Saturday, March 27, 2010

New Loan Modifications (In a Nut Shell)

I received a wonderful email from a trusted lender. 

She was explaining "in a nutshell" the newer loan modification/refinance initiatives coming from the White House.  I wanted to pass this along to you:

*  Once again, the programs are VOLUNTARY.  Banks do not have to participate.

*  The offer from the government is to provide a federal loan insurance (FHA) on refinanced mortgages if the current lender will reduce the first mortgage to 96.5% of the current market value.  If there is a second trust on the home, the total loan to value cannot exceed 115% of the total value of the home.  In the case of having two separate lenders, they may have to be working together to reduce what was originally owed to them.

*  What makes this a good idea is that the lenders get the underwater borrowers and risk of foreclosure; and replace it with an insurable loan program through FHA.  The fed has allotted $14 billion dollars to pay for this program. That will be the incentive to the banks to participate.  If you already have an FHA loan, this is not a program for you, but there may be other products, such as a streamline FHA refinance that is available to you.

*  It will take a few months (at best) for lenders to assess the risk and determine how or if, they will participate.

I'd like to thank Cindy for providing me, and in turn, you, with reducing this complicated program to the basics, so I can provide you this information... in a Nut Shell!

Who do I think this will help?  Those with 2 mortgages with the same bank (careful, you do  not always know who the "investor" is - just because you pay both mortgages to Bank of America doesn't mean that they own the loan; they are the largest loan SERVICER in the country, but they don't actually own all the mortgages they service.

Why?  Because let's say BofA does own both mortgages: an $80K loan and a $20K loan on the same house that is now worth $60K.  They can foreclose and get $60K minus the costs to foreclose and sell, so someething like $50K... OR they can refi with an insured loan for $69,000. 

We'll see how this plays out, but this is my expectation.


For all your lending needs, please contact:
Cindy Fox, Senior Mortgage Planner
12500 Fair Lakes Circle, Suite 130
Fairfax, VA 22033
(703) 409-2002 cell
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