By York Van Nixon III
Well, I guess anything is better than waiting for divine intervention. For millions of “underwater” homeowners, Noah sailed away with the chosen few aboard and left the rest to drown in a sea of mortgage payments they could not afford.
President Obama before turning gray was often likened by his adoring supporters to another messiah who reportedly walked on water. While the comparisons in the minds of fundamentalist Christians may be blasphemous, ultra-conservation lawmakers have certainly forced him down a thorny path and crucified him – sans the nails – for not doing a better job of fixing problems created over a eight-year administration in less than two years. With little more than 13 months before Election Day, Mr. Obama is spending what little political capital he has left to do what should have been done before healthcare reform – stabilize housing.
Yesterday President Obama threw a Hail Mary pass into the epicenter of the housing crisis. Las Vegas, Nevada has more homes per capita in foreclosure than any state in the Union. Latest estimates put more than 60 percent of homes in the Silver State “underwater,” where the homeowner owes more on their mortgage than the current market value.
Mr. Obama unveiled his initiative with the admonition “We can’t wait.” He was referring to not waiting for a deadlocked Congress to find solutions for today’s problems by passing legislation that has a ten-year outlook. But what Obama is proposing is little more than placing a Band-Aid from Washington, DC to cover a gaping wound.
Lacking any real power to effect major solutions, Mr. Obama is extending the Home Affordable Refinance Program (HARP). When HARP was introduced more than two years ago, its goal was to reduce mortgage payments for more than 5 million homeowners struggling to stay current. While those on the right are calling the program a complete failure, to date, more than 800,000 borrowers have made it through the loan modification process.
In reality, banks have little motivation to take less money on a loan, providing payments are timely. The fact many borrowers due to changed employment situations can barely make payments is not the concern of a lender. For many seeking loan modification, missing two consecutive payments is the fastest way to get their application to the top of the heap.
Under the revised HARP guidelines announced yesterday, the 125 percent loan-to-value (LTV) ceiling will be eliminated. This is good news for homeowners who owe more on their mortgage than their house is worth. Since the financial meltdown in 2008, conventional mortgages can only be obtained as long as the borrower has equity of 20 percent or more.
To qualify homeowners must be current on their existing mortgage owned by Fannie Mae or Freddie Mac and not missed more than one payment in the past 12 months.
The extended HARP program will also reduce some of the costs associated with refinancing. Instead of paying for an appraisal, an AVM (automated valuation model developed by the Appraisal Institute) will be used when possible. Washington, DC residents will likely have to get an appraisal. The AVM does not return reliable values when used in cities where the average age of construction is near or prior to 1911.
Mortgage insurance, one of the larger fees in the refinance process, will be transferred to the new loan. This could translate into thousands in savings for homeowners.
Final details of the new HARP guidelines will not be available until November.
Borrowers wishing to participate in HARP should contact their lender to find out if it is owned by Fannie Mae or Freddie Mac.
For more information on HARP, please follow this link, or call a FNMA counselor at 1-877-722-6757.
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