HAMP Changes Take Effect Friday June 1

Effective Friday, June 1, 2012 HAMP “Tier 2”  -  which many people have simply referred to as HAMP 2.0  -  will roll out for the Making Home Affordable (MHA) loan modification program.  Like many MHA updates, these changes apply to non-GSE mortgages. 

The goal of HAMP 'Tier 2' is to increase eligibility for homeowners, including:

• those who did not meet the original HAMP guidelines,
• those who may have failed on a HAMP modification, or 
• those who own rental properties.

With HAMP 'Tier 2', many of the initial qualification criteria are still in place:

• loan must have been originated before January 1, 2009, 
• homeowner must be able to document a financial hardship;
• Only loans on properties with one-four units can be modified;
• there is a maximum outstanding loan amount (maximum unpaid principal balance.

But now, a borrower may also be considered for HAMP 'Tier 2' if any of the following also apply:

• they did not successfully complete (defaulted on) a HAMP 'Tier 1' modification;
• their monthly mortgage payment is below the minimum 31 percent front end Debt-To-Income ratio;
• and, most controversially, up to three seperate mortgages may be modified if they secure rental properties

No mortgage loan may be modified more than once in either Tier 1 or Tier 2. 

People interested in learning more about the HAMP program and the new 'Tier 2' changes, can visit the Making Home Affordable website, here.

The Homeownership Advisors Network will continue to focus its attention on helping owner-occupants avoid foreclosure, but may be able to answer some basic questions for rental property owners as well.

HAMP, HAMP 2.0, DTI, VPN, HARP, MHA, GSE... the 'alphabet-soup' of programs, agencies and programs can be overwhelming for struggling homeowners.  In Minnesota, there is a FREE, effective resource available: The Homeownership Advisors Network.  Trained and certified foreclosure prevention experts can work with YOU to find a solution to YOUR mortgage issues.  Don't delay, contact an advisor by visiting the Center's website today.

Another New Refi Program? Get the Facts!

During the 2012 State of the Union Address, President Obama announced another expansion of the federal mortgage refinance program :

That's why I'm sending this Congress a plan that gives every responsible homeowner the chance to save about $3,000 a year on their mortgage, by refinancing at historically low interest rates. No more red tape. No more runaround from the banks. A small fee on the largest financial institutions will ensure that it won't add to the deficit, and will give banks that were rescued by taxpayers a chance to repay a deficit of trust. (From the State of the Union Address)

The current versions of the refinance program (HARP and HARP II) allow homeowners whose loans are owned by Fannie Mae, Freddie Mac or the Federal Housing Finance Agency, to refinance to current historically-low interest rates, EVEN IF the loan value exceeds the value of the home (allows "underwater" homeowners the opportunity to refinance).


On Wednesday, February 1st, the president released additional information about the proposed expansion of the refinance programs:


The proposed program (HARP 3?) would allow ALL homeowners who are current on their mortgage — even those who do not have loans backed by Fannie, Freddie or FHFA and even if they're  underwater on their mortgage — to also refinance their loans.


The proposal put forward by the administration includes some details about the who would qualify:

• only owner-occupied, single-family homes are eligible.
• Homeowners must be current on their mortgage and not had a lat payment for at least the past six months; 
• Homeowners must have a minimum FICO credit score of 580; 
• The loan amount cannot exceed the current federal conforming loan limit. 

For those who meet the criteria, the program would allow for a streamlined application process in which lenders would only need to confirm that a homeowner is employed and the home would not have to be appraised.


NOW... What does this REALLY mean for the average Minnesota Homeowner who might want to refinance?

• Even though HARP II was announced in October of 2011, as of early February 2012, very few lenders and servicers have processes and procedures in place for homeowners to take advantage of the refinance program.  Any formal expansion to the program announced today would take MONTHS before a homeowner would likely be able to work out a refinance with their lender.  (See our blog post on the HARP 2.0 announcement in October, here)

• Most Importantly, this expanded program will require CONGRESSIONAL APPROVAL. Given the fact that we are in a rather contentious election year... approval by congress is far from certain.

