Mortgage Insights Blog

Under the new Making Home Affordable refinance program, the Obama Administration is hoping that more homeowners can take advantage of the historic low interest rates offered on 30 year fixed rate mortgages while the Fed is still actively buying the market.  They are targeting homeowners that are current on their mortgage payments but may not be able to take advantage of the historically low interest rates now offered due to a decrease in their home's value. Homeowners must still meet income and credit qualifications but can now refinance their first mortgage as long as it meets the following criteria: 

• First - the current loan must be owned by Fannie Mae or Freddie Mac. Remember, even though your loan is currently being serviced (the act of collecting your monthly mortgage payments) by a bank - Wells Fargo, Countrywide, American home Mortgage, etc. – lenders will sell your loan in the secondary market to replenish their reserves in order to continue originating new mortgages. The majority of these loans end up being purchased by Fannie Mae and Freddie Mac, or by Wall Street investors, and if your loan was purchased by Fannie or Freddie your loan will qualify for the new program. To determine if your loan is owned by Fannie Mae or Freddie Mac please go to their respective web sites and fill out the on-line inquiry forms – Fannie Mae: http://loanlookup.fanniemae.com/loanlookup/ and Freddie Mac - https://ww3.freddiemac.com/corporate/

  Second – the new program will allow you to borrow up to 105% of your home’s current value without requiring any mortgage insurance, and if you already have mortgage insurance it will transfer to the new loan without any increases to your premium. To get an approximation of your home’s value try www.zillow.com or www.cyberhomes.com

  Third – Credit requirements still remain strict – borrowers must be able to prove income and assets under a full documentation mortgage application, meaning borrowers must be able to provide tax returns and pay stubs to prove their incomes as well as have sufficient credit scores (680+ with no 60 day late’s in the past 12 months).

  Fourth - This program will only be eligible for first loans that fall within Fannie Mae and Freddie Mac loan amount guidelines (loan amounts up to $729,750 for Santa Clara County). For a loan amount look up in your county go to:

  Fifth – If you have a 2^nd mortgage then the 2^nd lender must be willing to re-subordinate to the new mortgage - You may have a 2^nd mortgage that will not be counted in the calculation when determining your new loan to value (up to 105% allowed) and that 2^nd mortgage must agree to re-subordinate behind a new first mortgage. Most 2^nd lenders are cooperating, especially those who have received Federal bail-out money (Wells Fargo, Chase, WAMU, CitiBank, Suntrust, etc.) but others are not and there is no way to pressure them into agreeing.

  Sixth – Will the new refinance improve your current housing payment situation? You will not be able to consolidate your first and second mortgages or any other debts – only first mortgages are eligible for the program without providing any cash-out, however, the government is working on a similar program for 2^nd mortgages. Expected Interest rates offered through the program - current interest rates offered for a new 30 year fixed rate mortgage through this program are between 4% and 5% for loan amounts of $417,000 and below and between 5% and 6% for loan amount above $417,000 to $729,750

If you are interested in discussing the above criteria or about finding a possible solution to your current financing please feel free to contact me and we can schedule an appointment to review your financial information. For additional resources please feel free to view the government's website - http://makinghomeaffordable.gov/