HARP changes to allow a greater number of refinances
While some of my industry friends rushed to be the first to get this information to the streets it seemed more prudent to verify the information found in the FHFA letter dated October 24. Now that a week has passed and the initial smoke has cleared here is a bullet point review of the important factors covered by this revamp of HARP.
- The existing loan must have been sold to Fannie or Freddie on or before May 31, 2009
- The current loan amount must be greater than 80% of the current value (LTV)
- This revamp removes the 125% LTV limit for fixed rate loans (there is no new ceiling)
- Lenders will get a new set of Representations and Warranties (this will affect some who may not participate)
- This eliminates the need for a new appraisal when there is a reliable Automated Valuation Model (AVM) available
- The program extends through December 31, 2013 (and you can bet some people will wait that long)
- This allows people to also refinance into a shorter loan term (because of the lower rates and their DTI)
- The mortgage cannot have been previously refinanced under HARP unless it was from March-May of 2009
- The borrower must be current on their loan payments at the time of refinance
- The borrower cannot have been late on payments in the previous six months and not more than once in the previous 12 months
- If refinancing into a fixed rate there is no maximum LTV
- If refinancing into an adjustable rate (ARM) there is a maximum LTV of 105%
- Condominiums are eligible under Enterprise requirements
- When this becomes available will vary by mortgage lender
- Program participation by lenders is not mandatory
Those are straight from the horse’s mouth. There has been a lot of speculation and some of it is not in the official document.
I am a multi-year veteran of the industry who has served in the highest offices in the industry. I can help you get the best deals and avoid getting ripped off!
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No-Seasoning Cash Out Refinance on Investments
It’s back! A little common sense in lending can go a long way. From 2003 to 2009 I was tops in real estate investment lending in Georgia. I had the privilege of teaching in the John Adams Real Estate Investment Institute at Emory University and having the only lenders office inside the Georgia Real Estate Investor’s Association. Because of that and massive radio, cable and print advertising I was able to help thousands of real estate investors get started and stay successful through the bubble.
Play this short audio file for more details about the Non-Seasoned Cash Out Refinance for Real Estate Investors
I am a multi-year veteran of the industry who has served in the highest offices in the industry. I can help you get the best deals and avoid getting ripped off!
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FHA mortgage insurance changes official
HUD has issued Mortgagee Letter 2010-28 changing the Upfront and Annual Mortgage Insurance Premiums effective with case numbers assigned on or after October 4, 2010 as follows:
Upfront Premiums
| Loan Type | Upfront Premium Requirement |
| Purchase & Full Credit Qualifying Refinances | 100 BPS |
| Streamline Refinances (all types) | 100 BPS |
Annual Premiums
| LTV | Annual Premiums for Terms >15 Years |
| = or <95% | 85 BPS |
| >95% | 90 BPS |
| LTV | Annual Premiums for Terms =or <15 Years |
| = or <90% | None |
| >90% | 25 BPS |
These premiums are effective with case numbers assigned on or after October 4, 2010.
What is a streamline mortgage?
Regardless of the industry there are certain buzzwords or words that seem like they are created simply to confuse the outsider. Near the bottom of the list for business goals should be confusing customers. Unfortunately it does happen and the one who stands the highest chance for damage is the most valuable of all; the customer.
Mortgage professionals throw around terms like an alphabet soup that would frighten even Vanna White. Words like ten oh three (1003) and respa (RESPA – Real Estate Settlement and Procedures Act) fall out of their mouths like jelly beans out of a pinata.
Making it even a little more confusing for you different agencies use the same term to apply to different meanings and vice versa. Streamline and streamlined for example.
The Federal Housing Administration (FHA) makes available a couple of different “streamline” loans. Freddie Mac (FHLMC) has their “streamlined” loan. Essentially they are the same product and if you phone an FHA lender and ask for a “streamlined” loan they will neither laugh at you nor hang up on you.
