Danny Salas

Archive for the 'Loan Qualification' Category

Clearing up Confusion on HARP Loans

Freddie Mac and Fannie Mae have adopted changes to the Home Affordable Refinance Program (HARP) and you may be eligible to take advantage of these changes.

If your mortgage is owned or guaranteed by either Freddie Mac or Fannie Mae, you may be eligible to refinance your mortgage under the enhanced and expanded provisions of HARP. 

To see if your home loan is serviced by Fannie Mae, go to:  http://www.fanniemae.com/loanlookup/  

To see if your loan is currently serviced by Freddie Mac go to:  www.freddiemac.com/mymortgage

See the Federal Housing Finance Agency’s News Release on HARP changes go to:  http://accessloans.net/2011/10/24/harp-changes-to-reach-more-borrowers/

 

Clearing Up (or Causing More) Confusion on HARP Loans

The Federal Housing Finance Agency (FHFA) recently announced changes to the Home Affordable Refinance Program (HARP) to assist more home owners with the ability to refinance their homes, and save themselves from foreclosure.  While this announcement has grabbed the attention of the news media and the public, it needs to be understood that this is an update to HARP, not an introduction to HARP.  These loans have been in place for years; however, the guidelines have been updated to assist more borrowers with more opportunities than we have experienced in the past.  However, eligibility for these loan programs will not start until December 1, 2011, and it may take time for the GSE’s (Fannie Mae and Freddie Mac) to get contracts solidified with individual banks.  So patients, regarding true availability of these loan programs, must be expected. 

HARP, consists of Fannie Mae and Freddie Mac loans whereby borrowers may refinance their existing mortgage, lower the interest rate, and therefore payments, even if they were under water or had no equity in their homes.  Old guidelines enabled people to refinance up to 125% of their homes’ value, while new guidelines will not limit the loan to value…so, you, potentially, could refinance a $200,000 loan, even if your home is worth $100,000.

Also, with the old guidelines, you were limited to 105% of the value of your home, if you had a second mortgage, that was going to stay on the home, and the two loans combined could not exceed 125% of the value of the home.  This has changed as well. 

Fannie Mae participates in HARP via a loan called “RefiPlus.”   Freddie Mac participates in HARP via a loan called, “Open Access.”  Fore simplicity purposes, I will discuss Fannie Mae’s RefiPlus program, however, similar rules follow Freddie Mac’s Open Access’ eligibilities. 

One of the biggest changes is the cost of these loans.  Here’s what needs to be understood:  With risk, there’s cost.  For example, if someone is buying an investment home, that’s a riskier loan for the GSE’s to sell, so they are more expensive loans.  You can pay those fees up front, or you can increase the interest rate on that loan, absorbing all, or a portion, of the additional fees.  Same thing with these HARP loans!  If you have no equity, it’s riskier for the bank, and therefore, the GSE’s would charge more money, when you delivered the HARP loans to them…and therefore, the bank would pass those fees onto the consumer.  What the Enhanced HARP Guidelines have done, is lower those delivery fees, so that it can benefit more people by keeping those costs, and therefore interest rates, down. 

In the past you couldn’t be late on any mortgage payment, in the past twelve months to qualify.  Now, it’s going to just be the past six months.  If your payment is increasing by 20% (from an adjustable to a fixed rate mortgage) you must meet other guidelines in order to be eligible, but you still may be eligible.  If you have had a bankruptcy or foreclosure, you may not have to wait the traditional four to seven years, in order to be eligible.  If your loan amount is greater than 80% of the value of your home, the maximum amount of increased cost, or delivery fees, to the GSE’s will be .75% Points.  A fraction of what we’ve seen in the past.  These fee changes will not go into effect for loans delivered to the GSE’s until January 1, 2012. 

So, you’ll notice that the application dates, for eligibility are December 1, 2011; however, the delivery of these loans to the GSE’s are January 1, 2012.  These dates aren’t too far apart; however, you’ll notice that they are particular, regarding when you make take an application, qualify for the new program, qualify for the lower fees associated with the enhanced program, and delivery of that loan to the GSE’s.  All of these particulars must be hashed out behind the scenes, before eligibility for consumers may be taken advantage of.  Banks need to have their internal guidelines changed, to accommodate, and educate their underwriters, staff, etc., on qualifying and delivering these loans in an appropriate manner. 

