Friday, November 25, 2011

Not delinquent yet - NEW HOPE TO SAVE YOUR HOME

The government's expanded refinance program for underwater homeowners, dubbed HARP 2, looks better than expected for both borrowers and banks.

The Obama administration announced the broad outlines of the plan on Oct. 24. Fannie Mae and Freddie Mac filled in most of the details in guidance bulletins issued late Tuesday.

The new program greatly reduces or eliminates the risk-based fees Fannie and Freddie charge on many loans and virtually eliminates the chance that lenders will have to pay for losses on loans that go into default if they made underwriting mistakes. It also vastly streamlines the underwriting process.

Many borrowers won't qualify for the new program, but those who do could find it much easier and possibly cheaper to refinance than those who don't. Although lenders can begin taking applications Dec. 1, it could take several months before the new loans are made. Fannie Mae said it won't begin buying certain types of refinanced loans until March.

To qualify, your existing loan must have been sold to Fannie Mae or Freddie Mac on or before May 31, 2009. Your loan balance must be more than 80 percent of your home's market value. You can have no late payments on your existing mortgage in the past six months and no more than one late payment in the past 12 months. You are ineligible if you previously refinanced through HARP.

They've eased up on the qualifying factors over the HARP program.

The new program improves on the existing HARP refi program by letting borrowers refinance into a new fixed-rate loan no matter how much they owe. The existing program caps the new loan at 125 percent of the home's market value.

You can also refinance into a new adjustable rate loan that has a fixed rate for at least the first five years, but in this case your new first mortgage cannot exceed 105 percent of the home's value.

The new program greatly reduces or eliminates the fees Fannie and Freddie charge on loans based on risk characteristics such as the borrower's credit score and loan-to-value ratio. On a riskier loan, these fees sometimes exceed 3 percent of the loan balance and make refinancing uneconomical for many borrowers.

Under HARP 2, the fees will be capped at 0.75 percent on most loans and will be zero on fixed-rate loans with a term of 20 years or less.

In most cases, borrowers won't have to pay for a new appraisal (Fannie or Freddie will use their automated in-house appraisals) or have any particular debt-to-income ratio or credit score.

Borrowers who refinance through their existing loan servicer generally won't have to document their income or assets or have a particular credit score or debt-to-income ratio. The lender will only have to verify that one borrower on the loan has a job or other source of income, but not the amount of income.

If they refinance through a new lender, they will have to meet additional underwriting requirements, but not as many as people who are refinancing through traditional routes.

Effects on Second Mortgages.

Borrowers can have a second loan on the house of any amount and still qualify, as long as the holder of the second mortgage resubordinates it to the new loan. Most of the big lenders have agreed to do so, but there is no guarantee they or others will. "It's going to be case by case," says Brad Seibel, director of residential lending with Fremont Bank.

If borrowers have mortgage insurance on the existing loan, they must maintain it, but they should be able to transfer that insurance to the new loan at the old premium rate, according to Freddie Mac. The big mortgage insurers have agreed to allow this, but again there is no guarantee all will.

It's a big plus if they do. Normally refinancers must take out a new policy at today's rates, and rates have gone up significantly in the past few years. The higher cost has discouraged some homeowners from refinancing.

Although the original HARP program let homeowners take out a new loan of up to 125 percent of the home's value, many lenders were unwilling to make them up to that limit because if the borrower defaulted, the lender might have to pay for losses if they made any underwriting errors. And no lender wanted to run that risk on a deeply underwater home.

The new program, in many cases, will virtually eliminate the risk that lenders will have to pay for losses on either the existing or the refinanced loan under HARP 2. This could be a big incentive for lenders to refinance loans, especially ones they already own.

FBR analyst Edward Mills said the details on the liability waiver and the fee reduction were both better than he was expecting.

But there are still many questions about the program, such as what interest rates banks will charge, whether they will impose additional fees or underwriting requirements beyond what Fannie and Freddie require and whether investors will be willing to buy securities backed by these new HARP 2 loans.

Most lenders I spoke to said they are eager to make the new loans, but are still digesting the extremely complex details. (You can read Fannie's guidance at and Freddie's at

Mills says the program will definitely reach the government's target of refinancing 1 million loans, and possibly even 2 million.

There will be losses for some but seemingly only to profits

While borrowers will clearly benefit, the losers will be investors who own the guaranteed loans that are refinanced. They will be repaid, but will have to reinvest their proceeds, probably at a lower rate. These investors include Fannie and Freddie, the U.S. Treasury and the Federal Reserve - in other words, U.S. taxpayers.

The hope is that taxpayers as a whole will benefit if homeowners who lower their monthly payments under the program spend some of their savings (thus boosting the economy) and become more likely to stay in their underwater homes and not default.