For all practical purposes streamline loans, whether a streamline refinance or otherwise, indicate something less is required or they go faster than a standard loan. For the FHA streamline refinance a little less documentation is required and sometimes less evidence of value is required.
Hope for Home Owners with a Fannie Mae Loan
Fannie Mae mortgagors have long been jealous of FHA mortgagors because they have the FHA streamline refinance. Enter the FNMA DU Refi Plus. If you have an existing Fannie Mae home mortgage which does not have mortgage insurance you can refinance all the way up to 105% of the appraised value of your home provided you are current with your mortgage payments, are currently employed and meet a couple of other criteria.
Even if you have a second mortgage you can qualify for the loan as long as the second mortgage holder with agree to re-subordinate the mortgage. There is no maximum combined loan to value (CLTV) on the DU Plus and so long as there is no mortgage insurance on the existing loan there is no mortgage insurance on the DU Plus.
Novation Mortgage will request the subordination agreement from your existing lender and you will only need to get involved if for some reason they refuse to agree to re-subordinate. Don’t worry if you do not fully understand what all that means. When you call I will explain it to you in detail. In fact I may explain it to you even if you think you already know so that I make sure I know you understand – as they say on TV “that’s just the way I roll.”
If your home is in Georgia or Florida and it is the home you live in full time (primary residence) don’t hesitate to call me at 678-946-0101 and ask about the Fannie Mae DU Refi Plus or the FHA streamline refinance.
Can I Refinance If …
Some of the questions make us snicker but then we realize the reason most people are in bad shape is because they didn’t take time to ask basic questions when they were getting into a loan that would put them into bad shape. Here are a couple of answers to various “can I refinance if” type questions.
Can I refinance if I have been late on payments?
Maybe. It depends on what type of payments you have been late on, how long ago your last late payment was and what type of loan you are applying for. For example some lenders will allow you to do an FHA streamline refinance if you have been late on payments including mortgage payments and others will not (Novation allows FHA streamline refinances so long as the mortgage is current at the time of closing).
Can I refinance if my home is currently listed for sale?
No. But Novation will allow a refinance with the listing canceled and a good explanation why it was listed then canceled. We will not allow a cash-out but only rate and term on recently listed properties.
Can I refinance if I have had a foreclosure?
Maybe. It depends on how long ago the foreclosure was. It does not matter if the foreclosure was a primary residence, second home or investment property. As of today there are no conventional loans outside of the FHA streamline refinance which will allow a refinance to anyone who has had a foreclosure within the last 36 months as of the date of application.
Can I refinance from a non-FHA loan using an FHA streamline?
No. The FHA streamline is designed only for FHA loan to FHA loan refinance. You can still do an FHA refinance but not using the FHA streamline. One reason to do this would be to do a rate and term refinance up to 95% of the appraised value or a cash out refinance up to 85% of the appraised value.
Can I refinance if I have only been renting the home?
Not unless you have a true lease/purchase that was set up and recorded that way. Then it will actually be treated as a purchase rather than a refinance. The old practice of refinancing a property into the renters name from the owner’s name is gone. That was a sub-prime guideline that died with sub-prime loans.
Can I refinance if I lost my job?
The FHA streamline and Fannie DU Plus refinances only require employment verification or 1 year of tax returns for self-employed borrowers. If you are W2′d and we cannot verify employment you likely cannot refinance.
Can I refinance if I got a divorce?
If your former spouse is on the loan and on the title you will have to have a Quite Claim Deed and you will have to do a non-streamline refinance. You will have to qualify for the loan without your former spouse’s credit or income. You can use alimony and child support as supporting income provided there is a history of on-time payments and a future of realistic expectations you will continue to receive them.
If you are the type who likes to do all the research you can online before you start calling around let me remind you that (a) the mortgage banking industry changes every day – what was true today (April 9, 2009) may not be true even one day later (b) there are a dozen inexperienced loan officers in the business publishing information to every 1 who has 10 years or more of accurate experience (c) I have met people who claim to have decades of experience who are consistent in their errors. I belong to a group of professional mortgage bankers who spend much of our time critiquing each other and weighing one another against the truth. That helps guaranty our accuracy and honesty to you.
