Tag Archives: FHFA

New short-sale program offers relief for underwater homeowners

One of the federal government’s most-important financial relief efforts for underwater homeowners started operating Nov. 1.

  •  Traditionally short sales, where the lender agrees to accept less than the full amount owed and the house is sold to a new purchaser at a discounted price, are associated with extended periods of delinquency by the original owner. The new Fannie-Freddie program breaks with tradition by allowing short sales for owners who are current on their payments but are encountering a hardship that could force them into default.
  • Eligible hardships under the new program run the gamut: Job loss or reduction in income; divorce or separation; death of a borrower or another wage earner who helps pay the mortgage; serious illness or disability; employment transfer of 50 miles or greater; natural or man-made disaster; a sudden increase in housing expenses beyond the borrower’s control; a business failure; and “other,” meaning a serious financial issue that isn’t one of the above.
  • Homeowners who participate in this new program should be aware that although officials at the Federal Housing Finance Agency – the agency that oversees the program – are working on possible solutions with the credit industry at the moment, it appears that borrowers who use the new program may be hit with significant penalties on their FICO credit scores – 150 points or more.
  • Other factors to consider are promissory notes and other “contributions.” In the majority of states where lenders can pursue deficiencies, Fannie and Freddie expect borrowers who have assets to either make upfront cash contributions covering some of the loan balance owed or sign a promissory note. This would be in exchange for an official waiver of the debt for credit reporting purposes, potentially producing a more favorable credit score for the sellers.
  • Finally, participants should be aware of second-lien hurdles. The program sets a $6,000 limit on what second lien holders – banks that have extended equity lines of credit or second mortgages on underwater properties – can collect out of the new short sales. Some banks, however, don’t consider this a sufficient amount and may threaten to thwart sales if they cannot somehow extract more.

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New Modification Law & Avoiding Foreclosure

A new law that will be implemented on November 15, 2011 is yet another slap in the face to the American Homeowner regarding modifications.

Making Home AffordableThe basic eligibility requirements for an enhanced HARP (Home Affordable Refinance Program) loan are as follows:

  • Existing mortgage loan must be owned or guaranteed by Fannie Mae or Freddie Mac. To check whether a borrower has a Fannie Mae or Freddie Mac loan, go to MakingHomeAffordable.gov’s page on “Look up your loan“.
  • Existing mortgage loan must have been sold to Fannie Mae or Freddie Mac before June 1, 2009.
  • Existing mortgage loan cannot have been refinanced under HARP previously (except for Fannie Mae loans refinanced between March and May 2009).
  • Current loan-to-value (LTV) ratio must be more than 80%.
  • Existing mortgage loan must be current, with no late payments in the past six months, and no more than one late payment in the past 12 months.

More information is available from the Federal Housing Finance Agency (FHFA) on the agency’s website: www.fhfa.gov.

The reason why HARP is not good, is the same basic reason that HAMP (Home Affordable Modification Program) and the traditional modification is as follows:

It is strictly voluntary with all lenders; even though they say they participate.  Of course, there are factors with the seller or borrower that have an affect on being put in a modification plan that eliminate many from it.  This problem could be avoided if the banks would just lower the loan amount to the fair market value and a greater percent of people would have been able to keep their homes.  Even a future shared equity with the lender would have been acceptable if the property was sold for a profit in the future. Few banks are offering this program as well.

In conclusion, it is obviously important that we talk ASAP to go over your situation. I have several associates waiting to help: accountants, attorneys, and credit repair company.  If you’re moving on, getting back on track with your credit, staying in your home with an extended time without payments due in order to recoup finances, and most importantly receiving thousands from your bank at closing are all opportunities within your grasp!  I am just a phone call away!

John | (619) 890-3648