If a person is interested to refinance underwater loans under the HARP program, the amount of mortgage must be sufficient. Any late or no payments will disqualify them automatically from the eligibility of the program. Your loan must be backed by any mortgage agencies sponsored by the government. Most people are unaware of the agency who owns their property. They can get this information very easily through their lender.

In order to secure refinancing investment property underwater loan, you will need to have a stable credit score, whereas some lender rules will also apply. People can also simplify the refinance investment property underwater loan through their present lenders, whereas they can also go for other financial institutions.

If your credit score is less than 700, you should focus now on raising your score. Having your score taken care of, and getting 30-50 more points, mean getting more smiles from the lenders, and get better rates! The credit restoration process is not an immediate wam-bam process. It can take as little as 37 days, or even months if you do not follow a professional guide.

The great part about cleaning your credit is that it can be done alone, you do not need expensive companies or pay hundreds of dollars for such services. Once you buy a good ‘how to clean your credit guide’  you can follow the steps and expect your credit score to improve.

Modification Program for Underwater Investment Property

People who are interested in taking up refinancing their investment property underwater loan, but are not eligible for the HARP program, might be able to benefit from HAMP (Home Affordable Modification Program).

However, the loan must be backed by similar government agencies or through another lender that is eligible for the program. HAMP (home Affordable Modification Program) is supported by the government, but it does not fall into refinancing investment property underwater category. Instead, it is a loan modification plan which changes the home mortgage terms permanently. 

Underwater Property Refinancing Conclusion

If you qualify for a refinancing underwater loan, you must hire a mortgage broker in order to make the process simple and hassle free. A mortgage broker will help you immensely to get the best terms and rates.

How to Refinance Underwater Rental Property

Refinancing Underwater Rental Property

There has been tremendous drop in the value of homes in recent years. Most of home owners who wanted to refinance their mortgage, to benefit from low rates of interest, are now able to do so. But is rental property refinancing the same as residential property refinancing?  How to refinance underwater rental property? How to refinance when borrowers owe much more than the worth of their property.

There have also been some changes in the home refinancing regulations of the government. These plans now allow people to refinance mortgages for up to 125 percent of the current value of their home. People who are thinking of how to refinance underwater rental property on mortgage can also benefit from this change in plans. This will enable them to get reasonable credit to refinance for a more affordable loan.

Refinancing Upside Down Mortgages

If you have an adjustable rate of mortgage which is supposed to reset to an exceptionally higher rate or will need to make a huge payment, then the plan may be your best chance to restructure the loan if you owe much more than the worth of your property.

The lenders ask you to have at least 20 percent of equity in property for a conventional refinance. On the other hand, having no equity makes it virtually impossible. Originally, the refinancing program was limited for up to 105 percent of the present value of the property. Due to the loss in the value of homes across the country, only a few people were ready to take advantage of it. This also involves a great amount of risk.

On the other hand, people who had some equity in the property, shifted to conventional refinancing plans recently. This was drawn by low rates for those who had no equity because of the declining value of the homes. Government backed plans usually state that the real estate should be your primary residence, but in many cases you can get aid also for rental property.

Investment Properties Refinancing Programs

HARP - (Home Affordable Refinance Program) helps homeowners and landlords to be able to refinance their mortgage with fixed rates for 30 year mortgages. Though at the beginning Home Affordable Refinance Program was only for homeowners, new  regulations of the government added landlords needs to the HARP program.

The latest changes in the 125 percent should invite more people and give option to those who are thinking to refinance underwater rental property. Although, the value of homes has dropped drastically in many states, a majority of people have seen modest declines. In many housing markets of the U.S., a 125 percent plan must be reachable by most of the people who were not able to take up extensive home equity loans on their mortgages.

The revised home affordable refinance plan is less known to the loan modification choices by the government. It is a federal initiative to assist people in restructuring their mortgages to avoid foreclosure.

Usually, the loan modification plan is established for people who are unable to go with their mortgage plans. On the contrary, the refinance program is for people who might get into trouble if they are unable to cut down their mortgage costs or avoid a planned increase in the payments.

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Make sure you have a credit score higher than 700. If you do not, than your first worry should be ‘how do I improve my credit score’. Having a score improved by 30-50 points means you will be getting better rates, and saving money (not only on the mortgage, but on your credit cards too!).

