Refinancing Just Got Easier
Just this week on his Presidential campaign trail President Obama announced his home refinancing plan seeks to let a million or more American homeowners save money on their mortgages, even if those loans are underwater. But the plan itself is not a new idea: A pair of economists at Columbia University — Chris Mayer and Glenn Hubbard — have been proposing a similar measure for years.
The plan addresses an issue that’s been frustrating many homeowners, especially ones who have otherwise kept up with their mortgage payments: They see other people refinancing at today’s super-cheap interest rates — down around 4 percent for a 30-year fixed-rate loan — but they can’t qualify for those rates because their home price has fallen.
Under Obama’s plan, homeowners with loans backed by Fannie Mae and Freddie Mac that meet certain qualifications could be eligible to refinance their mortgages even if their home is worth less than they owe.
This could help turn around the fledging economy by redistributing household income towards other obligations or even allow monthly savings for some. In this tight gripped economic cycle we are in, any savings at this point is welcomed news.
The remarkable thing about this proposal is that it does not cost taxpayers any money. The key is for the major lenders to agree to go along with this proposal. The big question on most peoples mind is “Will it help me?” Clouded in Bureaucratic red tape are failed attempts to help struggling homeowners refinance under the HARP (Home Affordability Refinance Program).
The Home Affordable Refinance Program (HARP) is designed to assist homeowners in refinancing their mortgages – even if they owe more than the home’s current value. The primary expectation for Home Affordable Refinance is that refinancing will put responsible borrowers in a better position by reducing their monthly principal and interest payments or moving them from a more risky loan structure (such as an interest-only mortgage or a short-term ARM) to a more stable product (such as a fixed-rate mortgage).
The major problems with HARP are ratios in which loans must fall into in order to quality. Since its inception in 2009, fewer than one million loans have been refinanced. The projected number for the most recent plan that President Obama introduced is anywhere between 15 and 20 million loans. This goes a long way in keeping Americans in there homes. And the program itself seems to be a lot more straightforward.
A major point in the new program is the LTV (Loan To Value) Ratio that loans must have in order to qualify. Home loans upside down up to 125% are eligible provided other guidelines are met.
Since the program is only eligible for loans owned by Fannie Mae many people may wonder who owns their loan. There is an easy way to determine whether Fannie Mae is the investor on an existing loan other than having the borrower contacts their lender. Simply go to www.FannieMae.com and utilize the online tool, Fannie Mae Loan Lookup, for borrowers to determine whether Fannie Mae is the investor on their loan.
As many people have come to realize, qualifying for any of the programs or initiatives out there requires lots of patients. As 30 Year Fixed Rate Mortgages are at historic lows, it pays to be patient and persistent. The best place to start the process is with your current lender.
Details outlining this new agenda for refinancing home loans won’t be available until early to mid November.
Chris Vigil is the broker/owner of Chris Vigil Real Estate in Whittier and a licensed real estate appraiser. He can be reached at 562-945-4422 or www.Facebook.com/chrisvigilrealestate