The Making Home Affordable Program

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.

From FHFA Director James B. Lockhart:

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.

What now?

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”.


The snow is[photopress:snow_picture.jpg,thumb,alignright] finally melting off the tree branches in my yard today. One foot of snow fell last Wednesday afternoon turning my normal 45 min commute to Issaquah into 4 hours. I’m really impressed with how well the agents are doing maneuver on these slick streets. I had a showing Friday night, Saturday and Sunday on one listing, even though the roads are still slick and hard to navigate out here in Issaquah.

Nice to be back to RCG. I’ve been buried in an investment class for the last 3-4 months and haven’t been keeping up with the post reading or writing. Came up for breath today and I see that a Welcome to all the new contributors is in order! We’re honored to have you on board. 

Given that it’s tax time, I want to remind everyone to be sure you’re aware of all the tax advantaged investment programs out there for real estate. Who knows how long these will last. There’s a great new program called a solo 401K to go along with the Roth IRA programs investing in real estate.  I’ve blogged about this before and hope you check it out especially if you’re paying taxes on any real estate gains this year. 

I’m building a good retirment by investing this way and it will all be tax free.  A key player in the IRA game is the custodian.  I’ve been waiting for the new custodian in Seattle, Viking Bank with Jim Winder in charge of the Self Directed IRA department to get their website up and running so that RCG readers can get information on line. Jim Winder is a well known guru of self-directed IRA’s and he is respected local celebrity and has taught many many classes in the past.  He promises the Viking Bank site will be functional soon.  But it is tax time so until then, I’ll direct you to Pensco Trust to learn all you need to know about some really great tax strategies using some of the money you’ve already socked in retirement plans. Pensco Trust is a national leader in IRA education so I hope you find these articles helpful.  

Once Jim’s fully in the game I’ll post you his site and when he’ll be teaching live classes.  LTD will be hosting one, soon, I hope, and by the way, I met Jim here on RCG!

A Few Kind Words for one Merit Financial employee

Rather than jump on the bandwagon of the negative press regarding the Merit Financial failure(s), I’d like to tell my one and only Merit Financial Story.

One of our agents had a client who was using Merit Financial as their lender. When someone we meet has a pre-established lender relationship, especially a personal relationship…friend/relative, we do our best to support that relationship. Unfortunately, as the newspaper articles have highlighted, the loan rep was a young fellow with no lending experience who had never handled a loan that was a purchase, rather than a refinance. Two weeks into the 30 day escrow, it was apparent that absolutely nothing had been started with regard to the financing. The agent didn’t know what to do and came to me for advice.

I told her to get into the car and I made my one and only ever visit to Merit Financial. We had no appointment. I call it “camping out”, meaning “we’re not leaving until we get someone here to start paying attention BEFORE it is too late.” A young man by the name of Kris Quigley took full responsibility from the time I left that building, until everything was resolved, and escrow was closed. He worked day and night. He was literally working so hard that he made himself sick and ended up with pneumonia. He called me well into the night past 9 p.m. and I’m sure our client was not the only file he was bailing out of a fire.

My guess is that for every 20 people hired, who were mostly all talk and no action, there was at least one Kris Quigley in the background busting their butt to pick up the slack.

Kris…wherever you are…I wish you the best of luck in your future endeavors. I feel badly for people like Kris when I read these articles. Clearly not everyone who worked at Merit Financial was a Know-nothing slacker, as these articles would lead people to believe. Kris, feel free to use me as a reference if you need one. Hopefully you moved on before the $ hit the Fan.