You can keep reading or you can pick up your phone and call me directly at 678-946-0101. We service the Georgia and Florida residential real estate markets and through my group of mortgage banking masters I am sure I can refer you to one of them if you are not in my area of practice or expertise.
Who Can Use an FHA Streamline Refinance?
If you have an existing FHA home loan and you are current with your mortgage payments at the time of application and closing you can use an FHA streamline refinance to pay off your existing FHA home loan. The end result must be that your PITI is lower which almost always results from a lower interest rate. You cannot take cash out (limited to $500 leaving from the closing table) from an FHA streamline refinance.
Qualifying for an FHA streamline refinance is simple and in Georgia and Florida we can help you with no application fee. Call us at 678-946-0100
Refinance examples of savings based on interest and term
My good friend, in fact probably the closest thing to a brother I have ever had, telephoned me yesterday and asked if I thought he should refinance. His existing rate is 6.25% and par yesterday was 4.875% both on fixed 30 mortgages. His payoff is only $130,000 and his home is worth about $200,000 so there is plenty of room. Since he has already paid 8 years down I suggested we look at both a 20 year and a 30 year solution.
Because I am always very careful to over-estimate on closing costs he will actually end up bringing less to closing or having a slightly lower payment than I have indicated. On the 20 year to get that rate he is required to pay some discount and that is included in the amount to bring to closing or the loan amount. On the 30 year there would have been no discount if we had locked it yesterday.
His current P&I is 796.75 and his goal is not necessarily to lower his payment. In fact, if we go with the 20 year he actually shaves 2 years worth of payments off his total and at 796.75 x 24 = 19,122 that is a significant savings!
Fixed for 20 years at 4.5%
Loan amount $138,500 (includes taxes, insurance, rate buy down and all fees)
Principal and Interest $876.22
Leaving closing with $565.38
Fixed for 20 years at 4.5%
Loan amount $130,000
Principal and Interest $822.44
Bringing to closing $7664.39 (includes rate buy down)
Fixed for 30 years at 4.8755%
Loan amount $138,500 (includes taxes, insurance and all fees)
Principal and Interest $725.02
Leaving closing with $201
Fixed for 30 years at 4.875%
Loan amount $130,000
Principal and Interest $687.97
Bringing to closing $6632.72 (includes taxes, insurance and all fees)
My questions if I were the borrower would be about all that money I am bringing to closing? If it’s not yours it should be. First you have to know nobody works for free. No bank, lender, broker, attorney, underwriter, appraiser, insurance agent, processor, title agent, inspector, or government agency work for free. That’s where those fees go. Since my friend is already in an escrwo program he will get quite a bit back from escrow from his existing lender.
So let’s say he decides to go with the 4.5% fixed 20 where he is bringing $7664 to the closing to pay all the costs and buy the rate down. Remember that $19,122 he was saving from not having those 24 months of payments he will be shaving off? So now he is saving $11,458 and his payment totals over the next 240 months are only $7,200 higher (because the P&I is a little higher on the 20 at the lower rate than the 30 at the existing rate.) This means over the full life of the loan he will spend $4,258 less and own his home outright 2 years earlier. Further, if he really wants to get it paid off more quickly he can reduce his principle more quickly by paying additional principal reduction or bi monthly payments.
Now let’s look at the fixed 20 where he rolls the closing costs into the loan.? So in this example his current pay-off is $130,000. Putting all of the costs including insurance, taxes and the rate buy down into the payoff would be less than I have indicated but let’s stick with that in total costs. (Just a hint – people like that guy who used to advertise all the time who has ex employees now working for me would make the rate higher to accomplish the same goals but cost you every month as much as 100′s of dollars a month. We can do that too but I would not let this friend, a super conservative guy, do it that way.)
