Bailouts

More on the Newest Md and Refi Plans (March 2009)

Posted on Saturday, March 7, 2009

Making Homes Affordable

• We’re all sinking. This new strategy acknowledges we’re in different boats and offers solutions to fit specific circumstances
• Uses FannieMae and FreddieMac which already own or guarantee $5.2 trillion of $12 trillion total home loans in U.S. more than 30 million of us have mortgages owned or guaranteed by FannieMae or FreddieMac.
• There were 2.2 million foreclosures in 2008 and another 6 million predicted over the next 3 years if something is not done. There were 250,000 new foreclosure filings last month. 1 in every 10 home mortgages is late or in foreclosure
• Expected to Help 9 Million

Home Affordable Modification

• Late, Hardship, At Risk of Foreclosure
• PITI Greater than 31% of Monthly Income
• Primary Residence
• Under $759,750

• FannieMae servicers will evaluate all loans for program before foreclosing
• Prior to January 1, 2009
• Expected to Help 3 to 4 Million
• Until December 31, 2012
• Benefits:
? Decrease interest rate to as low as 2%, increase amortization to up to 40 years, other modification strategies to reduce payment to 31% if income
? No Fee
? $1000 per year principal reduction for 5 years if pay on time
• Use “net present value” test to determine if beneficial for investor/lender
• If modification will cost less than foreclosure/50% of loan, have to do. If will cost more its voluntary
• Banks getting money under Treasury’s $700 billion financial rescue plan required to participate
• Pay servicer $500 for modifying before default, another $1000 for successful modification, another $3000 over 3 years for no defaults. Lender/investor paid $1500
• CitiGroup, Bank of American, JP Mortgage Chase, Wells Fargo service 2/3 of all U.S. home mortgages and will be participating as long as their servicing contract does not specifically prohibit

Home Affordable Refinance

• Payments Current (no more than 30 days past due within past 12 months)
• Owned or Guaranteed by FannieMae or FreddieMac (call or website)
• Primary, Secondary or Income
• Owe 80% to 105% of Value (based on computer models)

• Expected to help 4 to 5 million
• Until June 2010
• Pay Fee
• If debt is over 55% of income get credit counseling
• Carry existing MI forward
• Second loans not included in ratio

Last year prices in 20 major areas decrease by more than 18%. Americans lost $3.3 trillion in property value last year. An estimated 14 million are underwater. Over 2.2 million of us already have servicer negative equity of over 125% underwater. 230,000 of us slide into negative equity each month. Another 2.2 million if us will be underwater if prices decrease another 5%. California has the most underwater loans with 1.9 million. Florida is second with 1.3 million. Won’t help Floridians as much since we’re more than 5% under water. New York, New Jersey and Connecticut has the least properties under water. Geographic distribution of homes underwater is broadening as causes driving foreclosures shift from rate resets to value reductions to economy and unemployment. 598,000 lost jobs last month alone. Unemployment is nearing double digits.

Both programs
• Full doc, need to be able to prove can pay
• After 5 years interest rate increases up to rate when loan started (currently 5%)
• Could end up costing $275 billion due to funding GSEs
• Won’t help people losing jobs or with heavy debts.
• Expect to see results in 3 months; reduce defaults and foreclosures, increased modifications and refinances.

More To Come

• $200 billion more (on top of initial $200 billion) to FannieMae and FreddieMac to buy mortgages
• Bankruptcy “cram downs”
• Dealing with second mortgages
• $10 billion to FDIC to insure lenders against further property value reductions
• Citigroup, Bank of America, JP Morgan Chase have their own modification programs and foreclosure moratoriums
• Florida Attorneys Saving Homes
• Legal Aid
• Mediation


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Comments

how can I find out if I can get a new loan?

monique r.  3/13/2009
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