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The Federal government has recently changed its guidelines on refinancing.

Homeowners who are “underwater” in regards to value in their homes can now also take advantage some of the lowest rates in 60 years, regardless of your appraised value or loan amount.

The Federal Housing Administration will reduce mortgage fees significantly for borrowers who qualify for the FHA’s streamline refinance program, after June 11, 2012.
Since the financial crisis of 2008, more than 750,000 borrowers have refinanced their mortgages through FHA’s streamline program, according to data from the Department of Housing and Urban Development. More than half of those refinances took place in 2009 after the housing and mortgage markets collapsed.
But rising mortgage insurance premiums on FHA loans have become an obstacle for many homeowners who want to refinance. Depending on the size of the loan, the fees can eat up much of what the borrower would save through the refinance. FHA asserts that lowering the MIP rates for streamline refinances will not incur taxpayer expenses or jeopardize its mutual mortgage insurance fund.
In this streamline program, the FHA asks for limited documentation from borrowers and doesn’t require an appraisal of the home. The no-appraisal rule allows owners to refinance even if they owe more on their mortgages than their houses are worth.
The lower fees go into effect June 11 and will be available to borrowers who refinance loans that were endorsed by the FHA before June 2009. FHA estimates that there are approximately 3.4 million households with qualifying FHA mortgage loans with mortgage rates over 5 percent.
The average household could save about $250 per month or $3000 annually using streamline refinancing.
Acting FHA commissioner Carol Galante remarked that lowering the insurance premium rates for streamlining FHA mortgages “is one way that FHA can help homeowners who are doing the right thing, paying their bills on time and who want to take advantage of today’s low interest rates.”
The program is providing an inexpensive method of refinancing, which can prevent foreclosures and provide homeowners with additional cash for paying bills and meeting essential household expenses.
The FHA Streamline Refinance is a unique mortgage product, available to homeowners with existing FHA home loans only. The program was built to be the fastest, simplest way for an FHA-insured homeowners to refinance their respective mortgages. The FHA Streamline Refinance’s big attraction is the leniency of its underwriting standards.
But In Order to Qualify, You Must Meet This Criteria…
    Your current FHA mortgage must have been assigned before May, 2009
    You must be current on your mortgage and not been late over the last 12 months consecutive.
If you meet these two criteria, you may be FHA Streamline-eligible and below are a few other items to consider,
If you had a bankruptcy, you are most likely eligible, but please call expert Loan officers and other mortgage professionals for more information about your particular situation.
There are many options available, including a “no-closing cost” option where you won’t have to come out of pocket for the refinance.
And remember: you may “not” need an appraisal to qualify.
The Federal Housing Administration will reduce mortgage fees significantly for borrowers who qualify for the FHA’s streamline refinance program. Again, the lower fees go into effect June 11 and will be available to borrowers who refinance loans that were endorsed by the FHA before June 2009.
The new, lower fees will make streamline refinances much more feasible to borrowers, as some estimates when the new fees take effect will be, a borrower refinancing $200,000 will pay $20 — instead of $3,500 — in upfront mortgage insurance. The borrower also will pay about $92 — instead of $208 — per month for annual mortgage insurance.
That’s because the FHA reduced the upfront mortgage insurance premium for eligible homeowners to 0.01 percent of the total loan and the annual premium to 0.55 percent of the loan.
In comparison the borrowers who are “not eligible” for the reduced fees under the streamline program, the cost of upfront mortgage insurance is 1.75 percent of the total loan and 1.25 percent of the loan per year.
Loan officers and other mortgage professionals say they have lists of clients who are waiting to refinance in June with the lower fees which could create a mini-refinance boom in June after the fees are reduced.
Remember that “No appraisal required”, except some lenders have overlays, if you are going from a 30-year to a (15-year mortgage) and your payment is not decreasing, or if you are removing one person off the title,” you’ll need an appraisal
As long as your mortgage payments decrease by at least 5 percent with the refinance, the lender does not have to order an appraisal of your home.
These guidelines are to help homeowners who are upside down on their mortgages.
Generally, lenders want a FICO score of 640 or higher for streamline refinances, Some lenders are willing to accept 620 and a few will go lower than that, but they usually charge higher rates on loans with lower scores.The FHA does not require a minimum credit score for streamline refinances, but the lender that is refinancing your mortgage will likely have its own requirements, as an additional “overlay”
With the streamline program, the FHA allows borrowers to refinance without having to show proof of employment and income. Although some states have laws that require lenders to verify borrowers’ income on all mortgages regardless of what the federal program allows. And in some cases you will likely be asked to present documentation that shows you can afford the mortgage payments.
In the last few years Lenders have been reluctant to underwrite mortgages without asking for full documentation and minimum credit scores, especially when many of the mortgages they are being asked to refinance have lower values and are underwater.
So these new guidlines should encourage lenders to embrace streamline refinances, since the government has changed the way it evaluates lenders’ FHA loan portfolios. The FHA has a scoring system based on the performance of each lender’s FHA loans. If a particular lender has too many delinquent loans compared to other lenders, the FHA may stop doing business with that lender.
Historically, the FHA Streamline Refinance has been an excellent program with lots of success stories and it remains the fastest, easiest refinance loan program in the country.
The FHA will start accepting these new streamline loans after June 11, 2012 but borrowers can begin the application process now in anticipation of the new program.
Everyone needs to be sure to find the ethical honest “Real Estate Industry Professionals” willing to assist the “American Homeowners”  who are “underwater” in regards to value in their home, be sure to  educate yourself, and beware of the mortgage fraudsters. Mortgage fraud is a material misstatement, misrepresentation, or omission relied on by an underwriter or lender to refinance, fund, purchase, or insure a loan.
If you have questions or need to know if you are dealing with a ethical or reputable lender, send an e-mail and I will attempt to assist you in the order the e-mails are received.

