Brent Bruce's Mortgage Insights

Hope for Homeowner's Update
and HUD Press Release

H4H appears to be still stuck in the mud.  I still do not have a single lender willing to fund one of these loans.  I have not been able to complete even one loan application in hopes of saving one of your homes.  Today my best advice is still to appeal to your existing lender in hopes they will be willing to work with you on a loan modification.

However, there is some news brewing.  Freddie Mac and Fannie Mae's programs that I discussed in the recent update, are supposed to be launched here on Dec. 15th.  We are all waiting with fingers crossed to see if the existing lenders like the program enough to start modifying loans.  Remember this program would rewrite your loan to a loan amount that would make your payment not more than 38% of your current gross income.  The difference between the new loan and the existing loan would be placed as a lien on your house and would need to be paid in the future.

The Department of Housing and Urban Development ( HUD ) has also been hard at work trying to modify their own H4H program to make it more appealing to lenders.  These revisions would allow for 96.5% of the current value in loan amount, and has some other beneficial features.  I have included the complete press release below.

I will be watching the Dec. 15th changes closely and will be sure to let you know if I see anything that may help you stay in your home.

Be sure to read the press release below and also go to my blog at www.brentbruce.com/blog and sign up to receive all of my Mortgage Insights comments.

Brent C. Bruce

Branch Manger – CMPS
Allied Home Mortgage Capital Corp.
Rancho Cucamonga, CA
909-463-4750
brentbruce@brentbruce.com
www.brentbruce.com

BUSH ADMINISTRATION ANNOUNCES FLEXIBILITY FOR “HOPE FOR HOMEOWNERS” PROGRAM
Changes will allow more struggling families to use the program and keep their homes

WASHINGTON - U.S. Housing and Urban Development Secretary Steve Preston today announced that the HOPE for Homeowners (H4H) Board of Directors has approved changes to the program to help more distressed borrowers refinance into affordable, government-back mortgages. The changes will reduce the program costs for consumers and lenders alike while also expanding eligibility by driving down the borrower's monthly mortgage payments.

"Clearly, meaningful changes were needed. These modifications should increase lender participation and help more families who are having difficulty paying their existing mortgages, but can afford a new affordable loan insured by HUD's Federal Housing Administration," said Preston.

By taking full advantage of the new authority provided under the Emergency Economic Stabilization Act (EESA) of 2008, HOPE for Homeowners will provide additional mortgage assistance to struggling homeowners.

Modifications to HOPE for Homeowners include:

• Increasing the loan to value ratio (LTV) to 96.5 percent for some H4H loans;
• Simplifying the process to remove subordinate liens by permitting upfront payments to lienholders; and
• Allowing lenders to extend mortgage terms from 30 to 40 years.

"These changes will further encourage lenders to take a hard look at this program before heading down the path to foreclosure and will provide families with another resource to refinance into a loan they can afford," said FHA Commissioner Brian D. Montgomery. "HOPE for Homeowners will continue to serve as another loss mitigation tool that can be used to help families keep their homes."

HOPE for Homeowners will continue to only offer affordable, government-insured fixed rate mortgages. Further, this program will maintain FHA's long-standing requirement that new loans be based on a family's long-term ability to repay the mortgage. Only owner-occupants are eligible for FHA-insured mortgages.

Background

Increasing the Loan-to-Value and Adjusting Debt-to-Income Ratios

The program will increase the loan-to-value ratio (LTV) on H4H loans to 96.5 percent for borrowers whose mortgage payments represent no more than 31 percent of their monthly gross income and household debt no more than 43 percent. This change will expand the number of eligible borrowers. Raising the loan-to-value ratio reduces the gap between the existing loan balances and the new H4H loan and decrease losses to the existing primary lienholders. Alternatively, the program will continue to offer borrowers with higher debt loads a 90 percent loan-to-value ratio on their H4H loans. This LTV ratio will include borrowers with debt-to-income ratios as high as 38 and 50 percent. In conjunction with the LTV change, H4H will eliminate the trial modification that was previously required. This measure was too complicated and required delicate negotiations among the existing lienholders, the new H4H lender, and the borrower.

Immediate Payments to Subordinate Lienholders

H4H will offer subordinate lienholders an immediate payment in exchange for releasing their liens, to permit more borrowers access to the program. Previously, subordinate lienholders who released their liens were only eligible to receive a small recovery payment when the home owned by the H4H borrower was sold. Given the amount of time that would pass between the creation of the H4H and the ultimate sale of the home, as well as the tremendous market uncertainties, subordinate lienholders were not guaranteed any return at all. To address this problem, the subordinate lienholders may now receive an immediate payment at the time the H4H loan is originated.

Extending Loan Terms from 30 to 40 years

To assure that borrowers are put into the most affordable monthly payment possible, HOPE for Homeowners will permit lenders to extend the mortgage term from 30 to 40 years. For borrowers with very high mortgage and household debt loads, extending out the amortization period may reduce their monthly payments enough to make it possible for them to qualify for this rescue product and save their homes.

