The Government’s Mortgage Bailout Plan

FHA home loans just got a booster shot in the arm… The US Fed has just announced that it will inject $600 Billion into Mortgage Backed Securities, and they will also use $200 billion to defrost the consumer credit market.

Today’s announcement by the fed that it will purchase was a move that I had been screaming for months, ever since the initial talk of the first $300 Billion Bailout plan.

This decision by the Feds should increase credit, while reducing FHA home loan rates. Rates has already dropped dramatically today… So far as Mortgage Bonds are up 128 basis points and it looks like it might continue to get better.

Transcipts of this video included below

Today the treasury and the Federal Reserve are announcing a facility to finance the issuance of non-mortgage asset backed paper in order to support lending to consumers and small businesses, which is vital to our economy.

The consumer asset backed securities market is a source of liquidity to financial institutions to provide federally guaranteed small-business loans and consumer lending such as auto loans student loans and credit cards.

Issuance of AVS in these areas reach 240 billion in 2007 our credit markets stresses led to a steep decline in the third quarter of 2008 in the market essentially came to a halt in October as a result millions of Americans cannot find affordable financing for the basic credit needs and credit card rates are climbing, making it more expensive for families to finance everyday purchases.

This lack of affordable consumer credit undermines consumer spending as a result weakens our economy to address this need and support the return of consumer lending. The treasury will provide 20 billion of credit protection to the Federal Reserve in connection with its $200 billion term asset backed securities loan facility.

By providing liquidity to issuers of consumer asset backed paper the Federal Reserve facility will enable a broad range of institutions to step up their lending and enabling borrowers to have access to lower-cost consumer finance and small-business loans.

The facility may be expanded over time, and eligible asset classes may be expanded later to include other assets such as commercial mortgage-backed securities non-agency residential mortgage-backed securities rather asset classes.

Throughout this financial market term oil our focus has been to stabilize the system and support the lending that is vital to our economy. Toward that and we’ve taken steps to strengthen the capital position of our financial institutions to stabilize a system to enable them to increase lending to American consumers and businesses.

Similarly we’ve enacted to stabilize a GSE’s and to purchase GSE mortgage-backed securities. In order to increase the availability of affordable mortgage credit throughout our nation today initiative is to support small business and consumer finance market is similarly aimed at increasing the availability of affordable lending.

Today’s announcement by the Fed that it will purchase direct debt obligations of Fannie Mae Freddie Mac and the Federal Home Loan Banks and also mortgage-backed securities guaranteed by Fannie Freddie and Ginnie Mae underscores our support for the housing market.

Nothing is more important to getting through this housing correction in the availability of affordable mortgage finance. It will take time to work through the difficulties in a market in our economy and new challenges will continue to arise I and my regulatory colleagues are committed to using all the tools of our disposal to preserve the strength of our financial institutions and stabilize our financial markets to minimize the spill over into the rest of the economy.

Hope for Homeowners Program

Prior to all of the chaos surrounding the $700 billion bailout bill, the government was working on the Hope for Homeowners program which was authorized by the Economic and Housing Recovery Act of 2008 and went into effect October 1st and end September 30, 2011.

Since President George Bush signed this into law on the 30th of July, the Hope for Homeowners’ team has been working to get the program off of the ground as directed by Congress.

The Hope for Homeowners Program is intended to give homeowners, well you guess it, hope, and chance to refinance into an FHA loan. These FHA loans would insure as much as $300 Billion, but are banks going to be willing to participate?

The X’s and O’s of the new Hope for Homeowners program couldn’t be released until Oct. 1st, and it’ll take a little bit of time for FHA loan lenders to implement this into their guidelines.

But, here are a few of the requirements:

1. You must occupy this property as you primary residence.
2. You do not have to have an existing FHA loan.
3. You must have closed on your home prior the January 1, 2008.
4. You must have made at least six on-time payments.
5. You do not own a second home.
6. You can prove hardship that your circumstances have changed and that you are no longer able to afford you monthly mortgage payment. (I’ll cover this later)
7. Your mortgage payment is 31% or more of your gross monthly income as of March of 2008 (standard FHA loan qualification).
8. You have not been convicted of fraud in the past 10 years.
9. The loan amount can not exceed  $550,440.
10. The up-front mortgage insurance premium is 3% and the annual mortgage insurance premium is 1.5%
11. Your current lender must waive all pre-payment penalties and late payment fees.
12. 2nd and 3rd mortgages must release their outstanding mortgage liens.
13. The borrower must agree to share with FHA both the equity created at the beginning of this new mortgage and any future appreciation in the value of the home.
14. You can not take out a second mortgage for the first 5years of this FHA loan unless there are some emergency repairs that you need to make to the property.