Thursday, November 17, 2011

Paying a fee for Mortgage help? DOH! Even Homer Simpson won't ... well

For several years, every agency known to man from the Federal Government to the State Government to the major Lenders to your National, State and Local Associations of Realtors have been advising you that you need not pay a fee for assistance. There is more help out there that Carter's has pills, but the help you want to seek is not asking for a deposit, downpayment, retainer or anything at all. The the FTC further protected us with the Mortgage Assistance Relief Services Rule. none of this has stoppedcompanies form targeting people in dire times looking for a way to keep the boat afloat. Read today's story from the L. A. Times: Homeowners, beware of firms charging a fee for mortgage help

Plenty of companies are eager to exploit the uncertain economy and housing market by trying to separate property owners from their money. But services seeking high fees for foreclosure assistance seldom prove beneficial, housing experts say.

Joyce Thompson and her husband, Paul English, were understandably shocked to receive an official-looking letter with the words "foreclosure sale pending" on the envelope. The letter included the address of their Long Beach condo and an auction date. "At this point," it warned, "your home will be sold and you will be evicted from your property."

But all was not lost. The letter turned out to be from a company called Expert Legal Helpers, which declared that "we will have authorization to postpone the sale of your property once we are contacted."

So Thompson, 56, gave them a call. "It sounded like a boiler room — lots of people talking in the background," she said.

A boiler room, for those not in the know (or who haven't seen the movie of the same name), is a call center where salespeople typically pitch a questionable product, usually with high-pressure tactics.

Thompson listened to the salesman's pitch for a few minutes and then hung up. She suspected it was a scam.

"We've only owned the condo for about two months," Thompson said. "It would take a lot of effort at this point for us to be delinquent on our mortgage payments. We'd practically have to beg them to put us in foreclosure."

Needless to say, Thompson and English haven't missed any payments. According to their lender, JPMorgan Chase, there's no problem with their account.

The bogus foreclosure letter Thompson and English received serves as a reminder to all homeowners that there are plenty of companies out there that will try to exploit the uncertain economy and housing market to separate you from your money.

There's been more and more of this sort of thing as homeowners struggle to keep a roof over their heads. Foreclosure filings rose in the third quarter, with 1 in every 213 properties nationwide facing a default notice, auction or bank repossession, according to market researcher RealtyTrac.

"If you ever get something about your property that's not from your lender, contact your lender," said Gary Kishner, a Chase spokesman. "Always make sure before you do anything."

Thompson and English live in Tustin. They bought the condo in a short sale for their daughter, who's attending Cal State Long Beach.

The website for Expert Legal Helpers says the company "will negotiate with your lender to reduce your mortgage payments, reduce principal loan balance and stop your foreclosure!"

"Where other companies are using inexperienced representatives, we have highly qualified attorneys, agents and appraisers," it says. "We have a well-connected network to help you achieve the best possible result for your particular situation."

The first red flag, though, is that when you call the number provided for Expert Legal Helpers, you end up speaking with a company called Expert Home Relief.

"It's the same company," explained Maria Burks, who identified herself as the processing manager for Expert Home Relief and Expert Legal Helpers. "Mainly we are Expert Home Relief."

Expert Home Relief doesn't have its own website. Burks is listed as the registrant for the Expert Legal Helpers site.

But a record check for the Santa Ana address of Expert Legal Helpers turns up yet another name, Affordable Home Relief Center. "That's also our company," Burks acknowledged.

Confusing as these multiple identities might be, she insisted that the service being offered is legitimate.

"We're not the bad guys," Burks said. "Most of the people who receive our letters don't even know that they've been foreclosed on. We're just waking them from a deep sleep."

And if you decide to act on that wake-up call, she said, her company charges about $2,500 to help with document preparation and mediation to stop the foreclosure process dead in its tracks.

"Ninety percent of the time we can stop the sale," Burks said.


"There are many ways that we do it," she answered, declining to go into specifics.

Marisol Arzate, director of outreach and education for the Housing Rights Center, a Los Angeles advocacy group, said this didn't sound right to her.

"It's very unlikely that a bank will negotiate a foreclosure," she said. "You need to give them their money if you want to stop the process."

Burks said her company checks public foreclosure filings and sends out hundreds of letters to potential customers.

I asked about the letter sent to Thompson and English, whom I noted were in good standing with their lender.

Burks ran their address through her computer and maintained that the address of the condo is listed for foreclosure, perhaps as a result of the former owner missing payments.

"We didn't do anything wrong," she said. "You should go after the title companies that aren't updating the records."

Perhaps. But that doesn't excuse other firms that send out frightening letters based on those records, and then seek high fees for a service that housing experts say will seldom prove beneficial.

Moreover, it's good to remember that a recently enacted rule from the Federal Trade Commission forbids companies from charging up-front fees for mortgage assistance. The provision is called the Mortgage Assistance Relief Services Rule.

The FTC's website also has plenty of other info for homeowners who think they may be targeted by scammers for mortgage assistance. The bottom line is that no one can guarantee they can get you off the foreclosure hook.

"We always tell people to be very cautious about agencies that charge a lot and promise a high success rate," said Arzate at the Housing Rights Center. "If you can't give the lender the money that it wants, you're probably going to be foreclosed on."

And you can take that advice to the bank.