Mortgage aid program will likely help millions

Some questions and answers about how it could affect payments, taxes

NEW YORK - It's welcome relief for homeowners struggling with mortgage payments.

The new federal program to let people refinance or modify their mortgages is expected to help millions of Americans lower monthly payments and avoid foreclosure. So what strings are attached?

You might be concerned about the impact to your credit report or the tax implications, for instance. Others who are still paying low introductory rates might fear their monthly bills could skyrocket.

Here are some questions and answers on concerns people might have about the Making Home Affordable program.

Q: How will my credit profile be affected?

A: Refinancing generally doesn't affect your score since it's simply a rewritten mortgage, according to Norm Magnuson of the Consumer Data Industry Association, a trade group based in Washington.

This is especially true of refinancing under the federal program, since one of the terms of eligibility is that homeowners can't have missed a payment in the past year.

It's not yet clear what impact a federal loan modification — an adjustment to terms of an existing mortgage, rather than a new one — will have on credit profiles, however, Magnuson said. Regulators haven't yet determined how the loan modifications will be reported, if at all.

If you're applying for a loan modification under Making Home Affordable, it means you've already missed payments and hurt your credit profile. A loan modification should improve your credit profile in the long-run since the idea is to get you on track for meeting payments.

It might also free up money to pay off other debts.

Q: Is it possible my payments will be higher?

A: If you're still paying a low, introductory rate, it's possible your monthly mortgage payment will increase slightly under the federal refinancing program. But the idea is to avoid the big interest rate spikes that typically come with adjustable-rate mortgages.

After applying for the Making Home Affordable program, your lender should give you a "good faith estimate" that includes your new interest rate, mortgage payment and the total cost of the loan. Compare the numbers with your current loan; you might decide that refinancing isn't an improvement.

You can also check out the payment reduction estimator on the government's Web site at http://www.makinghomeaffordable.gov/.

Q: Should I wait to see if mortgage interest rates come down in a couple of months before applying?

A: Probably not, since mortgage rates are at historic lows.

Last week, rates on 30-year mortgages inched upward to 4.87 percent, but that's still close to the lowest level in decades. Waiting for the rate to go any lower might backfire, said Ken Inadomi, director of the New York Mortgage Coalition.

Even introductory rates shouldn't be that much lower than fixed rates these days — in some cases, they may even be higher. So it's probably in your best interest to apply for refinancing now.

In case you decide to wait: The Making Home Affordable program expires on June 10, 2010.

Q: What are the tax implications?

A: Charges for refinancing a mortgage are tax deductible. The total cost should be evenly divided to be deducted over the life of the mortgage, Inadomi said. Other costs, such as attorney or appraisal fees, are not deductible.

You'll also have to adjust your mortgage interest deduction if you get a lower rate.

Q: Can I try to refinance or modify my mortgage on my own, without going through the program?

A: Working directly with a lender shouldn't be a problem if you think you're not eligible for the federal program. Just beware of getting a third party involved, especially if they ask for an upfront fee.

Last week, government officials warned homeowners of scammers that charge fees of $1,000 to $3,000 to help with loan modifications. Officials say such operations almost always are fraudulent, and that help is available for free from government-approved housing counselors.

Officials said the scams often go by official-sounding names designed to make borrowers think they are using the Obama administration's program.

updated 7:05 a.m. ET, Tues., April 21, 2009

http://www.msnbc.msn.com/id/30197516/

Beach to Bay Real Estate Center is a full service real estate brokerage servicing buyers, sellers and renters at the Delaware beach areas. We handle all forms of real estate, including residential, commercial, and lots and land, in addition to bank owned, short sales and auctioned properties and representation; mortgage needs including refinances, new home purchases, second homes, first time homebuyer programs and reverse mortgages; maintain professional relationships with local settlement attorneys, insurance companies, contractors, and inspection companies; and are affiliated with a preservation and restoration company. Beach to Bay services all of Sussex County, and southern Kent County, with a strong focus on the beach resort areas of Rehoboth Beach (19971), Lewes (19958), Bethany Beach (19930), Dewey Beach (19971), Milton (19968), Millsboro (19966) and more.

