2009 Mar 5th

Making Home Affordable – The Official Site

Home Refinance and Loan Modification Detailsaara_logo_4_013

The Federal government has a site with the details of the new programs:

financialstability.gov

 

It’s worth a look.

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  1. PTHOBO

    http://www.federalreserve.gov/fomc/beigebook/2009/20090304/2.htm Check this out from the Fed concerning Manhattan Condo prices. What will this do to Hoboken.

  2. Tiger

    Guys we might all qualify! LOL. Look at this question:
    “Are you having trouble paying your mortgage? For example, have you had a significant increase in your mortgage payment…”
    How about a 47% tax increase that hit us in 30 days? Does this count?

    It’s the new year, and many folks (like myself) got a letter saying that their monthly payment will increase several hundred dollars due to the tax increase, plus the effect of paying the last bill (which lowered escrow balance significantly).

    I was thinking of transfering money in escrow and get it over and done with. But hey… Since we’re bailing out everyone, if we get something, why not :-)?

  3. JC

    I agree, but I’m not to clear how this will affect your credit score.

    Also, the interest rate reduction is temporary for 5 years at which point I am not 100% certain I know where the IR will end up. I THINK at current levels so around 5.25%.

  4. Tiger

    I still do not get why they are offering temporary interest reduction. We all suggested a better idea on this blog: A 45/ 50/ or even 60 year mortgage. WHY NOT? Have them built equity in their homes, one dollar at a time.

    That, and make ‘walking out’ a harder option, and THEN see how foreclosures will drop on their own. It still amazes me how easy it is for people to just walk away in this country.

  5. Lori Turoff

    I agree with you Tiger. People need to have a stake in the home or they have no incentive to make payments down the line. I don’t have the statistics but the number of owners who default even after getting help is surprisingly high.

    Here’s another good suggestion: http://www.nytimes.com/2009/03/05/opinion/05geanokoplos.html?_r=1&ref=todayspaper

  6. Tiger

    Thanks Lori. What a terrific idea! At first it was hard for me to swallow, but I read it again and crunched some numbers and I think it has a lot of merit.

    Something to think about:
    – 30 year fixed $250K loan at 5.25%
    Monthly Payment: $1,380.51
    Total Payments: $496,983.33

    – If we underwrite the principal to $200K at 5.25%
    Monthly Payment: $1,104.41
    Total Payments: $397,586.67

    Yes there’s a total ‘loss’ of ‘potential’ interest of $100K, however you are still very likely to make your $147K, rather than walking out with a loss.

    Brilliant. But will our government or a greedy bank agree to this? Of course not.

  7. Tiger

    Greetings from Seattle! Beautiful rainy weather here (and it’s still 9:30PM my time). I was reading the Seattle Times, they had almost a full page explaining the program. I cannot find it online so I will type the useful info.

    I imagine most Hoboken homeowners are current on their mortgages, they still might qualify for hundreds of dollars every month. They put a simple formula, I hope it helps:

    Here it goes:
    1- Your loan has to be underwritten by Fanie or Freddie.
    2- You have to be current on your mortgage and in good standing.
    3- Take your pretax income and multiply it by .38.
    A- If the resulting amount is lower than your monthly payment, then you are paying too much for mortgage and you might qualify for a two-step program:
    – First, your bank has to adjust your mortgage (by either writing a loss or extending your mortgage to 40 years), to lower it down to .38 of your monthly pretax income (I assume that this piece is the one which might affect your credit rating)
    – Next, the government will match, dollar to dollar, until your mortgage is down to .31 of your monthly pretax income for five years (Home Affordable Refinance)
    – Your interest rate will increase at NO MORE than 1% / year after

    B- If the resulting amount is less than .38 but higher than .31, then you are in good shape, you might qualify for the government matching — to bring down your mortgage to .31. According to the newspaper, this is the Home Affordable Refinance, very similar to a “no cost” refinance. After 5 years your rate will increase at no more than 1% / year afterwards.

