Homeowners who have non-Fannie or Freddie related mortgages should contact their loan servicer’s loss mitigation department to see if special programs might be available at that institution.

With mortgage rates at record low levels, February saw a huge jump in refinances, but there should be more to come.  Fannie Mae said its refi business was three times January levels.  A new initiative coming out of the administration’s Making Home Affordable foreclosure prevention program will give another boost to refinances and reach some who have been ineligible for a refi under the old rules.

The Home Affordable Refinance will provide expanded refinance opportunities to borrowers with mortgages held or guaranteed by Fannie Mae.  A similar Freddie Mac plan is called the Relief Refinance Mortgage.  The initiatives are for borrowers who have demonstrated an acceptable payment history on their mortgage but due to a decline in home prices or where mortgage insurance (MI) is not available, have been unable to refinance to obtain a lower payment or move to a more stable product. 

The new program incorporates additional flexibility, notably, the maximum loan-to-value ratio has been raised to 105 percent to assist borrowers who have experienced home price declines. Qualifying refinancers can get fixed-rate mortgages up to 40-years duration or ARMs fixed for at least five years. 

The cost of the new Fannie Mae loan is determined according to a matrix of credit scores and LTV ratios.  Scores of 720 and up will generally get the very best rates and pay the lowest costs.  Those with the worst credit scores and high LTVs can be hit with discount point add-ons of as much as 3% of the loan amount in the Fannie Mae program. 

Freddie Mac’s risk fees are limited to 0.25%.  Aside from the risk fees, another big difference in the two programs is that Fannie Mae will allow borrowers to shop any Fannie Mae approved lender for the lowest closing costs.  Freddie Mac requires borrowers to refinance through the company that services their current loan.  The new Fannie and Freddie programs end June 10, 2010. 

Fannie and Freddie also are implementing loan modification programs under the Making Home Affordable plan for at-risk homeowners whose loans are owned or guaranteed by the two and who have either fallen behind on their mortgage payment or are in danger of doing so. 

You can contact me to find our whether Fannie Mae or Freddie Mac owns your loan.   For general information on the Making Home Affordable program, go to www.makinghomeaffordable.gov .

Josh Burley of Choice Finance

www.joshburley.net

What are my jumbo loan options?
Maryland – D.C. – Virginia – Delaware

Mortgage rates in March remained close to the record lows established in January.  At just under 5% for 30-year fixed-rate conventional mortgage, they are a powerful attraction as the spring home selling season gets underway. 

While rates for conforming mortgages have been excellent for some months now, rates for jumbo mortgages have been another issue. They have remained at extremely high relative levels since the mortgage market meltdown in 2007.  That is because, without the benefit of a guarantee from Fannie Mae or Freddie Mac, they have been difficult or impossible to sell to third party investors.  As a consequence, the lender who originates the loan generally has to keep it for their own portfolio, which is less profitable than selling them to get cash for new lending.  That has kept rate spreads over conforming loans, those up to $417,000 (temporarily as much as $729,750 in certain high cost areas) at 1 1/2% and up, depending on the lender and how much money they had for the program.

Rates would go up when money available became short. And, the programs’ availability was often spotty.  Now, some lenders are starting to get more aggressive in that part of the market.  Downpayments of 20-25% will be required, but the rate markup is being substantially reduced, to less than a percentage point.  And, as with most loans these days, substantial reserves (an amount equal to six months of principal, interest and taxes seems to be the gold standard) will be required, along with excellent credit and verifiable income.  Still, greater availability of jumbo loans will be great news for those buying (and selling!) in the higher tiers of the market.

Spring homebuyers should be aware of the overstressed condition of many lender/investors.  The high volume of refinances has been choking the mortgage pipeline and is not likely to ease soon with the introduction of Fannie Mae and Freddie Mac’s new refi programs. 

Because many mortgage lenders had pared down staff when business fell, so some are now overwhelmed, delaying the progress of mortgage paperwork.  As a consequence, make sure you have a sufficiently long rate lock period in place to be certain your loan has time to get approval.  The usual 30 days may not be enough. © 2009, Real Estate Information Services, Capitol Assets, & Choice Finance® (more…)