Demand for home purchase loans jumps

Increase could help gauge the outlook for spring buying season

NEW YORK - U.S. mortgage applications rose last week, as demand for home purchase loans jumped even as interest rates edged up from recent record lows, data from an industry group showed on Wednesday.

Demand for home purchase loans, an indicator of home sales, far outweighed demand for refinancing. The increase may help gauge what is in store for the hard-hit U.S. housing market this spring, the peak home buying season.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, for the week ended April 3 increased 4.7 percent to 1,250.6.

Cameron Findlay, chief economist at LendingTree.com based in Charlotte, North Carolina, said home loan demand at his company has remained strong and steady the last several weeks.

“In addition, the quality of the borrowers coming to us has remained high with high FICO scores and low loan-to-value ratios,” he said on Tuesday. “This is an encouraging sign as responsible borrowers looking to purchase or refinance their homes are getting the help they need with low rate, high-quality loans.”

FICO scores refer to borrowers’ credit ratings.

Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 4.73 percent, up 0.12 percentage point from the a record low the previous week but well below 5.78 percent a year ago. The survey has been conducted weekly since 1990.

“As rates remain at historic lows, we anticipate this trend will continue as more borrowers take the time to shop around for competitive rates on home loans,” he said.

The U.S. housing market is in the worst downturn since the Great Depression and its impact has rippled through the recession-hit economy, as well as the rest of the world.

Low mortgage rates have generated demand for home refinancing loans and should continue to do so, although when it comes to demand for loans to buy homes, the low rates had only a moderate impact until last week.

The MBA’s seasonally adjusted purchase index rose 11.1 percent to 297.7. The index, however, dropped 22.6 percent from its year-ago level of 384.7.

Overall mortgage applications last week were 72.4 percent above their year-ago level. The four-week moving average of mortgage applications, which smooths the volatile weekly figures, was up 13.3 percent.

Bob Walters, chief economist at Quicken Loans, an online mortgage lender in Livonia, Michigan, said home loan activity continued to improve as consumers took advantage of attractively low interest rates.

“While credit guidelines remain stringent, there are plenty of qualified folks who are putting more money back in their pockets by locking in a low rate,” he said.

“Incentives like the first-time home buyer tax credit are helping to generate increased purchase activity,” he said.

The Mortgage Bankers Association’s seasonally adjusted index of refinancing applications increased 3.2 percent to 6,813.5. The index was up 150.1 percent from its year-ago level of 2,724.7.

The refinance share of applications decreased to 77.9 percent from 79.1 percent, while the adjustable-rate mortgage share of activity was unchanged at 1.5 percent.

Fixed 15-year mortgage rates averaged 4.49 percent, up from 4.45 percent the previous week. Rates on one-year ARMs increased to 6.23 percent from 6.20 percent.

updated 12:00 p.m. ET, Wed., April 8, 2009

http://www.msnbc.msn.com/id/30107144/

Beach to Bay Real Estate Center is a full service real estate brokerage servicing buyers, sellers and renters at the Delaware beach areas. We handle all forms of real estate, including residential, commercial, and lots and land, in addition to bank owned, short sales and auctioned properties and representation; mortgage needs including refinances, new home purchases, second homes, first time homebuyer programs and reverse mortgages; maintain professional relationships with local settlement attorneys, insurance companies, contractors, and inspection companies; and are affiliated with a preservation and restoration company. Beach to Bay services all of Sussex County, and southern Kent County, with a strong focus on the beach resort areas of Rehoboth Beach (19971), Lewes (19958), Bethany Beach (19930), Dewey Beach (19971), Milton (19968), Millsboro (19966) and more.

Obama launches mortgage rescue plan

First participants in the Treasury Department's program to help homeowners avoid foreclosure include some of the nation's largest banks.

NEW YORK (CNNMoney.com) -- The Obama administration's loan modification program is finally underway.

The Treasury Department announced Wednesday the first six participants to sign up for President Obama's plan. They include three of the nation's largest banks: JPMorgan Chase (JPM, Fortune 500), which will get up to $3.6 billion in subsidy and incentive payments; Wells Fargo (WFC, Fortune 500), $2.9 billion; and Citigroup (C, Fortune 500), $2 billion. The others are GMAC Mortgage, $633 million; Saxon Mortgage Services, $407 million; and Select Portfolio Servicing, $376 million.

