DU REFINANCE PLUS (HARP) CHANGES NOW IN EFFECT
HARP Eligibility Date:
The mortgage eligibility date (May 31, 2009) is now based on the NOTE DATE of the original loan rather than Fannie Mae’s acquisition date.“Using the note date is more transparent to borrowers because borrowers know when they closed on their prior mortgage and typically do not know when their loan was sold to Fannie Mae.” – Fannie Mae
Foreclosures / Bankruptcies:
“To align with manual Refi Plus guidelines, the standard waiting period and re-establishment of credit criteria following a bankruptcy, foreclosure, deed-in-lieu or foreclosure, or preforeclosure sale is being removed for DU Refi Plus loan case files. DU will issue a message on loan case files for borrowers with a previous bankruptcy, foreclosure, deed-in-lieu of foreclosure, or preforeclosure sale letting the lender know that DU did identify the event and that the loan casefile would be eligible for delivery to Fannie Mae, regardless of when the event occurred.” (Note: DU or Desktop Underwriter is Fannie Mae’s automated underwriting system).
Note: If you have been declined for a HARP refinance in the past, check in periodically as lending guidelines are changing.
THE EASING SHALL CONTINUE
In May the Federal Reserve stated that by years end they would start unwinding Quantitative Easing, the stimulus program keeping interest rates at historic lows. Interest rates skyrocketed and the entire economy shuttered. Damage done. In November the Fed changed direction.
The economy is still very fragile. Things are going the right direction, led by housing, but at a snail’s pace. Unemployment is improving but still at 7.2%; flat for nearly a year.
“I don’t think Federal Reserve Board members would feel very comfortable about beginning the tapering process until we’re closer to 200,000 jobs added each month. We’re a long way from there — in fact we’re moving in the wrong direction,” said Mark Zandi, chief economist for Moody’s Analytics. (cnnfn.com)
On a positive note, if the Fed continues the stimulus for the foreseeable future, interest rates could fall. Lower rates equates to more affordable housing, and savings for those that can still refinance.
On November 19th, the Fed stated that the stimulus will likely continue into 2014.
THE FATE OF FANNIE MAE AND FREDDIE MAC
Since the great mortgage meltdown and housing crisis of 2008, many members of the Republican Party have pointed much of the blame at the GSEs, Fannie Mae and Freddie Mac, and have repeated called for the unwinding or dismantling of the GSEs. Yes, the GSEs played a role, but the GSEs where certainly not to blame. Look no further than Wall Street when casting your stones; but that is a different story all together. Recently, the cry to unwind the GSEs can now be heard from both parties; including the President himself.
The fate of the GSEs seemed sealed. With bi-partisan support, and a “progressive” president calling for the unwinding of the two entities responsible for the government controlled and regulated housing market; Fannie and Freddie seemed doomed.
Not so fast. The tide may be turning for the GSEs, and so may the minds of both parties. Need a hint? Earnings.
“Freddie Mac’s net income in the third-quarter hit $30.5 billion, including the $23.9 billion impact of releasing the valuation allowance on deferred tax assets, the government entity announced. Furthermore, Freddie reported a pre-tax income of $6.5 billion, compared to $4.9 billion in the second quarter of 2013, making it the eighth consecutive quarter of positive earnings and the second largest in company history.” (housingwire.com)
Mortgage giant Fannie Mae earned $8.7 billion in the July through September period, its seventh straight profitable quarter. The government-controlled company will have nearly repaid in full its taxpayer bailout of five years ago, after paying its third-quarter dividend. Fannie said Thursday its earnings were boosted by the rise in home prices during the quarter, which enabled it to reduce its reserves set aside for losses on mortgages. The earnings for the latest period compared with net income of $1.8 billion in the third quarter of 2012. Washington-based Fannie said it will pay a dividend of $8.6 billion to the U.S. Treasury next month, bringing its payments to about $114 billion. Fannie said Thursday that it expects to remain profitable “for the foreseeable future.” (AP)
Industry insiders believe that the immense profits being posted by the GSEs are swaying policy makers. The Republican Party loved the GSEs in the early and mid-2000s because they were printing money. “Big” government didn’t seem to be a factor. Well, they are printing money again and the mood on the Hill seems to be turning.
The fate of Fannie Mae and Freddie Mac is not sealed. They will likely be merged into one entity, but as long as they are printing money, they are not likely going away. The government has had it hands in the housing business since the 30s. Don’t expect them to give it up; especially when there is money to be made. And yes, that is how we got here in the first place. More to come.
THE STAGE IS SET FOR A COMEBACK
North Carolina Democrat Mel Watt, will likely be voted director of the Federal Housing Finance Agency (FHFA) in early December. The FHFA was created in 2008 to oversee Fannie Mae and Freddie Mac. Watt, often identified as a “progressive” liberal who called for the principle reduction of underwater homeowners, would have the power to modify the terms of 50% of the existing U.S. home mortgages, if confirmed as the agency’s director.
