Underwater Homeowners

October 25, 2011 by staff 

Underwater Homeowners, More Arizona homeowners may soon be able to refinance at current low interest rates mortgage-no matter how far you are underwater in their homes.

The Obama administration on Monday announced details of a long-awaited expansion of a program that helps homeowners refinance to lower their payments.

Mortgage rates have fallen to historic lows, many homeowners could save hundreds of dollars a month if they could reduce the amount of interest paid. But the housing crisis has created a major barrier.

A refinance loan usually requires the home has sufficient value to cover the entire amount of the new loan. However, sinking home values ??means many homeowners owe far more on their loans than their homes are worth. It is estimated that 40 percent of metropolitan Phoenix homeowners are currently underwater.

The Federal Home Affordable refinancing has allowed certain loans to refinance if the borrower has up to 125 percent of the value of the house. However, many borrowers under water in Arizona should be more.

The plan announced Monday to lift the requirement for full value, allowing some borrowers to refinance, regardless of how much your home value has decreased, if your mortgage is backed by one of the two largest federal mortgage agencies and comply other requirements.

Borrowers can begin applying as early as December, according to the few details released Monday, and the program will run until late 2013.

Speaking at a temporary stage in a suburb of Las Vegas, Obama touted the plan as a way to allow struggling homeowners to save money.

“Probably the main cause of the financial crisis and recession has been brutal housing bubble burst four years ago,” he said. “And as this happens, our recovery can not take off as quickly as after a normal recession.”

The ARPA program has helped nearly 900,000 homeowners nationwide to refinance. Arizona figures are not available.

The plan outlined by Obama and the Federal Housing Finance on Monday would expand ARPA changing the rules and the associated costs and extend the period of time in which borrowers can apply.

Among the key elements:

- The refinancing will be available to homeowners with loans backed by Fannie Mae or Freddie Mac in 2009 or before.

As with the current refinancing program, the option is open only to borrowers with mortgages backed by the two largest federal mortgage agencies. Borrowers whose banks have their private loans would not qualify. However, federally backed loans comprise the majority of existing mortgages in the state and country.

The federal government gave no official figure on how many people will be able to refinance, but the U.S. Housing and Urban Development, Shaun Donovan, head of an estimated 4 million families may be eligible.

Existing federal programs have encouraged lenders to refinance these loans or modify the loan repayment amounts to borrowers in financial trouble, but the banks that handle payments, in many cases have been slow to respond. Obama said the new program will enable other lenders that compete to make new loans.

“Some lenders, frankly, simply refuse to refinance,” he said Monday. “Therefore, these changes will encourage other lenders to compete for that business, offering better terms and rates, and eligible homeowners will be able to shop around.”

The program is designed to help borrowers who took out loans before the housing crisis, and only applies to loans backed by federal agencies on or before May 31, 2009.

Market watchers say the key will be whether the banks and mortgage giants actually follow through.

“The new refinancing program sounds like a good idea, but it must have teeth,” said John Smith, president of the Mesa-profit housing to our communities, which advises homeowners to avoid foreclosure . “The government needs to Fannie and Freddie going forward with these agreements.”

- The refinancing will be available for homeowners who are current on their mortgage payments.

To qualify, homeowners must have missed no more than one payment in the last year.

The plan differs from other programs that were designed to help borrowers who could no longer pay their mortgages. The federal loan modification program was open only to borrowers who were already behind on your payments.

However, refinancing is open to borrowers who have made their payments.

Although it might help some people who have struggled to make payments to avoid foreclosure, but could also help other owners simply release more money each month.

- The refinancing will be available for much the home is currently worth.

The loan only needs to be backed by Fannie or Freddie, and be in standard sizes – for example, large “jumbo” loans are not eligible.

Borrowers who meet the financial requirements could refinance no matter how much the loan amount exceeds the current value of the property, known as the LTV.

The previous plan called ARPA for a 105 percent loan-to-value, ie homeowners to be 5 percent more than their homes were worth could refinance with the plan. This proportion was quickly criticized for helping a few in the housing market hardest hit by Arizona, California, Nevada, Florida and Michigan. Was increased to 125 percent, but still was not enough for many homeowners who bought during the last decade in the Phoenix metropolitan area.

“If the limit is lifted completely, then make a big difference in Arizona,” said housinganlyst Michael Orr, who publishes an online review every day of the housing market in Phoenix is ??called the “Cromford Report. ” “Many people have a LTV of more than 200 percent.”

- Refinancing will cost less.

The changes announced Monday also would limit the costs associated with refinancing, hoping to make the move more affordable. Homeowners who qualify will not have to pay excessive fees for assessment or treatment.

Jay Luber, president of Galaxy Phoenix-based loan, known to many homeowners who qualify for this program.

It is believed that it could “accelerate the stabilization of the values ??of the Phoenix metro area by foreclosures and short sales decline.”

The doubts
Housing advocates point to past programs that have earned a bad reputation.

Affordable Housing Program Modification, HAMP was announced in conjunction with the original refinancing program two years ago.

Tens of thousands of homeowners in Arizona only promised loan modifications and implement testing programs. These borrowers made payments trial for over a year, in some cases only after he refused a permanent modification.

In general, the federal housing plan called for help 7 million to 9 million homeowners. Less than 2.5 million have been helped by all programs in the plan.

Phoenix real estate agent Kevin Kaufman is skeptical of the new plan.

“I am truly very, very pessimistic about any government program actually help people,” he said. “Having been in the trenches for four years and have seen so many empty promises. Do not think the government really help.”

Too late?
When Obama announced federal efforts to stop foreclosures two years ago, traveled to Mesa to make the announcement. At that time, foreclosures were up.

Today, foreclosures have been steadily declining in the Phoenix metropolitan area. So the latest move has been criticized as too late.

In addition, many market observers note that for many homeowners, the real problem is not just your monthly payment, but the fact that we still have to pay much more than their houses are worth, so you can not sell or move.

The Obama administration is implying something more help for people who have lost their homes to foreclosure and neighborhoods with many empty foreclosure homes.

But this expansion of ARPA is to help homeowners continued to pay like everyone else away.

Tom Schroeder was rejected for a refinance last year because he should at least 40 percent more than their house is worth Scottsdale. He said he is angry because he feels he is being penalized for the execution of other people and bad decisions.

“I keep paying my mortgage on time and watching others buy homes at 5 or now even a 4 percent (interest rates),” he said. “Changes in the refinance program sound good. I just want to see some action in which lenders and fast.”

Patricia Garcia Duarte, president of Phoenix-based nonprofit homeownership counseling Services District Housing, said the new plan awards refinancing to homeowners with good credit who have not lost many payments.

“Because more than one property worth remains a problem for many in Arizona,” he said. “The renewal ARPA is a good thing, not the whole solution.”

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