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The Treasury Department will cap the amount of mortgage modifications property investors can receive under a revamped Home Affordable Modification Program, officials said this week, to no more than a handful.

In January, the Obama administration expanded the program to allow homes occupied by someone other than the owner. There were other changes as well, including higher incentives for reducing principal, writing down second liens and loosened debt-to-income qualifications.

Before the changes, HAMP was expected to reach roughly 800,000 borrowers after Click Here for Full Video/Article (Members Only)

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To Your Continued $uccess!

Mike Butler

The 16-month robo-signing saga ends with a $26 billion settlement.

Nearly all 50 states agreed to a deal with Bank of America ($8.13 0%), JPMorgan Chase ($38.30 0%), Wells Fargo ($30.63 0%), Ally Financial ($23.31 0%) and Citigroup ($34.23 0%). Oklahoma AG Scott Pruitt is the only one not to sign.

If another nine smaller servicers join the settlement, the deal could rise to $30 billion.

Evidence arose showing these firms and their processors allegedly signed foreclosure documents en masse without a proper review of the loan file, evicted homeowners while in the modification process, and other abuses.

Iowa Attorney General Tom Miller led a multi-state coalition with the Justice Department and the Department of Housing and Urban Development beginning in October 2010. Since then, a settlement has been perpetually imminent as negotiations dragged on in the largest federal settlement with a single industry since a deal with tobacco companies in 1998.

Roughly $5 billion of the funds will be used as $2,000 payouts to hundreds of thousands of borrowers affected by the abuses and were foreclosed on between the beginning of 2008 and the end of 2011. A portion of the $5 billion will also go to the states.

Nearly 8.9 million properties received at least one foreclosure filing since 2007, according to Realty Trac.

Another $17 billion will be used as “credits” toward writing down principal on roughly 1 million loans mainly held in the bank servicing portfolios.

However, officials said some of the principal reductions will go toward mortgages in private-label securities, meaning investors will take some of the hit. However, the “credits” would be significantly less for mortgages held in private MBS holdings.

Banks must comply with any pooling and servicing agreements with investors, meaning before a servicer can write down principal on a mortgage in a privately held MBS, it must pass the net-present value test. Only “a couple” of the servicers would do this, officials said.

Roughly $10 billion of the $17 billion held for principal reduction credits will go to borrowers who are delinquent on their mortgages.

