On October 24, 2011, the Federal Housing Finance Agency (the “FHFA”) and Fannie Mae and Freddie Mac (the “GSEs”) announced an expansion of the Home Affordable Modification Program (the “HARP”), or so called “HARP Phase II”, in an effort designed to assist additional “underwater” borrowers.  

While the program is limited to loans originated and sold to Fannie Mae or Freddie Mac prior to May 31, 2009, one intriguing feature of the program is the limitation of required representations and warranties from lenders making such loans to the GSEs.  This feature could lead to a reduction in repurchase demands for a certain segment of GSE loans refinanced under HARP Phase II. 

Prior HARP refinances were subject to a maximum LTV of 125%.  That limit has been removed for fixed rate mortgages; adjustable rate refinances are still subject to a maximum LTV of 105%.  In addition to the lessening of representations and warranties, the removal of the upper limit on LTV ratios, and the current low interest rate environment could provide this program momentum producing results beyond those of past HARP or other Making Home Affordable programs.

The GSEs plan to issue guidance with additional details about the program changes mid-November.  Participation in HARP is not mandatory; therefore, mortgage entities wishing to participate will have time to review program amendments and implement necessary operational changes.

Eligibility criteria for HARP Phase II loans are as follows:

• The mortgage must be owned or guaranteed by Freddie Mac or Fannie Mae;

• The mortgage must have been sold to Fannie Mae or Freddie Mac on or before May 31, 2009;

• The mortgage cannot have been refinanced under HARP previously unless it is a Fannie Mae loan that was refinanced under HARP from March-May, 2009;

• The current loan-to-value (LTV) ratio must be greater than 80%; and

• The borrower must be current on the mortgage at the time of the refinance, with no late payment in the past six months and no more than one late payment in the past 12 months.

Other program features include:

• Certain agency fees will be waived if a borrower elects a shorter term with the new loan (for example, choosing a 20 year loan term when the prior loan had a 30 year term);

• If there is a reliable AVM estimate of value provided by Fannie Mae or Freddie Mac, a new appraisal will not be needed; if there is not a reliable AVM value, a new appraisal will be required;  and

• Certain lender representations and warranties will be waived.

A copy of the FHFA release may be found at the following link: http://fhfa.gov/webfiles/22722/HARP%20release%20102411%20Final.pdf

Also, FAQs about HARP Phase II may be found at the following link: http://fhfa.gov/webfiles/22723/HARP%20release%20102411QandA%20Final.pdf

The FHFA and the Department of the Treasury instituted HARP in early 2009 as part of the Obama Administration’s Making Home Affordable program.  HARP provides borrowers that have a depressed home value the opportunity to refinance their mortgage into a lower interest rate loan.

While HARP is only one of several refinancing options available to homeowners, HARP is unique because it is one of the few refinance programs that allows borrowers who owe more on their mortgage than their home is worth to take advantage of a lower rate refinancing option.

Google the term “credit repair” and 19 million results are instantly generated. With so much information available, and so much of it conflicting, how do you know which credit repair company is legitimate and which ones are really just looking to take advantage of desperate consumers?

The following are steps you can take to know exactly what to expect from a legitimate credit repair company and the valuable services they provide:

Get a referral from your mortgage professional. Not only do we work with credit repair specialists on a regular basis, our business depends on your success. It’s in our best interest to make sure you are represented by professionals who are experienced in dealing with creditors, the credit bureaus, and collection agencies.

Interview your candidates. Make sure they understand and can explain to you how credit scores are calculated. Remember the 5 factors that make up a credit score that we discussed in a previous article? Without a detailed knowledge of the specific elements that make up your credit score, how can they possibly create a successful strategy to increase your score?

Don’t believe the hype. Credit repair takes time. Don’t fall for advertisements from companies promising miracles in just a few days or weeks. Remember, it took time for your score to get where it is, and it will take a legitimate credit professional time to fix it, depending on your situation. For the most part, expect 3 to 6 months for the best results, and up to a year or more if you have more serious problems like bankruptcies or identity-theft issues.

Don’t spend more than $1,500. Depending on your situation, expect to spend between $800 and $1,500 for a legitimate credit repair company. Again, if you have serious credit challenges such as charge offs, collections, public records or identity theft issues, expect to be in the higher range and vice versa. In today’s market, where FICO scores one point below 740 could cost you thousands of dollars in interest and monthly payments, you’ll be glad you made this investment in your financial future.

Monitor your progress. Be sure to communicate with both your mortgage professional and your credit repair representative throughout the process. To ensure success, we all need to be on the same page. With the right team of professionals, you can expect your credit score to increase between 10 to 220 points over the course of 6 weeks to 6 months. That’s going to save you a lot of money on your mortgage, credit cards, auto loans, and even student loans.

Credit repair is a valuable, worthwhile service when you’re working with the right company.

It’s that time of year again… Daylight Savings Time (DST) that is.

Don’t forget to move your clocks behind one hour, this Sunday, November 6, 2011, at 2:00 a.m.

And did you know that throughout its long history, Daylight Saving Time has had a remarkable and sometimes unexpected impact? For instance, in the 1950s and 60s, each state and locality was permitted to choose start and end DST dates as they desired. During 1965, Minneapolis and St. Paul – which are considered one metropolitan area – didn’t agree on start dates, and for a period of time, these Twin Cities had a one hour time change between them. And on one Ohio to Virginia bus route, passengers technically had to change their watches 7 times in 35 miles!

Also, to keep to their published timetables, Amtrak trains cannot leave a station before the scheduled time. So when the clocks “fall back” in the fall, all trains that are running on time actually stop at 2:00 a.m. – the official time of DST change – and wait one hour before resuming their routes. In the spring, the routes instantaneously become one hour behind schedule, but they just keep going and do their best to make up the time.

You may have heard that President Obama plans to open up refinancing to more homeowners who are underwater. If you are wondering what this means… and if you can benefit… here are some facts to consider.

First, it’s important to realize that the president’s proposal is not a new program, but a revision to the current Home Affordable Refinance Program (HARP). However there is a big change: Now homeowners can refinance no matter how underwater they are! Before homeowners could only refinance if they were 25% or less underwater, and even then many banks only let people who were 5% or less underwater refinance.

Also, with the revision it’s possible that an appraisal won’t have to be preformed, which is great news as this will save time and money. But this is only the case if Fannie Mae or Freddie Mac can electronically estimate the value through their valuation models.

Keep in mind that these updates to HARP apply only to people whose mortgage is currently secured by Fannie Mae or Freddie Mac… and whose loan was securitized by Fannie Mae or Freddie Mac prior to May 31, 2009. So the chance are that people who have refinanced since May 2009 will not qualify to refinance under the HARP revision.

As of now, the revisions to HARP have been proposed by President Obama and the Federal Housing Finance Agency (FHFA), which regulates Fannie Mae and Freddie Mac. This directive has been given to Fannie Mae and Freddie Mac and they now have until November 15, 2011 to give guidance and details regarding how these changes will be run.

To read more details, you can visit the FHFA website.

Happy Halloween Everyone! I hope everyone has a safe Halloween!