Posted at 11:07 AM on October 25, 2011
by Paul Tosto
Filed under: Housing and mortgages
We're getting a ton of stories and responses this morning to our query on coping with underwater mortgages and the housing market. We'll be sharing some of them on the blog this afternoon.
On a first read of the announcement, the changes look to be aggressive, and will absolutely capture more borrowers who were frozen out of low-rate refinances. Itshould set off a refinance boomlet as pent-up demand rushes into the market to grab ultra-low rates.But before anyone gets too giddy, there are a few things worth understanding about how and when this new program will work out.Bottom line: While this is an encouraging set of changes, and will allow hundreds of thousands of additional refinances, implementation and participation by the private lenders, servicers, mortgage insurers and others remains THE key to the success, and availability, of HARP II.
Carlos Gutierrez is a mortgage broker in Plymouth who's shared his insights with us throughout the recession and "recovery." He talked about the frustrations he's dealt with trying to make the current programs work.
"I work with 10 lenders and they are not consistent in their acceptance of Fannie and Freddie loans," he said. "Some accept loans to 95% of the appraised value, other to 105% and I have only one that accepts loans to 125% of the appraised value.
"I have one customer with a loan... sold "under duress" to Freddie Mac. Freddie owns the loan now, but no lender will refinance it with the special programs."
So what should be done?
"Make all lenders accept loans to 125% ( or more)," Gutierrez said. "Somehow accept loans that now have mortgage insurance. Accept loans that Fannie and Freddie bought from bankrupt lenders ( it is not the borrower's fault).Allow borrowers to go from a fixed mortgage to an ARM (adjustable rate mortgage).
Hans Hansen, a banker from Spring Lake Park, shared frustration about his own circumstance.
I have called to attempt to refinance three times in the past two years. Each time the value of my home has declined to the point where I did not qualify. I also did not qualify due to the fact that I do not have a government guaranteed loan (Freddie Mac or Fannie Mae). I have never been late on a payment, and that was also used by the bank as a reason I could not refinance - apparently, these programs are only for those in peril of foreclosure.
Mortgage restructuring should be allowed for anyone current on their mortgage. I would be able to save over $350 per month if I could refinance at current rates.