Not every dollar the servicers reduce from the principal will be “credited” from the $17 billion the banks agreed to.

For every dollar forgiven, roughly 50 cents or less will be credited under the $17 billion number. Officials said the settlement would ultimately result in an estimated $45 billion in total principal reductions.

Another $3 billion will be spent on refinancing borrowers who owe more on their mortgage than their home is worth. The servicers will send plans to an oversight monitor to be determined on how they would solicit borrowers for the refinance program.

As part of the deal, Bank of America will send $1 billion cash to the Federal Housing Administration as part of the settlement.

“We believe this settlement will help provide additional support for homeowners who need assistance, brings more certainty to the housing market and aligns to our ongoing commitment to help rebuild our neighborhoods and get the housing market back on track,” said a Bank of America spokesman of the entire deal completed Thursday.

The servicers are required to complete the fixes within three years. The AGs built in incentives for relief provided within the first 12 months. The servicers are required to reach 75 percent of their targets within the first two years. Servicers that miss settlement targets and deadlines will be required to pay “substantial” cash amounts.

California and New York were in deep negotiations well night Wednesday.

California will get $18 billion of the agreement. California AG Kamala Harris left the multi-state negotiations last September when the estimated relief to the state was $4 billion.

“California families will finally see substantial relief after experiencing so much pain from the mortgage crisis,” Harris said. “Hundreds of thousands of homeowners will directly benefit from this California commitment.”

New York will receive $648 million in assistance from foreclosure settlement, including $495 million for principal reductions.

The settlement also establishes servicing standards similar to those agreed to in the federal consent orders signed last year.

Robo-signing, and dual-track foreclosures are forbidden and new processes are required to be put in place in order to clean up lost paperwork and oversight of document processors.

“In the past it’s been a dysfunctional system. This set of guidelines has the potential to change all that,” said Iowa AG Tom Miller. “I have a message for the banks. This is an opportunity for you to change things for the benefit of the homeonwers, the investors, yourself and your reputation.”

The settlement will also clear participating AGs to work with a federal fraud task force.

New York AG Eric Schneiderman will co-chair a task force with the Justice Department and HUD, reversed his previous decision to not sign onto the foreclosure deal. He was removed from the central negotiation committee last year when he tried to expand the scope of the investigation into securitization and other issues. His task force, along with California AG Kamala Harris and several other AGs, will look into secondary market and other fraud outside of the robo-signing probe.

Also as part of the deal, Schneiderman will not have to drop his suit against the banks for their use of the Mortgage Electronic Registration Systems.

“This historic settlement will provide immediate relief to homeowners – forcing banks to reduce the principal balance on many loans, refinance loans for underwater borrowers, and pay billions of dollars to states and consumers,” said HUD Secretary Donovan. “Banks must follow the laws. Any bank that hasn’t done so should be held accountable and should take prompt action to correct its mistakes. And it will not end with this settlement.”

By Jon Prior from the Housing Wire

Freddie Mac has invested billions of dollars betting that U.S. homeowners won’t be able to refinance their mortgages at today’s lower rates, according to an investigation by NPR and ProPublica, an independent, nonprofit newsroom.

January 30, 2012

Freddie Mac, a taxpayer-owned mortgage company, is supposed to make homeownership easier. One thing that makes owning a home more affordable is getting a cheaper mortgage.

These investments, while legal, raise concerns about a conflict of interest within Freddie Mac.

“We were actually shocked they did this,” says Scott Simon, who heads the mortgage-backed securities team at the giant bond trading and investment firm called PIMCO. “It seemed so out of line with their mission, out of line with what Congress wanted them to do.”

Freddie Mac, formally called the Federal Home Loan Mortgage Corp., was chartered by Congress in 1970. On its website, it says it has “a public mission to stabilize the nation’s residential mortgage markets and expand opportunities for homeownership.” The company is owned by U.S. taxpayers and overseen by a regulator, the Federal Housing Finance Agency (FHFA).

In December, Freddie’s chief executive, Charles Haldeman, assured Congress his company is “helping financially strapped families reduce their mortgage costs through refinancing their mortgages.”

