About Real Estate: Changes to fed’s refinancing program could help homeowners
The Obama administration is expected to soon announce details of changes to a federal program aimed at helping borrowers refinance instead of face foreclosure.Q. I saw a report on the nightly news that said President Barack Obama has approved some changes that would make it easier for people like me to refinance a home mortgage. I tried to refinance last year when interest rates dropped, but my application was rejected because my home is worth less than I paid for it about five years ago. Will the new changes finally allow me to refinance and lower my payments?
A. They may, provided that you meet a few basic requirements. Several readers have sent letters that ask about Obama#146;s new refinancing program, so I#146;m devoting this entire column to answering some of the most common questions.
Q. How does the new refinancing program work?
A. Actually, it#146;s not a new plan. It instead reflects changes to the Home Affordable Refinance Program, commonly called HARP, which the Obama administration launched more than two years ago in an effort to help owners refinance their loans so they could lower their payments and avoid foreclosure.
Administration officials initially thought the program could help as many as 5 million homeowners refinance when it was introduced in 2009, but only about 900,000 have qualified for a replacement loan as of today. A key factor behind the disappointing start was that lenders were hesitant to refinance borrowers who owe more than their property is worth #8212; a figure that had reached nearly 15 million households earlier this year.
Details of the changes are slated to be released Nov. 15. Obama has said a cornerstone of his plan will be to waive some current legal liabilities that banks can have if a loan turns sour, which in turn should prompt more lenders to issue refinance loans even if a home is worth much less than the borrower paid for it.
In other words, if you owe $125,000 on your loan but your house is worth only $100,000, the changes may still let you refinance at a lower rate if you meet the program#146;s other requirements.
Q. Will all home mortgages be eligible for the changes in HARP?
A. No. HARP is only available to homeowners whose mortgages are owned or backed by Fannie Mae or Freddie Mac, the two housing finance giants that were bailed out by the federal government in 2008 as they teetered near bankruptcy.
Together, Fannie and Freddie own more than half of all mortgages in the United States. But many borrowers don#146;t realize that their loan is owned by one of the two agencies because they typically are required to keep sending their monthly payments directly to the lender that originally issued the mortgage.
Your bank#146;s customer-service department probably can tell you whether your loan has been sold to Fannie or Freddie, thus making you eligible for HARP relief. Or, you can call Fannie Mae at (800) 732-6643 or Freddie Mac at (800) 424-5401 to see if you#146;re eligible for HARP or one of the other mortgage-related relief programs.
Q. I have already confirmed that my loan is owned by Fannie Mae, even though I still send my monthly checks to the bank that originally gave me the loan. So, what are some of the other benefits that I can get if I refinance through HARP? Also, what are the other loan requirements that I would have to meet?
A. One benefit is that both Fannie and Freddie will #147;streamline#148; the application process by eliminating some paperwork that was previously needed, which should speed up the refinancing process. It also eliminates the need for appraisals in many cases and additional fees that, until now, prevented cash-strapped homeowners from applying for HARP help.
Of course, borrowers must still prove they have enough income or savings to make their monthly payments at the reduced interest rate. Qualified applicants also must have been current on their payments for the past six months and had no more than one missed payment in the past 12 months.
Q. Will these changes be enough to make home prices go up again?
A. No, at least not immediately. But by making refinance loans easier to get, the HARP changes could stem the rising tide of foreclosures that have crippled property values across most parts of the nation and eventually lead to a rebound in prices a year or two from now.
Q. Where can I get more information?
A. Start by calling your current lender to see if you are qualified for HARP or other mortgage-relief programs. Also call Fannie Mae and Freddie Mac at the phone numbers listed earlier, or visit their outstanding websites, www.fanniemae.com and www.freddiemac.com.
Ÿ For the booklets #147;Straight Talk About Living Trusts#148; and #147;Free and Clear: Getting the Mortgage Monkey off Your Back,#148; send $4 for each and a self-addressed, stamped envelope to David Myers/Trust, P.O. Box 2960, Culver City, CA 90231-2960.
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