    C- If the resulting amount is less than .31, you do not qualify for anything.

  8. Lori Turoff

    From what I read in yesterday’s New York Times and on their site, there are two separate plans. One requires that your loan be Fannie or Freddie but the other does not. The one that does not is referred to as the “loan modification” plan. Your interest, real estate tax and insurance and maintenance payments must total more than 31% of your gross monthly income (before payroll deductions). The amount of the outstanding principal of your loan must be under the $729,750 limit for this area. (More for multi family homes) You must live in the home. You don’t need to be behind in your payments. You do need to show financial hardship although that term is not defined. If you meet the criteria your bank can modify your loan to get the total payments down to 31%. So here are my questions:

    What constitutes financial hardship? For example, as a realtor work entirely on commission. Since the housing market has tanked is it not reasonable to assume many realtors will see a severe drop in their income? Hopefully, not me, but certainly many others will. What qualifies?

    Does your bank have to agree to do this? What if the bank is, say, Haven Savings, and didn’t sell the mortgage or receive any bailout money?

    What does this do to your credit?

    What does the interest rate re-set at after the five year period?

    Lot’s of questions are sure to surface. It will be interesting to see the answers and how this plays out.

    Here’s the link to the article: http://www.nytimes.com/2009/03/05/your-money/mortgages/05housingprimer.html?pagewanted=1&_r=1

  9. Tiger

    Thanks Lori.

    Ink is not even dry and there’s plenty of confusion about this! These are very good questions.

    From what I understood though, the Home Affordable Refinance is open to **ALL** people who bought before 1/1/2009, live in their homes and the mortgage is less than $730K, as long as their mortgage payment is between 31% – 38% of their pretax income, that 7% will be paid by the government if a homeowner qualify. Above 38%, then yes, the bank has to take some sort of a hit.

    It seems that banks are required to participate in any of this, whether they got bailout money or not. However, it seems the **sweet** spot is the 31% to 38%, unless there’s a fineprint somewhere, why should a bank refuse free government aid that will increase the likelyhood of someone staying current on their mortgage, with no effect to their bottomline?

    What I’d like to ask friends here is, if you qualify, for the 38 –> 41 reduction (which seems to have NO effect on your credit rating at all). Will you take it? I see pros and cons for either answer.

  10. Tiger

    Correction to the third paragraph:
    It seems that banks are *NOT* required to particiapte in any of this….

  11. Mark

    Interesting piece on Manhattan prices from ny times

    http://www.nytimes.com/2009/03/08/realestate/08condo.html?_r=1&hp

  12. rich

    who the hell pays 38% of there income to their mortage?

    I don’t know if it is gross or net but only way you pay that is if you lied on your app or found a new job at way less pay.

    sounds like this will help mostly liers

  13. Tiger

    Rich, it’s 38% pretax. And I agree, that’s a lot of money to be paying on mortgage. They say your debt payment (all debt; mortgage, car, credit card, and loans) should not exceed 50% of your take home. If your mortgage is more than 38%, taxes are say 32%, that really leaves you with less than 30% for everything else.

    And btw 38% is the ‘workable’ amount; meaning that this is when government will kick in to help lower it to 31%. Many people are way above this number, hence their banks would need to take a hit just to bring them down to 38%. Seriously, scary stuff.

  14. Lori Turoff

    Rich & Tiger – the 38% includes not only your mortgage but your real estate taxes, monthly maintenance or condo fees, property insurance and flood insurance.

  15. Imee

    I think the official site of the program is the best source out there for info about it. I’ve seen so many sites write about the program but they either lack info or give info that’s not really confirmed. I do think the criticisms and praises about Making Home Affordable are worth a look, since I’m not 100% sold on it either. I just hope it does work out for those families and households who need their homes saved.

  16. lawyer

    Interesting..

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