Help (maybe) for people in trouble

You may know someone who is facing foreclosure. More and more of our neighbors are. If you do, please pass this news on. It might help!


NEW YORK (CNNMoney.com) -- Mortgage giants Fannie Mae and Freddie Mac have extended a moratorium on foreclosure suspensions for another three weeks, directing the mortgage servicers they work with to postpone any foreclosure or eviction proceedings through January 31.

Fannie (FNM, Fortune 500) and Freddie (FRE, Fortune 500) projected that, under the original moratorium, which began Nov. 26 and was scheduled to lapse on Jan. 9, 6,000 homeowners would avoid bank repossession and eventually qualify for mortgage modifications. The companies don't have any actual statistics tracking how many borrowers the moratorium has helped.

The extension should give servicers more time to help these at-risk homeowners enroll in the companies' Streamlined Modification Program.

That program is aimed at helping borrowers who are 90 days or more late on payments, who own and occupy their primary residences and who have not filed for bankruptcy to reduce mortgage payments to no more than 38% of their income. It was launched by Freddie and Fannie on December 15, 2008.

"Freddie Mac is committed to pursuing every responsible opportunity to reduce foreclosures and accelerate the return of stability to the U.S. housing market," said Freddie Mac CEO David Moffett in a prepared statement. "Today's announcement will provide Freddie Mac and its servicers additional opportunities to help put more families on the path to stable homeownership."

Renters benefit too
The foreclosure grace period applies to owners of single family homes as well as multiple family houses of two to four units that are occupied by renters. In addition to cutting the number of foreclosures, it could also help some families who rent apartments remain in their homes.

In the past, when building owners were foreclosed on their renters often faced immediate eviction, even when the renters were up to date with their payments.

In December, Fannie announced a new policy for renters called the National REO Rental Policy, which allows these renters to stay in their homes as long as they have legitimate leases and keep up with their rent payments.

The company said the additional three weeks of the moratorium will enable Fannie to put this new REO Rental policy more fully into operation.

It will also give Fannie more time to make sure all of its seriously delinquent borrowers who are eligible receive help from the company's "Second Look" initiative.

Under this program, which launched early last fall, Fannie Mae personnel work with servicers to make sure that all homeowners facing foreclosure have been contacted and told of the possible workout options available to them.

The more information the companies can get to homeowners, the more likely they are to save their homes.

What's good about falling home prices?

Would you be comforted to know that you might lose most of your home equity in the coming year? Would you be better able to plan? Here is a surprising opinion from the Center for Economic and Policy Research.


Home prices could be stabilized by lowering them further, a report from the think-tank Center for Economic and Policy Research suggests.

The proposal calls for 20 percent to 30 percent price cuts in the priciest markets, driven by restrictions on lending by Fannie Mae and Freddie Mac.

The center proposes that Fannie and Freddie use rent-based appraisals, saying that drastic declines would protect future homebuyers from paying “bubble-inflated prices on which they will subsequently lose money.”

What about current homeowners facing big drops in home value and wealth? “If homeowners will lose most of their home equity over the next year, it is better that they recognize this fact as soon as possible so that they can adjust their behavior accordingly,” the report says.

Source: U.S. News & World Report (12/03/2008)

What to know about mortgages today

With so much changing in the real estate and financial markets in recent weeks, many potential buyers are looking for answers. If you're currently shopping around for a mortgage, here is some information to consider.

Rates Remain Low

The federal government's recent backing of mortgage giants Fannie Mae and Freddie Mac has helped re-assure financial markets about the stability of the mortgage industry, and as a result already-favorable rates have dropped even further.

Interest rates on traditional 30 year fixed rate mortgages dropped by between .3 and .5 percent in the days following the news of the government bailout. Some analysts believe that rates will continue to drop, particularly if the government reduces or eliminates some of the fees that Fannie Mae and Freddie Mac currently charge lenders.

Today's Loans Require Extensive Documentation

Interest rates remain very favorable for buyers, but obtaining a home loan is not as easy as it has been in recent years - even for buyers with good credit. Some lenders had previously been amenable to approving buyers for a loan based on either basic income documentation, or in rare cases, no documentation at all. Today, lenders are carefully scrutinizing the income and credit situations of all loan applicants.

For the best chance at getting the loan you want, make sure to provide complete financial documentation, including:


* Completed federal tax returns for the previous three years.
* One to two month's worth of pay stubs
* All W-2 forms for each person who will be named on the loan
* Contact information of your supervisor or human resources manager, to confirm employment
* Two to three statements for every bank account, 401(k), IRA, or other retirement account that you have.
* Addresses and account numbers for any open forms of credit in your name.

Down Payments Grow

On the flipside of lower loan rates, some banks are raising the minimum down payment required in order to secure a loan. The existence of the once-popular "no money down" mortgages has already all but disappeared this year. Today, even homeowners able to put down 10 percent of the home's purchase price may find difficulty securing a loan product.

The reason: banks concerned over soften markets are attempting to limit their exposure. As a result, many are already adopting guidelines that Fannie Mae has indicated it would apply in 2009. Chief among those guidelines is the requirement that homeowners put down 15 percent of the home's purchase price.

Will you profit from FanFredFailure?

Mortgages are in the news again...but this time, the news is good! Especially for people looking to buy or refinance a home as interest rates have dropped to the lowest levels seen since April.

You've probably heard that Fannie Mae and Freddie Mac were taken over or "bailed out" by the Federal Government over the weekend. The announcement came as the government felt that both of these institutions were potentially unable to meet their obligations. These agencies must pay off maturing Bonds every month, and they do so by selling new Bonds. But during the last twelve months, investor appetite to purchase new mortgage-backed security Bonds has deteriorated. As such, it has become more difficult for Fannie and Freddie to replenish capital to fund more loans. If both Fannie and Freddie became insolvent, the housing market as well as the mortgage market would come under further pressure.

With the Treasury stepping in to provide a "backstop" for the mortgage giants, investors now have confidence to purchase Mortgage Bonds. And the greater interest has helped to stabilize the mortgage bond markets and lower interest rates.

Call your mortgage broker today so you can discuss what the news means to you and how you can benefit.

Thanks to our friend Kim Aldrich of Cobalt Mortgage in Port Townsend.

Help for a distressed real estate market

The House and Senate passed broad-based housing legislation which was signed into law by President Bush early yesterday. Heralded as the most sweeping housing reform since the “New Deal”, it includes the creation of a strong regulator for Fannie Mae and Freddie Mac and changes in both FHA and conforming loan limits, s well as modernization for FHA and the “Hope for Homeowner” plan which may help some distressed homeowners by refinancing them into FHA loans.

Here are some of the key provisions of the Housing and Economic Recovery Act:

• Higher permanent loan limits for conventional conforming and FHA, effective Jan 1, 2009; the act calls for limits to increase to a maximum amount of $625,500 depending on the metropolitan area. (The temporary limits established last March will expire on December 31, 2008)

• FHA floor limits will remain the same at $271,050

• The VA guarantee will increase

• Minimum cash investments for FHA loans will increase to 3.5%

• A moratorium on risk-based pricing for FHA loans will go into effect Oct. 1, 2008

• Seller-funded Down Payment Assistance Programs will be terminated Oct. 1, 2008

• Condo processing for FHA loans will be streamlined

• FHA reverse mortgages (HECM); changes include higher loan limits, availability with purchase transactions, and a modification of the origination fee. (Reverse Mortgages are currently not allowed in WA State due to State Law)

Thanks to our friend Kim Aldrich, Cobalt Mortgage in Port Townsend