So, the changes are coming, however, we must be patient.  This IS an opportunity that should increase more HARP volume, and save more Americans from foreclosure.

 

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HARP Changes to Reach More Borrowers

News Release obtained from http://www.fhfa.gov/webfiles/22721/HARP_release_102411_Final.pdf

FEDERAL HOUSING FINANCE AGENCY News Release: 10/24/11

 

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The Smart Consumer’s Guide To Home Ownership

The Mortgage Guide Book

HomePath Renovation

Homepath Renovation: Step by Step

Only available on properties acquired from Fannie Mae that require moderate renovation and designated by Fannie Mae on the www.homepath.com website as eligible for HomePath Renovation financing. Lender must document the file with appropriate pages printed from www.homepath.com

• Borrower must be an individual, US citizen, permanent resident alien or non-permanent resident alien.
• 1-4 unit owner-occupied principal residences only. Second homes, investment properties, manufactured homes, condos and co-ops are not eligible
• 1-unit owner-occupied 97% max loan to value 2-4 units 75% max loan to value
• The LTV is calculated from the LESSER of the purchase contract plus the total renovation costs (which includes renovation costs and required contingency) or the “as- completed” appraised value.
• Full “as-completed” appraisal required.
• The renovations must be completed within six (6) months after the closing date.
• Total Cost: The total renovation costs, including contingency, may not exceed the LESSER of 20% of the “as completed” appraised value or $30,000.00. No work can be started prior to closing. Rehab solely for foundation work is not permitted. Any foundation repairs may require a licensed foundation contractor.  Borrower may use more than one contractor; however, additional doc prep charges may apply. Each contractor must submit a Contractor Questionnaire, be accepted by the lender for the program and provide a W-9. Do-it-yourself projects are not eligible.
• Do-it-yourself Projects. “Do-it-yourself” borrower projects are not allowed.
• Renovation Escrow Account. Funds for renovation will be placed in an insured, interest-bearing account.
• Minimum Credit score required is a 660
• Max Debt to Income allowed is 45% (may allow up to 50% with strong compensating factors)
• Mortgage Insurance is not required; however loans with LTV’s over 80% are subject to applicable loan-level pricing adjustments.
• Loan Terms are 30 year fully amortized fixed rates ONLY (No balloons; ARMs; Interest-only)
• Escrow deposits for taxes and insurance will be established at closing. Borrower must provide paid-up first year’s homeowner insurance policy as a requirement of loan closing.
• Contractor: Contractors must be licensed and/or registered as required by individual
  State and/or local guidelines. All contractors must meet credit and reference guidelines as established from time to time by Construction Loan Committee and in accordance with FNMA HomeStyle guidelines. A Contractor Questionnaire must be filled out and signed by the business principal and include vendor and homeowner references related to the proposed project(s).
• Contractor Questionnaire: Contractor(s) must be designated for the construction project. The contractor(s) must complete a Contractor Questionnaire. Include a complete Questionnaire and send to the Construction Lending Department. Contractors must be registered or licensed in accordance with applicable state laws.
• Multiple contractors may be allowed on a case-by-case basis. All contractors must provide completed Contractor Questionnaire and W-9 tax information.
• Agreed Contract: Borrower must enter into a written contract with each contractor who will be performing some or all of the work. Each contract must include (1) the total amount to be paid to the contractor for the work, (2) a description and itemization of the work, (3) the timeframe needed to complete the work and (4) agreement by the contractor that the work will be completed within three (3) months of the closing of the loan
• Appraisal: Appraisal to be subject to completion of improvements. Appraiser must reference the existing condition of the property and specify the work to be done in detail. The appraiser must be provided contracts as described above indicating a description and itemization of the work.
• NO Cash-out: Borrower’s closing statement cannot show any cash to Borrower.
• Draws: Draws will be sent by Lender to Contractor. Draw requests must be signed by both Borrower and Contractor before submitting to Lender.
• Completion: All improvements must be completed in 3 months from closing. A 30 day extension fee of $750 will be charged to Borrower for non-completion. An additional $750 will be charged for each additional 30 days.

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