But public documents show that in 2010 and 2011, Freddie Mac set out to make gains for its own investment portfolio by using complex mortgage securities that brought in more money for Freddie Mac when homeowners in higher interest-rate loans were unable to qualify for a refinancing.

Those trades “put them squarely against the homeowner,” PIMCO’s Simon says.

Freddie Mac’s trades came at a time when mortgage rates were falling to record lows. Millions of homeowners wish they could refinance, but their lenders tell them they can’t qualify for today’s low rates because of tight rules. Freddie Mac is one of the gatekeepers with the power to set those rules, and lately, it has been saying no more often to homeowners.

That raises concerns among some industry insiders who see a conflict: Freddie Mac’s own financial health improves when homeowners can’t refinance.

Simply put, “Freddie Mac prevented households from being able to take advantage of today’s mortgage rates — and then bet on it,” says Alan Boyce, a former bond trader who has been involved in efforts to push for more refinancing of home loans.

In the summer of 2010, long lines of hopeful homeowners waited for help from the Neighborhood Assistance Corporation of America’s “Save the Dream” tour. The tour made stops around the U.S., offering assistance from hundreds of mortgage counselors from various mortgage companies.

Freddie and FHFA repeatedly declined to comment on the specific transactions, but Freddie did say that its employees who make investment decisions are “walled off” from those who decide the rules for homeowners.

When Homeowners Lose, Freddie Mac Wins

Freddie Mac, based in Northern Virginia, says its job is to purchase “loans from lenders to replenish their supply of funds so that they [the lenders] can make more mortgage loans to other borrowers.” That’s one reason why Freddie has a gigantic portfolio containing loans that generate income from mortgage payments. Critics say this investment portfolio has been allowed to grow far larger than necessary to further Freddie’s policy mission.

Plus, in 2010 and 2011, Freddie didn’t just hold a simple pile of loans. Instead, for hundreds of thousands of home loans, it used Wall Street alchemy to chop these loans up into complicated securities — slices of which were sold in financial markets.

    This hypothetical example may help explain what happens:

    1) Freddie Mac takes, say, $1 billion worth of home loans and packages them. With the help of a Wall Street banker, it can then slice off parts of the bundle to create different investment securities, some riskier than others. The slices could be set up so that, say, $900 million worth are relatively safe investments, based upon homeowners paying the principal on their mortgages.

    2) But the one remaining slice, worth $100 million, is the riskiest part. Freddie retains that slice, known as an “inverse floater,” which receives all of the interest payments from the entire $1 billion worth of mortgages.

    3) That riskiest investment pays out a lucrative stream of interest payments. But Freddie’s slice also has all the so-called “pre-payment risk” associated with that $1 billion worth of loans. So if lots of people “pre-pay” their old loans and refinance into new, cheaper ones, then Freddie Mac starts to lose money. If people can’t refinance, then Freddie wins because it continues to receive that flow of older, higher interest payments.

If the homeowner is unable to refinance, the Freddie Mac portfolio managers win, Simon says. “And if the homeowner can refinance, they lose.”

Refinancing A Path To Recovery…

“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 rates,” Obama said during his State of the Union speech last week. “No more red tape. No more runaround from the banks.”

In his State of the Union address, President Obama pushed for legislation to allow “every responsible homeowner the chance to save about $3,000 a year on their mortgage” by refinancing without what he called “red tape” or a “runaround from the banks.”

Columbia University economist Chris Mayer supports such an approach. “A widespread refinancing program would have many benefits — not only helping the economy and putting tens of billions of dollars back in consumers’ pockets, the equivalent of a very long-term tax cut,” he says.

“It also is likely to reduce foreclosures and benefit the U.S. government by having fewer losses that they have to pay,” Mayer adds.

In the long term, he says, allowing more Americans to refinance would help taxpayers as well as mortgage giants Freddie Mac and Fannie Mae, because they would suffer fewer losses related to foreclosures. These inverse floater trades, however, give Freddie Mac a short-term incentive to resist such so-called “mass re-fi” programs.

