There has been a lot of buzz about the new Home Affordable Refinance Program. I hope this will clear up some of the questions that people may have regarding the program.
This program is aimed at home owners, who due to market conditions have seen the value of their property (owner occupied or investment) decline, and are not defaulting on their mortgage payments. This program will allow home owners whose loan to value (LTV) on the property is between 80-105%, to refinance and obtain a lower rate where under normal circumstances they would be unable to without incurring additional fees, hits to the interest rate and private mortgage insurance (PMI). Under the guidelines issued on March 4, 2009 by Fannie Mae and Freddie Mac it states the following pertinent information:
- The loan must be securitized by Fannie Mae or Freddie Mac which can be verified by using the following links. The answer is either immediate at the website or you will receive an e-mail with the information. Fannie Mae Link and Freddie Mac Link.
- On a Fannie Mae backed loan the loan can be refinanced with any service provider or lender, which can be done using a mortgage broker. On a Freddie Mac backed loan the loan must be refinanced with the current lender which can also be done using a mortgage broker as long as the broker has this lender in his portfolio (you should ask your broker this question). If not then you can go to your current servicer and ask them to refinance you loan into a lower rate using this program.
- If PMI is not being incurred on the existing loan then it will not be incurred on the new loan.
- On a Fannie Mae backed loan the closing costs can be rolled into the loan and a sum of 2% of the loan amount (not to exceed $2000) can be taken as cash at closing. On a Freddie Mac backed loan closing costs of up to 2% of the loan amount can be rolled into the loan but cash can not be received at closing.
- The same borrowers that are on the existing loan must also be on the new loan, however a new borrower can be added.
- It seems from what I am hearing from lenders that the DTI (Debt to Income) does not get scrutinized as much as long as payments are current on all outstanding debt and the mortgage payment will not be increasing more than 20%. For instance people moving from an ARM (Adjustable Rate Mortgage) to a Fixed Rate Mortgage may encounter that scenario but your moving to a more secure stable product that will not adjust.
- Only loans that closed before March 2009 are eligible.
What if I have a 2nd Mortgage or Home Equity Loan or Line as well?
If you have another loan against the property the LTV rule (80-105%) applies only to the first loan. Only the first loan can be refinanced and the second loan holder must subordinate to the first in order for it to refinance. Lenders have already started rolling out the program and I am currently submitting files.
If you think you can qualify you should start talking and submitting your information to lenders or brokers soon as I think this will be a popular program. Here is a link to determine if you qualify for the programhttp://makinghomeaffordable.gov/refinance_eligibility.html.
It should be noted that this program is not for everyone. If have already missed payments then you do not qualify but may qualify for the new Loan Modification Program which you can see if you are eligible for at this linkhttp://makinghomeaffordable.gov/modification_eligibility.html.
If you think can benefit from this program please give me a call or send me an e-mail and I would be happy to help you get refinanced.
David P. Cruickshank
Loan Consultant
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