Archive for May 2nd, 2011

Making Home Affordable Refinance Program

The Real Deal with HARP

Attracted by the chance to decrease mortgage payments, plenty of homeowners take their chance in refinancing through HARP or Home Affordable Refinance Program. This program is created to make the refinancing process easier for homeowners who are experiencing financial challenges and do not have much equity for their homes. This federal program seems to be a wonderful opportunity, but all things considered, is it worth it?

Most borrowers who refinanced in the first half of 2010 saved around $125 to $150 on monthly mortgage payments says Freddie Mac. However, this is not a big amount in comparison to the thousands they spend on closing costs. The borrowers who greatly benefit from the HARP are those that acquired a large loan during the time when interest rates were at 6 to 8 percent. On the other hand, homeowners from the less expensive area may not get the same benefit.

In order to fully benefit from HARP, upfront costs must be reduced. But, this is not easy with expensive title fees in most states. Moreover, there is little chance to find a lender who can offer a refinance through HARP without collecting other fees. In fact, if ever lenders will waive upfront fees, they will most likely compensate for this by charging higher interest rates. In addition, they can include closing costs in the total payment of the refinanced loan. The problem with this is that it can affect a borrower’s eligibility for the program. This can influence the loan to value ratio of the mortgage.

HARP permits borrowers to refinance up to a maximum of 125% of the value of their homes. But, borrowers on borderline may be affected with the addition of closing costs in one’s loan amount. Despite the stipulated guidelines of the program, almost all lenders are not willing to offer refinancing for those borrowers with loans of more than 105% of their property’s value.

New Home Mortgage Servicer’s Guidelines Help with Foreclosure?

Fannie Mae and Freddie Mac are trying a new approach for companies that provide home loans. This is for the purpose of controlling the inefficiencies in the home finance system.

The Federal Housing Agency gave Freddie Mac and Fannie Mae directions to make guidelines for firms providing mortgage services. This is to control the blame to the servicers for their lack of effort to let the borrowers stay in their home and prevent foreclosures.

A lot of these mortgage services are being investigated by attorney general of the state for their participation in the failures and foreclosures in various mortgages.

These aligned approaches to servicing are aimed at helping reduce tax expenses of individuals who are suffering from billions of losses from the companies at the presently struggling housing market. Fannie Mae and Freddie Mac have been complaining about some delays and problems in their services that resulted to increased costs.

Some inclusions in the guidelines are incentives for services that will perform modifications for delinquent borrowers and sanctions for failure to meet specific goals. Moreover, the guideline prevents the servicers from considering foreclosures while the borrower can have the option of loan modification.

These changes can be used as a basis of regulators and lawmakers for the standards in nationwide servicing. These guidelines will be put to effect at the third or fourth quarter of the year said the FHFA.

Making these guidelines will be a huge task for Freddie Mac and Fannie Mae. The reason for this is that it will need a big amount from investors to finance 90 percent of loans and at least $5 trillion in mortgages. Fannie and Freddie works with at least 1,400 to 2,000 mortgage servicers said the spokesman of each of the two companies.

Freddie Mac further added that operational differences will show in the implementation of the guidelines. Bank of America Corp. JPMorgan Chase & Co, Citigroup Inc and Wells Fargo & Co, the major banks in the US are the biggest mortgage servicers today.