“If there was a mass re-fi program, the bets they made would get absolutely wiped out,” PIMCO’s Simon says. “The way these bets do the best is if the homeowner is barred from refinancing.”

In a written statement, Freddie said it “is actively supporting efforts for borrowers to realize the benefits of refinancing their mortgages to lower rates.” It also says it refinanced loans for hundreds of thousands of borrowers just last year.

Fannie and Freddie have taken part in an existing federal program known as “HARP” to help Americans refinance, but many economists say far more homeowners would benefit if Fannie and Freddie were to implement the program more aggressively.
The Silversteins had trouble selling this house after they moved out, forcing them to carry two mortgages for more than two years. “It just drained us,” says Jay Silverstein.
Enlarge Chris Arnold/NPR

The Silversteins had trouble selling their house after they moved out, forcing them to carry two mortgages for more than two years. “It just drained us,” says Jay Silverstein.

Stuck In ‘Financial Jail’

Some homeowners believe the current re-fi game is stacked against them.
If Jay and Bonnie Silverstein were able to refinance their mortgage, they could save nearly $500 a month.

Jay and Bonnie Silverstein describe themselves as truly stuck in a bad mortgage. They live in an unfinished development of yellow stucco houses north of Philadelphia. The developer went bankrupt.

The Silversteins bought this home before the housing market crashed, and then couldn’t sell their old house. They now say that buying a new home before selling the old one was a mistake — a painful one. Stuck with two mortgages, they started to get behind on their payments on the old house.

“It wound up taking us years to sell that house, so we had two homes and two mortgages for two-and-a-half years,” Jay Silverstein says. “It burned up my 401(k) and drained us.”

Jay Silverstein has a modest pension, and they haven’t missed a mortgage payment on their current home. Still, they are struggling. They could make the monthly payment on their new home if they could just refinance — down from their current interest rate of near 7 percent to today’s rates below 4 percent. That could save them roughly $500 a month.

“You know, we’re living paycheck to paycheck,” he says. A lower rate “might go a long way toward helping us.”

But that’s the problem — getting approved for a refinancing. Here’s why: After the housing market crashed, the Silversteins’ old house had to be sold for less than the mortgage was worth. That’s known as a short sale.

Freddie Mac has been tightening lending restrictions, and one of its restrictions blocks people with a short sale in their past from refinancing for up to four years following that short sale. So the Silversteins are stranded by the rule.

“We’re in financial jail,” Jay says. “We’ve never been there before.”
One of Freddie Mac’s restrictions blocks people who have a short sale in their past from refinancing for two to four years following the short sale.

Tight For Homeowners, But Elsewhere, Money Still Flows

Economists say that during the housing bubble, lending standards got too loose. Now many believe the pendulum has swung too far, making rules too tight.

The short-sale restriction may be a good example. For a home purchase, such a rule may be prudent, but allowing people with existing loans to refinance actually lowers the risk that they may default by giving them more affordable mortgage payments.

In a recent analysis of remedies for the stalled housing market, the Federal Reserve criticized Fannie and Freddie for the fees they have charged for refinancing. Such fees are “another possible reason for low rates of refinancing,” the Fed wrote, adding that the charges are “difficult to justify.”

Meanwhile, even though Freddie is a ward of the federal government, its top executives are highly compensated. The Freddie Mac official then in charge of its investment portfolio, Peter Federico, made $2.5 million in 2010, and had target compensation of $2.6 million for last year — the time period during which most of these inverse floater investments were made. ProPublica and NPR made numerous attempts to reach Federico. A woman who answered his home phone said he declined to comment.

NPR’s Uri Berliner and Marilyn Geewax also contributed to this report.

How Homeowner Assistance Fell Short

Freddie Mac: Mortgage giants Freddie Mac and Fannie Mae were government-sponsored enterprises that nearly failed during the 2008 financial crisis that brought down the U.S. housing market. The government took over the companies that year; it has sunk more than $169 billion into keeping them afloat. Freddie Mac was chartered by Congress in 1970.