Consistent with statutory and regulatory requirements, borrowers must continue to meet the following criteria:

• Their mortgage must have originated on or before January 1, 2008.
  
  
• They cannot afford their current loan.
  
  
• They must have made a minimum of six full payments on their existing first mortgage and did not intentionally miss mortgage payments.
  
  
• The loan amount may not exceed a maximum of $550,440.
  
  
• The Upfront Mortgage Insurance Premium is 3 percent and the Annual Mortgage Insurance Premium is 1.5 percent.
  
  
• The holders of existing mortgage liens must waive all prepayment penalties and late payment fees.
  
  
• They do not own a second home.
  
  
• They did not knowingly or willfully provide false information to obtain the existing mortgage, and they have not been convicted of fraud in the last 10 years.
  
  
• They must follow FHA's long-standing and strict policy of fully documented income and employment.

The HOPE for Homeowners program was authorized by the Housing and Economic Recovery Act of 2008. A Board of Directors was charged with establishing underwriting standards to ensure borrowers, after any write-down in principal, have a reasonable ability to repay their new FHA-insured mortgage. The program began October 1, 2008, and will end September 30, 2011.

The HOPE for Homeowners Board of Directors includes HUD Secretary Steve Preston, Treasury Secretary Henry Paulson, Federal Reserve Board Chairman Ben Bernanke, and FDIC Chairman Sheila Bair. They have named the following people to serve on the board as their designees: FHA Commissioner and Chairman of the Board Brian Montgomery, Federal Reserve Board Governor Elizabeth Duke, Treasury Assistant Secretary for Economic Policy Phillip Swagel, and Federal Deposit Insurance Corporation Director Tom Curry.

Read more about HOPE for Homeowners at www.hud.gov/hopeforhomeowners

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HUD is the nation's housing agency committed to increasing homeownership, particularly among minorities; creating affordable housing opportunities for low-income Americans; and supporting the homeless, elderly, people with disabilities and people living with AIDS. The Department also promotes economic and community development and enforces the nation's fair housing laws. More information about HUD and its programs is available on the Internet at www.hud.gov and espanol.hud.gov.

Why should I be PREAPPROVED?

People often say to me, Brent, I am looking to buy a house, but I do not know where or how to get started. The answer is to be preapproved through a competent and trustworthy loan officer. Let me take a moment to describe what preapproval is, why it is so important, and how to go about the simple process. This should give you a good idea as to why you should hurry to be preapproved!

What is PREAPPROVAL?

When I am talking to future home buyers they often have similar questions. How much house can I qualify for? What is the home buying process? What will my payments be? What interest rate do I qualify for? How much money do I have to put down? These are all questions that are answered during a quality preapproval.

Preapproval is the process of completing a loan application, and explaining your current financial situation to your loan officer. We should talk about your goals and expectations. We will review your credit report, income, assets, and liabilities. I will compile all of this information and explain the terms and conditions that you qualify for. I will be able to give you a ballpark figure of your monthly payment, down payment, maximum purchase price, and interest rate.

The preapproval appointment will be completed with you receiving a preapproval letter as well as an accurate Good Faith Estimate that provides a list of all of the fees you should expect in completing your home purchase.

Why do I need PREAPPROVAL?

In today’s home buying market, preapproval is mandatory. Sellers will not consider an offer that in not accompanied with a valid preapproval letter. Notice I say preapproval, not prequalification. Preapproval is what they expect. This is because prequalification is based on verbal figures while preapproval is based on verified figures.

While our housing market is still slow overall, there are some areas that are very hot. When houses are priced correctly they are being snapped up within only hours. Home sales numbers in the Southern California area up substantially. When shopping for a home you must have a preapproval in your hands, ready to make an offer immediately, with the confidence that you already know what the payment will be, down payment will be and that you will qualify with the bank. That is the significance of the preapproval.

How do I get PREAPPROVED?

As important and informative as preapproval can be, it is really quite simple to do. Just schedule a preapproval consultation with me by either giving me a call at my office, or by filling out an online application at www.brentbruce.com Once we have completed the appointment I will send you a list of documents that you will need to fax to me for verification. At that point I will send you your Preapproval Letter, Good Faith Estimate and any other information you request.

From then on you can always give me a call with any questions or concerns. My main goal during our preapproval process is to answer any and all of your questions so that you will feel comfortable and informed about your new home mortgage.

I can become very booked up so do not delay. Give me a call, email or start on your online application so we can schedule our consultation.

I look forward to seeing you in your new home!

Brent C. Bruce

Branch Manger – CMPS
Allied Home Mortgage Capital Corp.
Rancho Cucamonga, CA
909-463-4750
brentbruce@brentbruce.com
www.brentbruce.com