Additional loan servicers will be added to the list over time, a Treasury spokesman said.

Several major servicers, including JPMorgan Chase and Wells Fargo, said they began modifying loans under the government initiative earlier this month. CitiMortgage signed up for the program on Monday and will start processing applications soon.

"We view this modification program as yet another incremental opportunity for thousands of homeowners to preserve and maintain the dream of homeownership," Wells Fargo said in a statement.

Distressed homeowners and housing counselors have been eagerly awaiting the program's launch since Obama first announced it on Feb. 18. However, it took weeks for the government to clarify the terms and for the financial institutions to update their systems and start accepting applications, frustrating many of those in trouble.

Billed as helping up to 9 million borrowers stay in their homes, the two-part plan calls for servicers to reduce monthly payments to no more than 31% of eligible borrowers' pre-tax income or to refinance eligible mortgages even if the homeowner has little or no equity. The government is allocating $75 billion to subsidize part of payment reduction, as well as provide thousands of dollars in incentives for servicers and borrowers to participate.

The Treasury Department said Wednesday it is capping the payments to servicers to allow more companies to participate. It is allocating $50 billion to the program, with Fannie Mae (FNM, Fortune 500), Freddie Mac (FRE, Fortune 500) and the Department of Housing and Urban Development providing the rest.

The modification plan calls for the servicer to reduce interest rates so that the monthly obligation is no more than 38% of a borrower's pre-tax income, and then the government would kick in money to bring payments down to 31% of income. Servicers can also reduce the loan balance to achieve these affordability levels. The government will share in the cost, up to the amount the servicer would have received if it had reduced the interest rates.

Only loans where the cost of the foreclosure would be higher than the cost of modification would qualify. Also, Treasury will not provide subsidies to reduce rates to levels below 2%.

It was not immediately clear whether the servicers must pay the incentives to homeowners and investors out of their funding share.

In addition to subsidizing the interest rates, servicers will use the Treasury funding to pay for incentives for themselves, homeowners and investors. The program gives servicers $1,000 for each modification and another $1,000 a year for three years if the borrower stays current. It will also give $500 to servicers and $1,500 to mortgage holders if they modify at-risk loans before the borrower falls behind.

Homeowners, meanwhile, will get up to $1,000 a year for five years if they keep up with payments. The funds will be used to reduce their loan principals.

The Treasury Department set the caps based on public data about the mortgages the servicers handle. Though the program mandates that servicers modify all loans that meet the requirements, the department feels the servicers will have sufficient funds to cover all troubled borrowers' applications.

"We're confident we'll have enough money," said Treasury spokesman Andrew Williams.

Separately, major servicers also recently started accepting applications under the refinance portion of the program.

By Tami Luhby, CNNMoney.com senior writer

Last Updated: April 16, 2009: 10:15 AM ET

Beach to Bay Real Estate Center is a full service real estate brokerage servicing buyers, sellers and renters at the Delaware beach areas. We handle all forms of real estate, including residential, commercial, and lots and land, in addition to bank owned, short sales and auctioned properties and representation; mortgage needs including refinances, new home purchases, second homes, first time homebuyer programs and reverse mortgages; maintain professional relationships with local settlement attorneys, insurance companies, contractors, and inspection companies; and are affiliated with a preservation and restoration company. Beach to Bay services all of Sussex County, and southern Kent County, with a strong focus on the beach resort areas of Rehoboth Beach (19971), Lewes (19958), Bethany Beach (19930), Dewey Beach (19971), Milton (19968), Millsboro (19966) and more.

How to nab a low-rate home loan

Getting a new loan can save you a bundle, but cautious lenders will make you jump through hoops. These strategies can help.

(Money Magazine) -- On paper it seems like the perfect time to refinance. The average rate on a 30-year fixed mortgage recently hit a 20-year low when it fell below 5% in mid-March. And the Fed has said that it will spend $300 billion to buy back government-backed Treasury bonds; that will probably keep loan rates low for months to come.

But wade into the mortgage market, and you may quickly feel as if you're trying to grab a dollar in a game-show booth where the money is blowing around: Those ultralow rates are right in front of you, yet maddeningly elusive.

