In order to pay for the extension, the FHFA (Federal Housing Finance Agency) told Fannie Mae and Freddie Mac to increase their guarantee fees by 0.10%. This raises some important questions:

What is a guarantee fee?
A guarantee fee is charged by Fannie and Freddie (or any other provider of mortgage-backed securities) to lenders for bundling, servicing, selling and reporting MBS to investors. It can also be charged to help hedge against losses in the portfolio.

What does it mean for me?
Well, an increase in the guarantee fee for a lender of 0.10% equates to an increase of 0.50% charged to borrowers on their loans. So, let’s say you want a 4.0% and there are no points being charged- now you have to pay half-a-point for the very same rate. Don’t think this is fair? Sorry, Fannie and Freddie securitize over three quarters of all mortgages in the US, so there’s no way around it.

When does it go into effect?
That’s a tough question. Even though the change in being enacted April 1^st (no April Fool’s joke here) loans that are funded at the end of February are subject to the new fees because the process of securitizing takes a while. So, any lock placed after January 23^rd is subject to the new fees. The exact date that all lenders are using for their implementation varies by a few days, but this is industry-wide. If you’re locked in now, you better close on time. If your lender has to extend your lock, you may be subject to the changes.

What about FHA and VA loans?
FHA and VA loans are not affected. The only loans that are affected are the conforming Fannie/Freddie agency loans.

Is there any good news in all of this?
You bet there is- rates have come down a bit. To tell you the truth, it’s been hard to see a change in the rates because the market has improved by about the same amount as the increase in fees. The difference is that the markets can change- the guarantee fee will not. I suggest taking advantage of the rates while they’re low!

Why do these programs fall short? Because the banks don’t have to participate. Yeah, that’s right- we handed them more than $700 BILLION dollars to make sure they made it through the financial crash and they decided to buy T Bills (government debt) rather than help out you and me. Thanks. I heard on KUOW (local NPR) station a few days ago that less than one million people have been able to modify their mortgage with the HAMP. Sad.

They teased us with changes to the program last November. You may have seen me say something about it back then. Well… that was underwhelming. All they are really doing is making Fannie and Freddie lower the fees for the program. Yes, that means slightly lower rates for HARP’ers, but get this- banks decided not to implement any of the new changes until March, when Fannie Mae and Freddie Mac make the fee changes.

It’s worth saying that I’m not a cynic. I really do think that the government will eventually do something that will actually help people. The frustration, however, comes from the fact that I and other mortgage originators are on the front lines. It’s not easy to talk to someone on the phone and have them start crying because they’re going to eventually lose their house because they are choosing between medical bills and a mortgage. Maybe all they need is a few hundred a month in savings to make it work- but with things the way they are now they’ll never know.

The most notable changes are the following:

• The limit of 125% loan-to-value has been removed
• The rates for new loan terms of 20 years and shorter should be a lot better
• The rates for new loans of greater than 20 years will have better rates (but not as good as 20 year rates)

The trouble that I see is that a) it’s still a voluntary program for the banks and MI companies and b) they still aren’t fixing the problem. Officially, yesterday was the first day that I could take applications for new-and-improved HARP refinances. Unfortunately, the pricing changes that are going to lower rates aren’t going into effect until JANUARY 3RD! Oh, and by the way- the changes to the maximum loan-to-value don’t go into effect until MARCH 2012! Oy vey.

Also, we’re just now getting “guidance” from the big banks about whether or not they’re going to participate in the program and how they’re going to augment the guidelines. We just got word from several of our banks stating that they are delaying implementation of all changes until March.

So, I know you’ve been hanging on, waiting for someone to come along and help, but the government and banks are saying to you, “Just wait a little longer.”

Don’t forget- if you receive VA disability you may be eligible to have your funding fee waived.

Call or email me if you’re a vet and I’ll help you get into a home ZERO DOWN!

The trouble with the program is that it’s too limited. Good sense might make the arguement that if you reduce someone’s mortgage payment that’s struggling with being underwater that they will be in a better position to afford their home and not be foreclosed on. Duh.

Many factors have been major speed-bumps. They range from things like: having mortgage insurance and the MI company not participating, being too underwater, having a second mortgage and the list goes on.

Here are a few of the changes that are announced:

• Removing the ceiling of 125% LTV for Fannie and Freddie Loans
• Eliminates the need for a full appraisal if a reliable AVM is provided (automated valuation model)
• Eliminating some risk-based fees from FNMA and FHLMC for refinancing into shorter-term loans

There will be more details released on November 15th.

In my humble opinion, the glaring problem that is not yet addressed and the way I read the letter will not be is that the program is voluntary for lenders, servicers and mortgage insurers. So far that’s been the biggest problem- not all banks and MI companies are playing ball. It’s time for everyone to get in the game. I think that HARP should be required for anyone who wants to continue to do business with Fannie and Freddie. They provide over $5.7 TRILLION in funding for the US mortgage markets. They are the big gorilla and should throw some weight around.

Here is a link to the letter

The 4% mortgage – good luck getting one – Oct. 19, 2011.

Check out this article from housingwire.com. There’s been some rumors that the govt. is trying to amend the HARP program so that many of the people that don’t qualify for the program in it’s current form can get some relief.

IT’S ABOUT TIME!

Check out this video from PNB’s youtube.com channel

Of course, it isn’t a solo effort. Tracy Howard, my processor, is an integral part of my team and I appreciate all of her help! Wow, I feel like I’m giving an awards speech. Rest assured, I know it’s not that big of a deal. I just want to say thanks to Tracy, my referral partners and all of my wonderful clients. It was a nice boost to my day to see my name in print.

Here are the quotes. Rates are higher by a touch today, but I still think it’s a great deal either way. With the “fee” option, you’ll save somewhere in the neighborhood of $311/month. With the “no fee” option you’ll save approximately $270/month.

If you’re concerned about the fact that you’re extending your mortgage to thirty years, consider this-

Right now, you’ve paid about $59,114 in interest. If you project 5 years into the future, you’ll have paid about $129,639 in total interest. If you refinance to x.xxx% and project the next five years, you’ll have paid the $59,114 in interest on your current loan plus $59,879 over the next five years totaling $118,994. So, after five years, you’re definitely ahead in total interest.

If you ask the question: What about the interest paid over the life of the loan; I have an answer. On your current loan, you’re slated to pay about $335,776 in interest. On the new loan, you’ll pay $288,857 over the next thirty years. If you combine that number with the number that you’ve already paid ($59,114) you’ll have paid $288,857. That’s $46,918! If you factor that over 30 years, you’ve increased your effective income by $1563/year for about 3 total hours of work for you. So, if you could say that for those three hours, you’re being paid $15,639.33/hour. Not a bad wage.

Jon