This plan is intended to helping approximately 400,000 struggling homeowners… hmmm, nationwide 252,363 homes received at least one foreclosure-related noticed in June of this year. This is in no way going to clean up the mess that we are in by any stretch, but at least this is going to give hope for 400,000 homeowners.

The biggest problem that I see is the fact that most likely you bought your home fairly recently and that you either haven’t built enough equity or more than likely your property has depreciated. The maximum loan-to-value for the Hope for Homeowners program is 90% that means that if your property is worth (as of today’s appraisal, not what you bought it for) $100,000 then they will only lend $90,000.

Included in that 90% loan to value you must included the required 3% mortgage insurance premium, so basically the maximum loan-to-value is 87%.

Realizing that most Americans’ homes have depreciated in the past several months, your only option would be to approach your current mortgage company, let them know that you have applied for the Hope for Homeowners program, and ask for them to accept a payoff for less than what is actually owed. Sort of like a “Short Sale”.

Most people might initially think that this is much tougher than is really is. I just helped one of my clients negotiate a loan modification package which reduced her 1st mortgage interest rate from an 8.375% down to a 5.375%, and we also negotiated the second mortgage from $52,000 down to $2,500. They also reduced the interest rate on 2nd mortgage from a 12.375% down to a 8.00% spread out over 30 year, instead of the 15 year balloon that it was originally structured as.

So these lenders are willing to negotiate, because they don’t want all of these empty foreclosed homes on their books.

I will continue to follow this program please subscribe to this feed to be alerted.

$700 Billion Bail Out Plan

The market bounced around today after the huge fall off yesterday, as stocks plummeted.  Investors will wait to see what will happen next.

After the $700 billion bailout plan failed to be passed by Congress yesterday we saw a 778 point loss, the biggest one-day point loss in history.

Even if they are to pass this $700 billion bailout plan later this week, there is still so much turbulent activity out there, which will keep a downward pressure on stocks.  Economists are forecasting a loss of nearly 104,000 jobs in September this coming Friday, and if that is the case this would be one of the biggest job loss drops in nearly 5 years.

Since the $700 billion financial bailout plan was rejected, the next steps are unclear.  It has left lawmakers scrambling around trying to figure out if they want to renegotiate the bill.

To be honest with you, I’m not exactly sure if I wanted that bill to pass either.  The reason being is that from what I have been reading and watching all over the news, there doesn’t appear to be any specific plan of action with the $700 billion.

I think that the lawmakers need to get a “plan” together first of exactly what they want to do with this $700 billion bailout, and then go back to the drawing board.

President George W. Bush spoke this morning before the stock market opened in New York and Toronto and warned that if this bill wasn’t passed.  It could send our economy into a long lasting recession. Uhhh, you think…  Imagine that. I will keep you posted as much as possible about this bailout plan.

How to Refinance A Home Loan

During the recent real estate boom the adjustable interest rate mortgage with its low rates was an attractive option for many homeowners across the country. Unfortunately those same low rates are now starting to reset and are often times lead to unaffordable payments for the home owners.

How ARM Home Loan Problems Begin

If you have an ARM home loan you may recently have experienced a increase in both your adjustable interest rate mortgage payment and your loans interest rate. Many people can absorb the initial payment increase but then life usually steps in.

The Car needs a muffler, the kids need school clothes and the cost of everyday living just keeps going up. Little by little you seem to be getting farther and farther behind.For many people this is where the adjustable home mortgage trouble starts.

What You Need To Know IF You Have An Adjustable Rate Mortgage

• If you know you have an adjustable interest rate mortgage the first thing you need to know is when the loans rate will reset and how much it will increase by. This information can be found on your adjustable rate rider.

• Next you need to know what your credit score is. In todays tight market borrowers need at least a 680 credit score to refinance adjustable mortgage with a fixed rate conforming loan. For FHA financing you will need at least a 620 credit score.

• If your credit score is below this level and you are unable to refinance your ARM home mortgage you may need to look into either repairing your credit or working with the lender to try and work out an arrangement. As long as you contact them early many lenders are happy to assist customers that are having ARM loan trouble,as long as the have a good payment history.

WAMU Bought By JPMorgan Chase

Washington Mutual is now the property of JPMorgan Chase. The deal happened late Thursday night. For JPM the grand prize is (hands down) WaMu’s California branch network.

The thrift’s mortgage business has been sliding for years. On Thursday, The Wall Street Journal reported that a handful of hedge funds were considering making a bid on WaMu but nothing ever came of. The Journal wasn’t the only newspaper that bit at the story. So did we.

The rumor was true but the result didn’t match the rumor. Keep in mind that regulators, traditionally, have not been thrilled with hedge funds owning depositories…