Lenders, grappling with deadbeat homeowners and shifting regulations, have pared back on mortgage products and upped credit requirements. Still, you have a good incentive to try: If you took out a mortgage two years ago, when rates were in the mid-sixes, you stand to drop your rate nearly two percentage points, saving almost $300 a month on a $300,000 loan. Here's how to navigate the roadblocks.

Figure out if you qualify. Nowadays, credit score and equity are king. To land the best rates, you'll probably need a credit score of at least 740, and 20% equity. "Banks are looking for reasons not to lend you money," says Mark Miskiel of Lighthouse Mortgage in Sedona, Ariz.

If you don't have 20% equity, a refi isn't out of the question - President Obama's housing package allows homeowners who owe as much as 105% to receive government-backed loans. To qualify for that program, however, your original mortgage must be held by one of the government-sponsored entities, Freddie Mac or Fannie Mae; you must prove that you can keep up with payments; and you'll get stuck with fees that tack 0.25% to 3% onto your rate.

Get rid of the HELOC. Home-equity loans and lines have become the enemy of would-be refinancers. Before you can close on a new loan, your home-equity lender must agree to "subordinate" the secondary loan (meaning that your primary lender will get repaid first in the event you run into financial trouble). That can take at least a month, says Bob Moulton of the Americana Mortgage Group in Manhasset, N.Y.

One way to speed up the process is to do a consolidation refi through your home-equity lender. If that's not possible, aim to submit the subordination paperwork as you start shopping for a primary mortgage. And know that other lenders may add up to 0.25% to your rate to cash out the secondary loan.

Know where to look. No matter how stellar your credit, you won't get a great rate without doing some serious shopping. That's because every bank is using different standards for underwriting loans, so while you may look like a risky borrower to one, another may welcome you with open arms. In general, says Keith Gumbinger of mortgage data firm HSH Associates, you're likely to get the best rates from small local banks and credit unions.

Unfortunately, if you need a jumbo loan (typically $417,000, but it can go up to $729,750 in high-cost areas), you can kiss those super-low rates goodbye. While jumbos normally run about half a percentage point higher than smaller ones, today the spread is a point and a half.

Pay a point upfront. A point, which equals 1% of your mortgage amount, typically buys you an eighth to a quarter of a percentage point drop in your rate. Today some overloaded lenders are knocking half a percentage point off for those who pay a point, hoping this extra initial cost will deter serial refinancers.

If you're planning to stay put for about five years, it may be worth it. Conversely, consider adding an eighth of a percentage point to your rate to lock it in for 45 days. Banks and lenders are putting a lot more effort into vetting applications, so it can take up to two months to close a loan, vs. about 30 days in the past; you don't want to risk rates' moving against you while you wait. The payoff for patience: a loan you can live with, for a very long time.

Not so long ago, having a pulse qualified you to take out a mortgage. These days lenders are vetting applicants with the ardor of a Senate committee grilling an AIG executive. Here's a summary of what's changed.

Carla Fried, Money Magazine

April 17, 2009: 11:52 AM ET

http://money.cnn.com/2009/04/17/real_estate/low_rate_loan.moneymag/index.htm?postversion=2009041711

Beach to Bay Real Estate Center is a full service real estate brokerage servicing buyers, sellers and renters at the Delaware beach areas. We handle all forms of real estate, including residential, commercial, and lots and land, in addition to bank owned, short sales and auctioned properties and representation; mortgage needs including refinances, new home purchases, second homes, first time homebuyer programs and reverse mortgages; maintain professional relationships with local settlement attorneys, insurance companies, contractors, and inspection companies; and are affiliated with a preservation and restoration company. Beach to Bay services all of Sussex County, and southern Kent County, with a strong focus on the beach resort areas of Rehoboth Beach (19971), Lewes (19958), Bethany Beach (19930), Dewey Beach (19971), Milton (19968), Millsboro (19966) and more.

Obama: Timing right for millions to refinance

WASHINGTON — Declaring "good news" in the midst of an economic meltdown, President Obama on Thursday urged families to take advantage of record low mortgage rates by refinancing their homes.

"We are a time where people can really take advantage of this," Obama said, seated with a handful of homeowners who have already lowered their bills.