“Our statutory mission is to provide liquidity, stability and affordability to the U.S. housing market,” Freddie Mac says on its website. Fannie and Freddie own or guarantee trillions of dollars worth of mortgages and mortgage-backed securities. The Securities and Exchange Commission has charged that six former top executives of Frannie and Freddie misled investors about the firms’ exposure to high-risk mortgages.

FHFA: The Federal Housing Finance Agency has regulated Freddie Mac and Fannie Mae since the government took them over in 2008. The FHFA was created as part of the Housing and Economic Recovery Act of 2008, which was designed in part to allow borrowers to refinance with lower-cost, government-backed mortgages.

The Obama administration has been pressing the FHFA to allow more homeowners to refinance their government-backed loans at lower rates. But so far, programs to help millions of homeowners lower their costs have fallen short of expectations.

Refinancing: With mortgage rates at historic lows, millions of homeowners could save hundreds of dollars a month by refinancing their mortgages. Rates for 30-year fixed-rate mortgages have remained below 4 percent for several weeks in a row. But many homeowners can’t qualify for refinancing because their homes are “underwater” — the value has dropped far below the amount that they owe on their mortgages. In many cases, they can’t get a “re-fi” because they have been tripped up by a tangle of complicated eligibility requirements and paperwork.

— Avie Schneider from NPR

In the real world, it’s not if you will be asked, but when you will be asked for some kind of personal loan from your great employee(s) or contractors.

Sure it would be easy to announce ‘NEVER Do That!”

but, most investors I know, have a huge heart and truly enjoy helping people.

Here is a proper way to “help your people” and cover your butt.

FYI, you should NOT do this like a Pay Day Cash Advance business. This should be, at most, allowed once every year or two. If you allow this to be “common practice,” you will get beat up and you will LOSE BIG TIME.

This is a very frustrating and pain in the butt activity, and it should be avoided as your first rule.

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The Treasury Department will triple payments to mortgage investors for reducing borrower principal through an expanded Home Affordable Modification Program announced Friday.

Officials announced several critical changes to HAMP, including an enrollment extension to Dec. 31, 2013, from its original expiration date at the end of this year.

The Treasury will also require servicers to factor in second liens and other obligations in the debt-to-income ratio calculation. Previously, if a borrower’s first-lien mortgage monthly payment was below 31% of the income, the borrower was deemed ineligible. Factoring other debts to the DTI evaluation will expand the pool of borrowers who could receive the assistance.

To combat blight,

officials said they would also

expand HAMP to investors who are renting properties to tenants.

Since HAMP launched in March 2010, more than 900,000 permanent modifications have been conducted. The Treasury originally estimated the program to reach between 3 million to 4 million borrowers. As of Dec. 1, less than 1 million were estimated to be eligible for the program under past rules.

Of the modifications already given, roughly 36,400 resulted in reduced principal as of Dec. 1. The Treasury paid between six and 21 cents to the investors for each dollar forgiven under HAMP, but that will grow to between 18 and 63 cents, under the rule changes.

In a conference call Friday, Treasury Assistant Secretary Tim Massad would not estimate how many borrowers would be eligible after the changes, but he did say mortgage servicers were signaled some expansion, even for principal reduction.

“We have previewed the changes with the servicers,” Massad said. “We got a very positive initial reaction.”

Department of Housing and Urban Development Secretary Shaun Donovan said in the conference call Friday that the Treasury would make these payments to Fannie Mae and Freddie Mac if they participate in the principal reduction program.

To date, the GSEs have not committed to such a program.

Both GSEs owe the Treasury $151 billion in bailouts, and their regulator the Federal Housing Finance Agency said a wide-scale principal reduction program would cost Fannie and Freddie $100 billion.

Of the $29.9 billion allocated for HAMP and other housing programs, the Treasury has spent only $2.3 billion. The Treasury still owes another $9 billion to $10 billion for the modifications already done, Massad said.

Donovan renewed calls for servicers to ramp up principal reductions, and reiterated that they would be a main tool in crackdowns stemming from the ongoing foreclosure settlement talks and the securitization investigations launched this week.

“These changes aren’t going to solve all the problems in the housing market, but they shouldn’t have to wait for the market to hit bottom before getting some relief,” Donovan said.

article received from Jon Prior

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