We'll continue to monitor this program, and if the program expansion does become a reality, we'll notify Minnesota Homeowners via this blog and our website, here.

HARP Changes - What We Know, What We Don't

It is likely that President Obama will be announcing some major changes to the Home Affordable Refinance Program (HARP) on Monday, October 24th, 2011.  The Federal Housing Finance Agency, the agency that regulates Fannie Mae and Freddie Mac as well as the 12 Federal Home Loan Banks throughout the country, has issued a press release outlining some of the important changes to the HARP program.


What We Know:

• The goal is to prevent additional foreclosures by allowing additional underwater homeowners to refinance their mortgages at today's low interest rates and/or shortening the term of their mortgage.
• Most importantly, the current 125% Loan to Value limit (LTV Ceiling) will be removed, but there is still a MINIMUM LTV of 80%.  Borrowers that are underwater by any amount greater than 80% may be able to participate in HARP.
• Borrowers fees to participate in HARP will be reduced.
• To participate, borrowers must be current, have not been late on a payment in the last 12 months, and have a verifiable source of income.  Actual affordability ratio (how much income needed) has not been released.
• The new guidelines should waive the need for a full appraisal if a reliable Automated Valuation Model (AVM) is available on the property.
• Participation in HARP is a one-time opportunity.  If a homeowner has refinanced under the original HARP guidelines, they will NOT be able to refinance a second time under these new changes.
• Only mortgages that are owned by the Government Sponsored Enterprises (GSE's), -- Fannie Mae and Freddie Mac -- will be participating in the new program.  The mortgage must have been sold to Fannie Mae or Freddie Mac on or before May 31, 2009.  To determine if your loan is owned by Fannie or Freddie, you can use the following links:
• Fannie Mae Loan Lookup
• Freddie Mac Loan Lookup

What We Don't Know

This blog post was written on Monday 10/24/2011... and many of the details may change over time.  Please call a non-profit housing counselor for additional details about these HARP changes... or any other question you may have about your mortgage.

• When will homeowners actually be able to refinance their Freddie Mac- or Fannie Mae-backed mortgage?  Guidelines on the new program will be sent to lenders and servicers by November 15th.  After that, the lenders/servicers will have to convert those guidelines into actual policies and procedures.  This means that it may be mid-December or even early 2012 before a homeowner can actually participate.  In addition, the concept of the program is complicated by the fact that certain servicers DO NOT ORIGINATE loans and may not have the capacity to originate the new HARP loan - without extensive (and time-consuming) changes to their internal systems.  PLUS, as we've seen with the original HARP program, there may be inconsistencies from one servicer to another.
• What will happen to homeowners in the following circumstances:
• Multiple mortgages - second lien holders will have to agree to 're-subordinate' their loan to the newly refinanced loan.  While there is no risk to the junior lien holders... we don't know which, if any, second lien holders will agree re-subordinate their mortgages.
• Private Mortgage Insurance Holders - PMI holders have agreed to make the transfer of insurance from one loan to another easier... the details are still being worked out. 

Once again... as the guidelines to servicers and lenders will not be available until November 15th... it will take several additional weeks for the lenders and servicers to convert those guidelines into policies and procedures, meaning that it may a couple of months before homeowners can access this new phase of HARP.

HAMP, HARP and Now HAFA too?

Last week we mentioned that HAMP and HARP were members of the duet known as Making Home Affordable... well... the group has added a third band member and is now a trio.

The U.S. Treasury has announced the "Home Affordable Foreclosure Alternatives" (HAFA) Program which is designed to help struggling homeowners who are unable to qualify for a mortgage modification under the Home Affordable Modification Program (HAMP).

HAFA sings backup for HAMP, and provides incentives to servicers/lenders as well as borrowers to move forward with a short sale or deed-in-lieu of foreclosure.