Rates on 30-year mortgages have fallen and last week hit 4.78% on average, the lowest on record. Rates are down by more than a full percentage point from a year ago.

"The main message we want to send today is there are 7 to 9 million people across the country who right now could be taking advantage of lower mortgage rates," Obama said in a photo opportunity in the Roosevelt Room. "That is money in their pocket."

The president encouraged people to take advantage of a government website —www.makinghomeaffordable.gov— to see how they can get help.

In just a handful of minutes of addressing reporters, Obama read the website address aloud five times.

But the top U.S. housing official said later that interest rates on typical home loans will probably continue to fall from their current, record lows..

"I think you will see them continue to come down, based on everything that we're doing, but recognize that they've already started to make a big difference," Housing and Urban Development Secretary Shawn Donovan said on CNBC.

Donovan was speaking after the White House press event where Obama touted his plans to rescue the housing market.

In late February, the White House announced a plan to help 9 million homeowners win lower mortgage rates or lower their monthly bills to a more affordable level.

"Home purchases are up about 20% since we announced the plan so we are already beginning to see a difference," Donovan said.

The president credited his own government's efforts, in part, for contributing to a recent surge in refinancing. The collapse of the inflated housing market helped contribute to a meltdown in the financial sector and the broader economy, and millions of people have lost their homes or been at risk for foreclosure.

Obama also warned people to watch out for scam artists.

"If somebody is asking you for money up front before they help you with your refinancing," Obama said, "it's probably a scam."

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Beach to Bay Real Estate Center is a full service real estate brokerage servicing buyers, sellers and renters at the Delaware beach areas. We handle all forms of real estate, including residential, commercial, and lots and land, in addition to bank owned, short sales and auctioned properties and representation; mortgage needs including refinances, new home purchases, second homes, first time homebuyer programs and reverse mortgages; maintain professional relationships with local settlement attorneys, insurance companies, contractors, and inspection companies; and are affiliated with a preservation and restoration company. Beach to Bay services all of Sussex County, and southern Kent County, with a strong focus on the beach resort areas of Rehoboth Beach (19971), Lewes (19958), Bethany Beach (19930), Dewey Beach (19971), Milton (19968), Millsboro (19966) and more.

Refinancing for LE$$

You do need a new title insurance policy when you refinance, but you might be able to get one for less than you think.

(Money Magazine) -- Question: I'm refinancing my mortgage, and my lender tells me that I need to get a new title insurance policy, which will cost more than a thousand dollars. We haven't made any changes to our home, and there aren't any outstanding liens on the property. Is there any way around this fee?

Answer: There's no way to get out of paying for title insurance altogether. All lenders will require you to purchase a new policy when you refinance, since your current one is only in effect for the duration of that mortgage. This fee is normally 0.5% to 1% of your loan amount.

But if you ask title insurance providers the right questions and shop around for the best deal, you may be able to knock hundreds of dollars off the price.

If it has been less than 10 years since you got your original loan, contact your title search company and ask if you can have your title reissued (also known as a special refinance or substitution rate). This can cut the price by 40% to 70%, depending on whether you use the same lender or a new one and how long it's been since you last had a title search on the property.

Also ask about any other discounts they might provide, such as reduced fees for public service employees or seniors.

You can also ask a title search provider to perform a "quick" search, which mostly hunts down new lien problems that may have occurred since the most recent title search. A quick search could be about 40% cheaper than getting a new policy.

Finally, try buying directly from a title insurance company. Studies show that agent fees can account for about 70% of the cost of title insurance. You can find a list of local independent title insurance companies at the website of title industry trade group American Land Title Association (homeclosing101.org). Or see if your state is one of the 31 covered by new online title insurer EnTitleDirect.com, which sells directly to consumers.

More costs you can negotiate

Application fee. Ask that it be waived or credited toward your closing costs. Potential savings: about $300 and up.

Document-preparation fees. These go toward the lender's bottom line. Don't accept them. Potential savings: $150 to $300.

Home inspection. This cost is passed on to you, so ask your lender to shop for a better deal. Potential savings: at least $50.

By Dee Depass, Money Magazine

January 5, 2009: 10:56 AM ET

Take a bite out of closing costs

Hold the fees please. How to save if you're buying a new home or just refinancing.