Going this way makes his payoff $138,500 and his monthly P&I $876.22. So we’re saving 2 years at $796.74 which is $19,122 but we’re adding a little to the monthly P&I which, over the life of the loan, will be 19,075.20 which results in (a) owning the home 2 years sooner and (b) a net gain of $46.80 in hard cash. But here’s the clincher and well beyond the scope of this short article. I know he is going to make additional principle payments as soon as his son graduates from college which is this Summer. At the 20 year term and the 4.5% rate his additional principle reduction payments will have a much larger impact that if he were financed for 30 years.
I would do the 20 year term refinance personally in a drop of a hat and roll the costs back into the loan.
Are interest rates headed up? Today they are, yes. But …
Interest rates are never stable. In recent years people seemed to assume that if the rate was, for example, 4.875% today they would have a week or two to make up their mind. This is simply not the case. Rates could very easily be 4.875% today and 5.250% tomorrow … or even this afternoon. RATES CAN CHANGE SEVERAL TIMES PER DAY. There is no way to accurately and 100% predict when rates will go up or down. There is a way to be very sure rates cannot drop much lower than they have been during the last 5 days.
You can either take advantage of a great rate or you can gamble. The gamble? Several fold actually.
(a) You could be gambling that rates will come back down below 5% or just lock your rate today, before they go up again.
(b) You could be gambling that your Debt to Income ratio is acceptable – if rates go up your payment goes up and that may throw you into a different category on DTI
(c) You could be gambling that rates don’t steadily increase from now to multiple percentage points higher
Listen, I know what the media has said but you must understand this: most reporters know nothing about banking and finance or the economy and they simply parrot what they have heard from industry insiders like myself. The problem with that is they don’t understand what we are saying so they report bits and pieces out of context. To fully understand what an amazing opportunity you have to refinance or purchase today at these incredibly low rates you simply need to speak with an astute mortgage professional with at least 5 years in the business without a complaint.
Do yourself a huge favor and deal with a professional from your region. We only do Georgia and Florida for a good reason: this is where we live. I am from Georgia and my wife is from Florida.
Call us today while interest rates are still acheviable down into the high 4% range without discount points. Seriously, tomorrow may be too late and these rates could very easily disappear into the pages of history.
Should I refinance now or wait?
Let me make this very simple: Today we know qualified borrowers can get a mortgage with interest rates in the mid to high 4% range. Historically the sustained low interest rates have been in the mid 5% range. It is virtually impossible, without subsidies, for interest rates to go lower than 4.5% because of the necessary profit margin to the lenders and their investors.
Ken Cook
My advice to anyone considering refinancing today who wants to be sure to take advantage of these truly historically low home loan rates is to do it today. If you wait you may get the same rate but not likely anything any lower and certainly not much lower a lower interest rate at all.
Let’s say you have a $300,000 loan and and interest rate on a fixed 30 year loan of 6% and you have the opportunity to refinance to 5% how much less would your payment be?
At 6% a $300,000 -30 year fixed mortgage would have a P&I of $1789.70
At 5% a $300,000 -30 year fixed mortgage would have a P&I of $1603.78
At 4.5% that same loan would have a P&I of $1514.38
The drop of 1% would save $185.92 per month or $2,231.04 per year
The drop of 1.5% (from 6% to 4.5%) would save $275.32 per month or $3,303.84 per year
Ask how closing costs can be balanced with either SRP or YSP. Lenders are not required to disclose their SRP even though they make more than mortgage brokers. Mortgage brokers, at least for the next 12 months, are require by law to disclose their YSP. Brokers do not make more than lenders. Lenders make more than brokers -ask how the spread can be used to reduce closing costs (this will result in a slightly higher interest rate but lower closing costs).
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Daily Rates for Qualified Buyers
Today |
Last Week |
|
| 30 Year Fixed | 3.50% | 3.61% |
| 15 Year Fixed | 2.88% | 2.92% |
| 5/1 ARM | 2.31% | 2.51% |
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