HARP stands for Home Affordable Refinance Program. Eligible borrowers obtained their original mortgages prior to July of 2009. You can borrow up to 125% of the current value. Some loans will require an appraisal and others do not. It was designed to help millions of borrowers get relief though, unfortunately, the program has only helped a few hundred thousand homeowners. I have had mixed success with my customers with this program. The first thing to do is determine if Fannie Mae or Freddie Mac owns your loan. They have search engines on their websites, www.fanniemae.com or www.freddiemac.com. Remember, you don’t make your payments to Fannie or Freddie. They are investors, not loan servicers (collecting the payments). That means they buy the loans and pay a premium to lenders to service the loans. The best bet is going back to the lender who is servicing your loan and find out if they can refinance your home.

Currently, there is no relief for underwater homeowners with mortgages not owned by Fannie or Freddie. Proposals are being considered to help. President Obama was selling refinancing in his recent jobs speech. I have noticed a bigger effort from my company, PHH Home Loans and Coldwell Banker Home Loans to originate HARP refinances. If you had bought your house prior to July 2009 with a mortgage from PHH or CBHL, get in touch with me to see if we can save you some money! Those borrowers I have helped have saved an average of more than $125 per month! I’m David Wolsky and can be reached at (520) 275-2536 or david@davidwolsky.com.

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I got a call the other day from a potential client interested in refinancing his home. He was trying to modify his loan and the lender suggested that he stopped making payments because the banks will not even talk to you about modifying a loan that is getting paid on a timely basis. Of course, their credit is shot now and they cannot qualify for a refinance despite the record low interest rates. I get calls like these every week. Why can’t everyone refinance their homes with record low interest rates?

1. Many homeowners have lost all of their equity or are underwater (owing more than the current value of their homes). Nationally, about 25% of homeowners fall into this category. In Tucson, over 30% of homeowners are underwater and in Phoenix, sources estimate over 50% fall into this category.

2. I am finding that some potential clients will pay for an appraisal, only to find out the appraiser has given the property a low value. Although there might be equity, it may not be enough to refinance.

3. Underwriting guidelines are very stringent. Many borrowers obtained their home loans with alternative document loans such as stated income loans, no document mortgages or no ratio mortgages. These products do not exist in the current mortgage marketplace. As a result, these same borrowers cannot refinance their loans because they cannot verify their income or assets.

4. Your credit is shot! About 25% of Americans have badly damaged credit. They have walked away from home loans and credit card debt. Bankruptcies are on the rise. Thousands of homes are foreclosed every day!!!

5. Another road block to refinancing is home equity lines in second position behind your current first mortgage. The combined loan-to-value ratio (CLTV) is very high in many cases. Lending guidelines cap CLTV especially in declining markets such as Arizona. Even if you have sufficient equity in your home, the second mortgage lenders are inundated with requests to subordinate their equity lines behind new first mortgages.

Despite these challenges, many borrowers are able to refinance their homes because they have the right combination of Good to excellent credit, income and asset qualifications and equity in their homes. Others may qualify for a program to help folks without enough equity if their home loans are owned by Fannie Mae or Freddie Mac.

If you are endeavoring to refinance, please be patient during the process as the system is at its capacity. I have heard that the three biggest banks in the country are taking over 90 days to process refinances. The residential mortgage industry has significantly consolidated over the past three and a half years as the economy was melting down. Of the top 25 lenders in 2008, only eight still exist! Also, lenders prioritize purchase transactions, so a refinance may have to go on the back burner. The best scenario for refinancing is to have your income and asset documentation available at the time of application. You will be required to submit your  two most recent income tax returns with all schedules, your two most recent W2s, if applicable and your two most recent bank and investment statements. If you own more than one home, be prepared to provide the complete housing expense documentation of house payments, taxes, insurance and home owners association fees, if any. Appraisals can take a week or two to complete. They are ordered through the lender’s appraisal management service. Be truthful on your application and hang in there! Be extra patient if you have a second mortgage or equity line and you want to keep it subordinated to your new first mortgage because you will add several weeks onto the transaction. Work with professionals! I’m David Wolsky, fully licensed in Arizona with over sixteen years of experience. I can be reached at david@davidwolsky.com or by calling 520-275-2536.

