Like so many homeowners across the country, you can start to sense a feeling of helplessness when attempting to refinance a loan which is higher than the current value of your home ... yes, you are underwater and looking for a fresh breath. Here's some info you may find helpful in your endeavor.
“A lot of people have been sitting and not doing anything,” said Cari Sweet-Kostoplis, a senior mortgage banker at Atlantic Home Loans in Lincoln Park, N.J. But they may qualify to refinance their loans through a variety of programs aimed at avoiding late or partial payments or foreclosure. “I don’t think a lot of people are aware that they have this option,” said Jeff Kinney, the vice president for innovation and development of Fannie Mae, who oversees refinancing activity. Because interest rates remain low, he said, refinancing may bring their payment “to a level that is sustainable to them and put money in their pockets.”
In the New York region, according to Zillow.com, some 17.1 percent of single-family homes right now are considered underwater, which means the owners owe more on the mortgage than the home is worth. (The national average of underwater properties is 28.4 percent.)
Those looking to refinance through programs offered by Fannie Mae and Freddie Mac, the government buyers of home loans, will first need to find out who holds or services their mortgage so they can determine whether they qualify. On their Web sites, both agencies provide links that show whether a particular address is in their portfolio.
Be careful, though, if you own an apartment. “Sometimes the system doesn’t recognize the unit” number, said Matt Hackett, the underwriting manager of Equity Now, a direct mortgage lender based in New York.
If your loan is owned by Fannie or Freddie, you may qualify for the Home Affordable Refinance Program, or HARP. Some 2.5 million to 3 million homeowners may be eligible to use HARP, according to government estimates — provided, among other things, that they have not been late on their payments more than once in the last 12 months.
Instead of the 80 percent loan-to-home-value required in most initial mortgages today (the remaining 20 percent comes from your down payment), HARP loans offer up to 125 percent, to cover the home’s shrunken value. That means a home appraised at $500,000 could warrant a loan of up to $625,000, if the owner’s income was sufficient to repay it, instead of the maximum $400,000 in most conventional mortgages.
Federal Housing Administration loans also have refinancing options. One of them, the F.H.A. Short Refinance option, requires the lender to write down at least 10 percent of the remaining balance of the loan and the homeowner to be current on payments, among other requirements. Still other programs are available for people who have lost their jobs.
If your loan is held by a bank or has been bundled up and sold to an investment group, your options may be more limited. “It is case by case,” Mr. Hackett said. You may need to call around to locate other lenders willing to refinance underwater loans.
Lenders like Atlantic Home Loans have started offering loans with lender-paid mortgage insurance, and will refinance at 95 percent of the value, Mrs. Sweet-Kostoplis said. She added that one of her clients reduced her mortgage payment by $850 a month when the rate came down to 4.5 percent from 6.7 percent.
When you meet with your mortgage officer, Mrs. Sweet-Kostoplis advised, don’t hide anything in your financial situation. “The mortgage person is on your team” and wants to help you stay in your home, she said. If you need help sorting out your options, HUD lists agencies and counselors whose advice is generally free.
Fannie Mae also has a broader umbrella, called Refi Plus, that can be used by people whose mortgages finance second homes and income properties. The programs have flexibility; most of them run through June 30, 2012.
Given where rates are, your immediate action could ring you the results you are looking for ... so pick up the phone and Good Luck to you.