You do not have to hire expensive ‘credit repair’ services, these can cost you quite a lot. Many people today buy a ‘clean your credit guide’ and follow the instructions. Once the credit improvements take place, you can proceed in the investment property refinancing  process.

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In order to refinance underwater rental property, you will need to have a loan backed by one of the secondary lenders supported by the government. These lenders are the ones that support a majority of mortgages in the United States. So the first thing you need to do is to check if your rental property is owned by Fannie Mae or Freddie Mac. If you are paying a mortgage interest rate more than 5.5%, you better call your loan officer and request a meeting, you can lock a lower rate through the government backed plans.

Read More About Underwater Mortgage Situation:

•  Upside Down Mortgage – And How To Refinance It?
• FHA Underwater Mortgage Refinancing Requirements 2011
• FHA Streamline Refinance Guidelines 2011
• When Is Refinancing a VERY Bad Idea?

FHA Streamline Refinance – No Out Of Pocket Closing Costs

FHA Refinance – No Out Of Pocket Closing Costs

 There are many FHA refinancing closing costs which need to be paid during an FHA refinancing process. These closing costs may include all the fees and costs summed up in the FHA refinance process. Except from the FHA streamline refinance – ‘no out of pocket closing costs’ which will be explained here, there are other ways the FHA allows borrowers to pay their closing costs.

Closing costs include of all the fees and costs which had to be paid during the approval of the refinanced mortgage. Costs such as appraisal fees, title fees, lenders fees, and government fees connected to the FHA mortgage processing. FHA refinance streamline programs ’no out of pocket closing costs’ can be very appealing to customers who wish to refinance but can not afford paying the current closing costs.

The closing costs for a FHA streamline refinancing mortgage can be 2% of the mortgage loan. This means for every $100,000 you refinance, the closing costs will be around $2000. When homeowners who refinance do not have enough cash to pay the closing costs and the FHA agrees, the closing costs would be mounted into the new mortgage loan.

‘No Closing Costs’ Does Not Mean It Is Free

It might be tricky to think that the fact that the FHA streamline refinancing has a no closing cost option, it is free of charges. It is certainly not. There are two main ways to complete the transaction without pulling cash out of your pockets.

The first option is when you mount the closing costs into the new mortgage. In this case you will be paying an interest as agreed, on a slightly higher amount of mortgage.

The second option in FHA streamline refinancing is that the lender agrees to pay off all the closing costs (which becomes a ‘no out of pocket closing costs’ for you) in exchange to offering a slightly higher interest rate.

Which Closing Cost Payment Option Is Better

Now (Sep’ 2011) when a echo sound was heard when the mortgage interest rates have hit yet another ‘ever low’ rates (60 years low), requesting the first an option may be a smart move. When interest rates are so low, $4000 additional mortgage will overthrow you off the deck. You should forward this issue to your current mortgage divisor, to calculate the impact it will have over your future mortgage payments. 

For a $300,000 mortgage the closing costs may reach $9000. The second option (lender paying in exchange for a higher rate) may not be financial, but may be the only option if the closing costs fees are not affordable. Even though, today (end of 2011)  when the national interest rates  have reached rock bottom adding a small percent may still be acceptable.

Win-Win – No Out Of Pocket Closing Costs

The option not to pay the closing costs is a fine option to the borrower, but it is also a fine option for the lender, as they will be gaining profit twice.

First time would be when the mortgage sum increases, the lender will make more profit as the interest rate will be on a larger sum. The second thing would be that the lender will agree to a no out of pocket closing costs in exchange too slight increase in the rate. They will be making higher profit on the whole sum.

When No Out Of Pocket Is Not Permitted

There are several scenarios in which the FHA streamline refinancing will not approve a no-out-of-pocket closing costs solution. This can be if the FHA streamline refinanced mortgage does not have enough equity (97.75%) according to the FHA appraisal evaluation report. Though appraisal report is not needed for the FHA streamline refinancing, the no-cash-out will be possible for equity over 97.75% or 97.75% of the previous loan amount.

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Read More Relevant Posts

• How to Refinance An Underwater Mortgage
• How To Detect Refinancing Scams
• FHA Streamline Refinancing Guide 2011
• Cash-Out Refinancing Requirements