Just as an FYI, in a short sale situation, the mortgage holder allows the homeowner to sell the property for a price short of the balance owed on the property’s loan.

The Center will be working on a more in-depth fact sheet over the coming weeks, but the basics of the program are as follows:

• Should speed up the Short Sale process, as it uses borrower financial and hardship information that was collected when they applied for a HAMP modification.
• Allows borrowers to receive PRE-APPROVED short sales terms (including minimum price accepted, proceeds to owner and real estate agents, etc.) BEFORE listing the property.
• KEY: While in Minnesota, as a non-recourse state, first mortgage debt is fully released from future liability, under HAFA, subordinate lien holders that receive an incentive under HAFA must also FULLY RELEASE that debt as well.  This means that homeowners will not have to sign a promissory note or worry about a future deficiency judgment.  (NOTE: This is ONLY if the junior, or subordinate, lien holder receives money under HAFA.
• Unifies documents, timeframes and deadlines to speed up the process.
• Provides financial incentives for all parties.  $1,500 to the borrower for relocation assistance and $1,000 for servicers to cover admin costs, and up to $3,000 in short sale proceeds to be shared among subordinate lien holders.  In most cases subordinate lien holders see nothing from a short sale... and have been the reason that many short sales have fallen through.  It will be interesting to see if this incentive changes their attitude.  It will be especially interesting to see if junior lien holders will be willing to trade possible FUTURE JUDGMENTS for a rather small ($3,000) incentive today.
• Requires ALL SERVICERS participating in HAMP to implement HAFA.
• Goes into effect on April 5th, but lenders and servicers may begin sooner if they choose.  The program is scheduled to end on December 31, 2012.
• Homeowners that are denied for a HAMP modification MUST receive a notification from their lender/servicer, in writing, of the HAFA option and give the borrower 14 days to respond orally or in writing.

Who qualifies for HAFA?

The homeowner must meet the basic eligibility criteria for HAMP

• the loan must be on their Primary Residence (no investors or second homes);  
• 1 to 4 units, as long as one of the units is the owner's primary residence;
• First lien originated before 2009 Mortgage either delinquent or in imminent danger of default,
• Unpaid principal balance no more than $729,750;
• Borrower’s total monthly PITIA payment exceeds 31% of gross income.

BIG QUESTIONS still remain about the program:

• Will homeowners that won't be able to hold on to their properties go through the extra effort to sell... or simply walk away.  "Post-HAMP-Denial-Strategic-Default"
• What effect will this new program have on already-pressured sales prices?  Short Sales already put a downward pressure on local "comps".  What will happen when there is a FLOOD of HAFA-generated short sales?
• What procedures are in place to prevent fraud?  Real Estate Agents are being called upon to help the bank determine the price they'll accept, and once the price is set, any offer over the minimum amount MUST be accepted by the bank.  This could be a magnet attracting fraud at all kinds of levels.

Feel free to respond in the comments!

Home Affordable Refi Program Extended

The Home Affordable Refinance Program (HARP), the lesser-known half of the "Making Home Affordable" duet, has been extended for one more year, and will now be available through June 30, 2011, according to a statement from the Federal Housing Finance Agency.

The idea behind the HARP program is to allow borrowers who owe up to 25% more than their homes are currently worth* to refinance to a quality, fixed-rate mortgage.   

The Minnesota Home Ownership Center has a fact sheet that can help understand the basics of the entire "Making Home Affordable" program, here.

ALSO... we couldn't post about loan modifications / refis with warning Minnesota Home Owners, AGAIN, to make sure that they DO NOT PAY for any third-party loan modification service. Deal directly with your lender yourself, or with one of our free, non-profit Foreclosure Counselors. For additional warnings about for-profit loan modification companies (and scams)... visit here.  To find your local non-profit Foreclosure Counselor, click here.

* While program guidelines allow for 125% Loan-To-Value (LTV) amounts... most lenders are only allowing 105% or less LTV... one of the major drawbacks to the program.