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March 6, 2009
Housing Loan Modification?
So in light of all a couple recent posts (Dahill, etal) on the new refinancing plans that Prez Obama has announced, I have this to report: I called my lender (Chase) this morning to ask them for advice on our mortgage (my husband and I have a 30 year fixed at %6.5). We've been making every payment on time, but as I was laid off last Nov. due to budget cuts, I'm slowly depleting my savings looking for work, and want to secure a more pragmatic rate. (Btw, the value of our BK coop has remained steady).
After being on hold for 20 minutes with the friendly folks at Chase, I was read to (yes, actually "read to") by the deer-in-headlights "mortgage advisor" at Chase (I'm pretty sure she was at a call center in Manila--not that that is important, it's more surreal than anything else) for about three minutes which gave vague bulletpoint details about Obama's plan but no concrete assistance (ie, I wanted to ask Chase what I could actively do to improve our rate/payments over the long term, etc). She basically said they didn't have any advice on the matter and re: the latest refi/home assistance plans coming out of DC, wouldn't have any more info until probably the end of March.
So. I followed up by emailing our mortgage broker, who left me a VM saying that until Obama's housing plans were actually IMPLEMENTED, they are more theory than anything else. She also said that since I'm recently unemployed, she suggests we do a loan modification instead of a refi, to avoid closing costs.
Just wanted to share my experiences and see what others out there in a similar situation have been contemplating!
Comments
YES, you should pursue the modification instead of the refinance because you can prove your hardship. You will not be able to qualify for a refinance because you are currently out of work.
Both these plans will start April 1st. We are all just getting this information as it comes out so it's going to take the industry a couple of weeks to digest and structure these programs.
The good news today is that it has already affected mortgage rates for the better due to MBS traders buying lower coupon notes for fear that higher coupons will prepay quicker due to upcoming refinances. It's what we call "down in coupon" The rationalization for this is if they by fixed income MBS at lower rates those loans will last longer since borrowers will be reluctant to refinance out of them thus increasing their longevity. The higher coupons "higher rates" are risky because they feel that those borrowers will refinance into lower rates at a future date causing them to lose their investment.
This along with the "flight to quality" is going to cause mortgage rates to drop.
Also good news about the REFI PLUS program is that you are grandfathered in if you have a current Fannie/Freddie Loan. That means no condo/coop restrictions or no PMI (if you don't have it currently) regardless if the new LTV is 95% due to lower housing costs.
The more I read into this program the more I like it. What they need to do now if get rid of the LLPA or Loan Level Price Adjustments so that everyone that can qualify will get a better rate regardless if it's a condo, 3 family, sub 720 fico, etc...
I believe if you can document that you can pay your mortgage ( DTI is with in reason ) you should be able to get the same rate that anyone else does.
That's my opinion... I'll do my best to update the brownstoner community once I have more information.
Adam
adahill@approvedfunding.com
Posted by: Adam Dahill at March 5, 2009 3:05 PM
NEW YORK, March 4, 2009 — JPMorgan Chase announced today that it strongly supports the Administration's mortgage modification program, as detailed today.
"This builds on the efforts we have already implemented and extends them to more struggling homeowners and provides us and other servicers more options to keep families in their homes," said Jamie Dimon, Chief Executive Officer of JPMorgan Chase & Co. "The plan appropriately balances the interest of homeowners, mortgage servicers and investors. As a result, more families will be helped with long-term and sustainable solutions through a consistent process, including a verification of income."
We support the program because:
The guidelines establish a clear, fair and consistent set of standards for all servicers to follow.
It is intended for the right borrowers: those with mortgages below $729,750.
All borrowers must fully document their income.
All borrowers must clearly demonstrate financial hardship.
It covers verified owner-occupied homes only.
The owners of the mortgages will be confident that servicers will follow owners' best economic interests in making modifications.
"JPMorgan Chase believes that this program, along with the fiscal stimulus plan and the TALF program, are all strong steps to improve both the economy and the financial system and to help those who are deserving and in need of assistance," Dimon said.
"There is no silver bullet," he said. "The thoughtful and rapid roll-out of various programs is the only intelligent way to begin to solve these problems. These mortgage modifications are economically and morally the right thing to do for individual customers. It is the respectful way in which we all would want to be treated. We will work hard to incorporate the new criteria into our own loan modification process to quickly help customers, and we urge all to participate in this plan as soon as possible."
"This program maintains the essential principle that individuals, businesses and corporations should pay their loans if they can afford to do so," Dimon said. "We believe this program's completeness eliminates the need for judicial modification in bankruptcy, but if legislated, judicial modifications should be consistent with this plan and only for borrowers who couldn't qualify or were not offered a modification."
"Extraordinary times need extraordinary measures. It is time to implement this program—even if it's not perfect in everyone's view—and move on," Dimon said.
Posted by: geekspice at March 5, 2009 4:10 PM
From an article I read this morning: "The plan would create a $75 billion loan modification program that would allow “responsible homeowners” to refinance to interest rates as low as 2 percent."
I am wondering if we would we need to start another 30-year mortgage from scratch if we modified our loan? Also, we are paying PMI, as we put 5% down... would this still be a requirement under the new guidelines?
Posted by: Crumpler at March 6, 2009 9:43 AM
Unfortunately from what I have read, a "Responsible Homeowner" is one who has LTV of 105%, and totaling housing payments exceeding 38% of income. It seems if you are truly responsible, you get to keep on paying your mortgage for your home at current rates and subsidize others who get to live in a nicer home for less money.
Posted by: newsouthsloper at March 6, 2009 10:33 AM
"Responsbile Homewoner" definition includes people who put no money down (100% financing) + those who cashed out equity to buy cars, boats, vacations etc.
The pontential for abuse under the loan modification system is big.
Posted by: Boerum Hill at March 6, 2009 11:01 AM
There are no responsible homebuyers in most parts of Brooklyn onlt greedy bafoons that went by the motto of. "If home prices go up rents go up too" " I gotta a million dollar house even though I am not worth 2 cents
Posted by: hannible at March 6, 2009 12:12 PM
I haven't been laid off, but I accepted a substantial cut in my base salary. Would this still qualify as hardship for purposes of a loan modification?
Posted by: BklynCynic at March 6, 2009 1:53 PM
^^^^
Yes. A part of Obama's plan is to have mortgage payments be 31% of income and all bills total no more than 38%. As long as you have your paystubs to prove your pay cut and your mortgage is under $729,000, you should be able to modify your loan.
Posted by: i_heart_brooklyn at March 7, 2009 5:32 AM
Thanks for sharing information about home loan modification. I think loan modification is a process for modifying loans for more affordable payments.
Posted by: Loan Modification at September 2, 2009 9:35 AM
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