BEND, Ore. (CNN/Money) - With mortgage rates still as low as they are, financing a house is dirt cheap these days, right?

Not if you pay a fortune in closing costs.

As anyone who has shopped around for a mortgage knows, it's extremely difficult to compare one lender's offering to with that of another lender because the up-front fees vary so much and are not guaranteed. Lenders and their venders can, and sometimes do, add or inflate fees in the eleventh hour of a transaction.

The U.S. Department of Housing and Urban Development (HUD) has been working on regulations that promise to simplify the mortgage process and save consumers as much as $1,000 off a typical mortgage transaction. When such rules will be rolled out, if ever, is still anyone's guess.

With no regulation in sight, borrowers should consider these strategies for keeping their closing costs in check.

Get friendly with your current lender

If you're looking into refinancing, the first call you should make is to your existing lender, who already has critical information about you and your house on file, said Keith Gumbinger, vice president for HSH Associates.

Since you have an existing relationship, a "streamlined" process might be possible. That can save you a lot of extra paperwork and money on everything from application fees to appraisal fees.

Fee-ed Up? Here are just some of the costs of closing on a mortgage. Fee Average cost* Application $272 Appraisal $310 Credit report $28 Document preparation $206 Processing $288 Recording $86 Underwriting $236 *Based on a $100,000 loan. Not every lender surveyed charges all of these fees. Source: HSH Associates December 2003 survey of lenders

Although fees for title search and title insurance are not determined by the lender, you may also get a break there. If you recently refinanced or took out a loan, you can save as much as 50 percent on title insurance by asking for a reissue rate, which your lender can request on your behalf.

If you're a homeowner shopping for a new house, you should also try giving your existing lender first dibs on the new business. Assuming you've been a good client and your lender originates the kind of mortgage you're interested in, it's possible to get a better-than-market deal, according to Gumbinger.

Get nitpicky about fees...

There are more than a dozen kinds of fees that could show up on your final closing statement, including credit report fees, appraisal fees, document preparation fees, title fees, recording fees and underwriting fees.

All told, fees on a $200,000 mortgage could add up to anywhere from $1,000 to $3,000 – that's not including any "discount" points you pay up front to get the best interest rate. (A "point" is a fee that equals 1 percent of the loan amount.)

Lenders are required to give you a good-faith estimate of your closing costs within three days after you apply for a loan. Some will give you such an estimate even before you apply if you ask for one. Even if it is no guarantee, this written estimate will give you an idea of what kind of fees you can expect to pay, as well as an opportunity to negotiate for a better deal.

"If you're a good credit borrower you can challenge fees if they seem excessive," said Gumbinger, noting that lenders don't control many fees that show up on your statement.

Keep in mind that the good faith estimate doesn't include such out-of-pocket costs as state mortgage taxes, homeowners insurance and property taxes, which you may be expected to pay at the time of closing. In fact, your total tab at closing could be several times more than originally estimated, said Gumbinger.

... but keep the big picture in view

Closing costs are certainly a consideration for both new loans and refinancing. But it's important to not lose sight of what should be your first priority – getting the lowest rate possible.

Indeed, the difference between paying, say, 6 percent and 5.5 percent on a new loan adds up to nearly $23,000 in total interest on a $200,000 30-year loan. If you have to pay a few hundred dollars in closing costs to get that rate, you can rest assured that it is a worthy investment.

It may even be worth it to pay a point or so up front in order to lock in the lowest rates. Let's say that you'll knock your rate down to 5 percent on that $200,000 loan by paying an extra point ($2,000) up front. Considering that you'll cut $62 off your monthly payment and about $22,000 from total interest by going from 6 percent to 5.5 percent, it makes sense as long as you plan to stay in the house long enough to recoup those up front costs.

In fact, if you're short on cash you might even consider rolling the closing costs into your loan, if that is an option. You'll want to consider how much more you'll pay each month as well as in interest over the life of a loan.

If you roll $2,000 in finance costs into a loan with a 5.5 percent rate, for example, you'll pay an extra $11 a month and about $2,000 extra in total interest. In this case you're still better off than if you had not refinanced at all.