The Treasury has revealed their plans as promised which address helping responsible home owners with higher loan-to-values refinance and home owners who are facing financial distress (and may not qualify for a refinance) modify their existing loan.
It appears that the High Balance Conforming Loan Limits will apply to “high cost areas” such as Seattle and Bellevue. This morning, I’m seeing that banks and lenders are now implementing the new higher loan balance of $567,500 (vs $506,000) which was announced two weeks ago (I’ve received one notice this morning stating this will take place effective March 6, 2009). Update 4/23/2009: It looks like banks/wholesale lenders may not adopt the revised 2009 High Balance limits until closer to May 1, 2009 when Fannie will officially begin to purchase these loans. The few banks who did step up to the revised limit early on, either never did or quickly retracted back to the $506,000 loan amount.
Fannie Mae and Freddie Mac will also undertake Home Affordable Refinance, a program that is designed to reduce mortgage rates for 4 to 5 million people whose loans are owned or guaranteed by Fannie Mae or Freddie Mac. The refinance option will allow borrowers that currently owe between 80 and 105 percent of the value of their home to refinance their mortgages.
With the refinance program, it appears to be along the lines of a streamline refi where an appraisal may not be required. This is not uncommon for “well qualified” borrowers to have an appraisal “waived”. They have disappeared in recent times…it looks like the waiver is back. The Home Affordable Refinance program ends on June 2010.
I’m especially pleased with the Home Affordable Modification program which I’m hoping will put an end to unsavory loan mods that were predatory. This program is geared towards home owners who are at “imminent risk of default” and are in “financial hardship”. It only applies towards owner occupied residences and this is a “full doc” process where the home owner will have to provide two most recent paystubs, most recent tax returns and sign a 4506T. Second liens holders will receive compensation when they extinguish their lien rights (mortgage).
Loans to be modified must have been originated on or before January 1, 2009 and this program will run until December 31, 2012.
Home owners in financial distress should contact their mortgage servicer (where the mortgage payment is sent to) right away.
Home owners looking to refinance should gather their income documents and contact their preferred mortgage originator…and please be patient. Refinances are taking longer to process and close. Every aspect of the real estate industry has reduced staff. Hopefully these programs will recreate a some jobs in the real estate lending industry.
Treasury has doubled it’s buying of Preferred Stock in Fannie and Freddie to $200 billion each in an attempt to keep mortgage rates low. What needs to happen is to have some of the price hits (LLPA) removed or modified so that these efforts will work “in concert”.