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Bonds took another beating today as investors shunned safe haven instruments in exchange for riskier investments. Mortgage Bonds did trade briefly higher at the open but fell off a cliff after news from China that manufacturing in that country was at a 3 month high signaling that the global recession may be coming to an end.

In the past week we have seen the average mortgage rate jump a half point higher! 5.25% is certainly a great low rate, but 4.75% was available only a few days ago. Bond yields are surging because the economy is showing signs of improvement such as the June 1st report showing manufacturing shrank as at a slower pace and construction spending rose. Let’s hold off on the champagne for now because manufacturing shrank, but not as much as expected. Another reason that bond traders are getting jittery is because of the fear of inflation. Bonds have fixed rates and their value erodes with inflation. Conversely to stocks, bond yields increase whenever bonds are sold and yields lower when bought. According to Nobel Prize winning economist, Paul Krugman in his May 28th column The Big Inflation Scare, the threat of inflation is unfounded in the current economic environment. Krugman points out the lack of inflation right now. Prices are down from a year ago and deflation has more potential than inflation (as I write this blog on June 1st, 2009). Krugman also indicates that even though the Fed is printing money and buying debt, there still isn’t a precedent for inflation as banks have been repaying the Fed. Plus the banks are sitting on reserves rather than lending out their money. Is the economy roaring back? Hardly! Maybe the eyes of the financial markets. Those guys read the tea leaves differently than the rank and file. I still see economic issues from my vantage point on the front lines of the housing market. Credit is still tight, property values are groping to level off and now rates are increasing. The job market is still lousy and the wave of layoffs continues to build.

As for the mortgage market, today’s Wall Street Journal suggests that low rates may be disappearing fast. The article goes on to suggest that the rise in interest could be ominous for the housing market at such a precarious time for our economy. The low rates and tax credits for first time home buyers has stimulated the housing market but higher rates could throw a wrench into the recovery. When rates go down signifcantly, refinancing your home could save hundreds of dollars a year. Will the lower rates come back? It’s hard to say. We saw some significant swing in bond yields last week. It could go down, just as fast as it went up so strap on your seat belts. It is likely that we will see rates settle down in the weeks to come, but it would be unlikely for them to reach the 4.75% we saw last week. Stay tuned and visit my site, www.livingintucson.com for timely commentaries on the mortgage market. Call David Wolsky at 520-977-3300 or email me at david@davidwolsky.com for all of your Tucson mortgage needs.

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Hey, we have the leader of the free world advocating refinancing! “The main message we want to send today is there are 7 to 9 million people across the county who right now could be taking advantage of lower mortgage rates.”

Check out this video:

 http://cosmos.bcst.yahoo.com/up/player/popup/index.php?cl=12894847.

We are getting several calls a week from folks requesting refinances. We can help many of these borrowers especially now that the government has rolled out the Making Home Affordable Program.

We can offer you a refinance with record low interest rates if you fit into any of these categories:

• You have a conventional loan up to $417,000
• Your new mortgage will be 80% or less than the current value as determined by an appraisal
• You can verify your income & assets
• Your mortgage payments are current
• Your credit score is 620 or above

If you do not have at least 20% equity, you may still qualify for a refinance.

• Your first mortgage loan-to-value ratio is between 80% and 105%
• Your existing mortgage is owned by Fannie Mae or Freddie Mac.(These agencies do not collect the payments, but they buy loans for banks that collect payments. In other words, you might be making your payments to Wells Fargo, but Fannie Mae owns the loan).
• To determine if Fannie Mae owns your loan, go to www.fanniemae.com. If not, check with www.freddiemac.com. These agencies own more than 40% of all home loans in the United States.

Be patient, the system is taking longer primarily due to capacity. We are inundated with new files, but as an industry, we have not hired back loan processors, underwriters and funders to approve and fund the new loans. Purchase loans will take priority. However, if you hang in there you will be rewarded with a record low interest rate!

Related posts:

1. How Come It’s So Hard To Refinance? I got a call the other day from a potential...
2. HARP – Help for Underwater Homeowners HARP stands for Home Affordable Refinance Program. Eligible borrowers...

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