Senate Republicans blocked Watt’s confirmation in October, but due to recent changes in voting requirements, Watt would simply need a majority vote to be confirmed, which is all but guaranteed in December.
With Watt’s confirmation, industry insiders anticipate an expansion of the Home Affordable Refinancing Program (HARP). Possible changes could be an extension of the June 2009 date, which currently prohibits loans originated after May 31st, 2009 from qualifying for HARP. That change alone would allow millions of home owners to refinance to lower rates who are underwater.
Watt will likely reverse the momentum to wind down Fannie Mae and Freddie Mac. With the possible expansion of HARP, and other policy changes, the GSEs may even grow. The stage is being set for the possible comeback of the GSEs. This could bring about some exciting opportunities for homeowners and homebuyers; not to mention the mortgage industry as a whole. Refinance boom 2014?
HOME SALES DIP
Existing home sales dropped in October, but are still substantially higher than last year. New home sales up slightly.
“The supply of existing-homes for sale remained fairly unchanged, as inventory inched up from a 4.9-month supply in September to a 5-month supply in October, NAR posted. Meanwhile, the supply of new homes for sale slightly dipped to a 5-month supply in October, compared to a 5.2-month supply in September, the Census Bureau and HUD said.” (housingwire.com)
“The erosion in buying power is dampening home sales,” said Lawrence Yun, NAR’s chief economist. “Moreover, low inventory is holding back sales while at the same time pushing up home prices in most of the country. More new home construction is needed to help relieve the inventory pressure and moderate price gains.”
Median Existing Home Price: $199,500 (up 12.8% from October 2012)
PURCHASE MORTGAGE APPLICATIONS RISE
“Applications for new home purchases increased by double-digits in the latest Mortgage Bankers Association update, signaling an America that is prepared to buy more homes.” (housingwire.com)
The MBA stated that home sales will likely increase by 10% in 2014. As the overall economy improves, the housing market should continue to post strong gains.
$13 BILLION FINE
JPMorgan Chase agrees to a $13 billion settlement with the Attorney General over “federal and civil claims related to the bank’s packaging, marketing, sale and issuance of mortgage backed securities prior to the housing downturn.” (housingwire.com)
Don’t shed too many tears for JPMorgan Chase; the majority of the $13 billion dollar settlement will be tax deductible.
FREDDIE MAC 2014 PREDICTIONS
- Rising rates. Expect 5% 30 year fixed rates by the end of 2014
- Purchase transactions to outpace refinance transactions (first time since 2000)
- Housing starts at 1.15 million units
- 700,000 new construction jobs
- Home values to rise 5%-6% (nationally)
- Home sales to rise 5%-6%
KNOW BEFORE YOU OWE
New mortgage disclosures are coming soon. The Consumer Financial Protection Bureau’s announced its new “Know Before You Owe” loan disclosures, set to replace the current Good Faith Estimate and Truth in Lending disclosures.
“Our new ‘Know Before You Owe’ mortgage forms improve consumer understanding, aid comparison shopping, and help prevent closing table surprises for consumers,” said CFPB Director Richard Cordray.
THIRD PARTY ORIGINATIONS PERFORMANCE IMPROVES
Third party mortgage originations, those originated by mortgage brokers and mortgage bankers, are now performing at a high level.
“Moody’s Investors Service released a report saying loans originated by third-party brokers and correspondent lenders continue to equal retail loans in payment performance, thanks to higher underwriting guidelines and additional scrutiny of loans sourced by third-party originators. After studying default rates on Fannie and Freddie third-party and retail loans from the past decade, Moody’s analysts discovered that recent third-party originated loans are performing just as well, if not better, than retail mortgages.” (housingwire.com)
Moody’s failed to mention that loans originated by mortgage brokers and mortgage bankers are done so by licensed loan officers. Retail bank loan originators are not licensed. This factor may have an impact on the quality of loans being originated by third party originators.
2nd MORTGAGE EXTINGQUISHMENT (ARIZONA ONLY)
The State of Arizona currently has more than $150 million to contribute to homeowners that are underwater and qualify for HARP. The Arizona Department of Housing will offer up to $100K per homeowner(s) that owes more than their home is worth in principle reduction. The State assistance is not a 2nd mortgage, does not require repayment, and is forgivable after five years.
May now be combined with Second Mortgage Extinguishment up to $60,000!
If you or someone you know, owes more than your home is worth, and obtained the mortgage prior to June 1st, 2009, call or email me to see if you qualify for a principle reduction. Borrowers that have already completed a HARP refinance do not qualify.
30 YEAR FIXED
15 YEAR FIXED
Interest rates as of 11/22/2013. Conforming interest rates. Interest rates and APR based on loan amounts not to exceed $417,000. Loan to value not to exceed 80%. 720+ credit score. Owner occupied only. Purchase and rate in term refinances. Not all applicants will qualify. Call today for your individual scenario rate quote. Published rates do not apply to HARP loans.