Obama Plan - Can You Benefit?

Fannie Mae and Freddie Mac have just released details on how they will handle refinance transactions authorized by the Home Affordable Refinance program. The complete details of both programs can be found by accessing the program guides from Fannie Mae and Freddie Mac, but we will discuss some of the highlights below.

You probably have seen already that lenders and investors are in a holding pattern, as they determine if, when and how they will accept these transactions. Even though this legislation has passed - they are not all required to participate. For right now, your very first step is to contact your existing servicer, and get information from them as to their participation.

In the case of all loans, th ey have to be delivered back to the existing owner of the loan today. Meaning, if Fannie Mae is the owner of the loan, the loan must be delivered to Fannie Mae and underwritten according to their guidelines. The same is true for Freddie Mac.

You must determine who owns the loan. A borrower has the ability to do this by contacting their servicer and asking...or by using the links below. Note that the property address must be entered exactly as the agency has it on file, or it may not be found (ie: Rd or Road? St or Street? You may want check how it appears on your statement.)

Does Fannie Mae Own Your Mortgage?

Does Freddie Mac Own Your Mortgage?


Let's look at the guidelines for both Fannie Mae and Freddie Mac and point out some of the key factors we see that will impact or enhance your ability to participate.

One key point to remember is that these are the guides as they are originating from the agencies. And just as participation in the programs is voluntary, individual investors and servicers may choose to implement constraints that deviate from the guidelines, much in the same manner that we are seeing additional underwriting overlays in the processing of loan files today.

Fannie Mae

Let's look at the difference between the types of refinancing available from Fannie. The primary difference for originators is as follows between the two programs..

DU Refi Plus

Available to all Fannie Mae approved lenders using DU; borrower must credit qualify.
Available across all lending channels (retail, wholesale and correspondent).

Refi Plus

If a client does NOT qualify for DU Refi Plus, they may still be able to refinance, but would have to work directly with the current servicer, or one of the servicer's affiliates or retail channels.

Many of the guidelines are similar for both DU Refi Plus and Refi Plus. Similarities include:

That the borrower must be receiving either a lower mortgage payment or moving to a more stable type of product like an ARM to a Fixed-Rate. ARM programs are available but must have initial fixed periods of five years or greater.
The maximum LTV is 105%. There is no limitation on CLTV, but 2nd lien holders will need to re-subordinate.
If PMI does not exist on the loan today, it will not be required on the new loan, regardless of LTV. If PMI does exist on the loan, the loan will be required to be re-insured through the existing PMI company.
LLPA's (loan level pricing adjustments) exist for both loans, see guides for details or consult your investors.
The availability for appraisal waivers will exist in limited situations.
Freddie Mac
The Freddie Mac guidelines are somewhat similar to Fannie Mae's, but if you go through the detailed guidelines linked above, you will see they are a bit more vague at this time. Although Freddie Mac initially stated that these refinances may ONLY be originated by the servicer or one of their retail or affiliate channels, right as this article of the release of this article, we have learned from a source at Freddie Mac that they are looking at options that could enable more originators to be involved in refinances under this program.

One potential area that could cause a problem is that while no cash out is allowed, funds extended to cover closing costs may not exceed $2,500.

Additional Resources:


Does Fannie Mae Own Your Mortgage?

Does Freddie Mac Own Your Mortgage?

What is a Loan Modification?

What is a Loan Modification?

Loan Modification is arguably the best tool that can be used by homeowners in the midst of financial hardship to save their homes from entering foreclosure.

According to the HUD website, a Loan Modification is a permanent change in one or more of the terms of a mortgagor's loan allowing the loan to be reinstated which in turn results in a payment the mortgagor can afford.

Loan modification is a term very unfamiliar to homeowners but not for very long. What most people are coming to realize is that losing their home to foreclosure is becoming a real possibility. Home foreclosure in America today is at an all time high and is affecting many homeowners that never believed they could lose their home to foreclosure. Homeowners are feeling the crunch of higher interest rates, fuel costs, and a slowing economy. A loan modification may be the only way for a homeowner to save their home. Negotiating with the bank for a modification of your home loan can be an overwhelming process for many homeowners and Pinnacle Hill Consulting is here to take the guesswork out of the entire process and keep you in your home at a payment you can afford.

To ensure that you understand what a loan modification can actually do for you, consider the following facts:

* A loan modification is indicated when the original loan that is secured by a residence has terms that make it impossible for the homeowner to continue making the payments, thus risking the loss of the residence.
* Loan modifications are not the same as debt consolidations, refinancing loans, or even forbearances. Instead, they are long term solutions for rising interest rates or other hardships that are threatening to overwhelm the budget of a homeowner.
* Loan modifications typically involve a reduction in the interest rate, principle balance or an extension of the length of the term of the loan. In some cases the resolution involves a different type of loan or a combination of the three.
* Loan modifications stop foreclosure proceedings and instead reinstate the loans as they are being modified.

The following are some of the factors that explain why lenders are actually in favor of working with the borrowers and their negotiators in order to reach an equitable loan modification agreement:

* All or portion of the outstanding principal and interest, past due escrow, late fees, and even costs may be rolled into the loan modification and thus will not be lost revenue to the lender. Since they are spread over a long period of time, they do not pose a problem to the borrower.
* Modified mortgages may use a step rate approach or an extended term methodology to provide for the repayment of the due and past due funds. The lower payments ensure the repayment by the borrower while to the lender the added time is actually money in the bank in terms of yet to be earned interest due.
* Foreclosure is avoided and even though banks routinely foreclose on properties and sell the homes to other buyers for a fraction of a price, the slowing housing market has made it difficult for banks to unload such properties and then recover any additional funds from the previous homeowners. Loan modification is a fiscally much more attractive solution for any lender.
* A modified loan protects the credit rating of a borrower and it also helps lenders in showing less defaulting loans in their portfolio. This of course makes a good impression when the financial institution is wooing potential investors.

For more information please visit www.pinnaclehillconsulting.com.