I'm getting calls from existing customers who are hearing reports on the recent housing stimulus package released March 4th, so I figured it was time to call in and find out for myself what homeowners are facing when they initiate the process of obtaining a note modification. I was happy to discover that one of the questions asked by Countrywide's automated system was to inquire if the call was being made by the individual or by a "third party", which hopefully means the banks and mortgage companies are cracking down on the many note modification transactions that homeowners have the ability to (and should!) take care of themselves.
CBS Marketwatch. Com published an article that gave more detail than has been available up to this point. Highlights are:
For Note Modifications-
-There are incentives now for removing second liens on loans modified under this program
-There is a refinance option for homeowners who have an existing mortgage owned by Fannie Mae or Freddie Mac if their current loan-to-value ratio is above 80%
-Mortgages with an unpaid principal balance of up to $729,750 may be eligible for the program
investor-owned properties may not participate (I've read a contradiction to the investor owned criteria, today)
-This program is scheduled to expire by the end of 2012
-Servicers will receive an up-front fee of $1,000 for each modification, which in turn may be passed through the program participants as "pay for success" fees paid for still-performing loans of $1,000 per year going to homeowners who make their payments on time int he form of principal reduction payments of $1,000 each year for up to five years
-Lenders receive bonus fees if modifications are made while a homeowner is still current on their mortgage payments
-Lenders must reduce monthly payments on mortgages so that the borrower's payment is no greater than 38% of income
-The government shares the burden of reducing payments to 31% of the homeowner's income
-To reach the 31% target, interest payments will first be reduced down to as low as 2%
-If the rate is still above 31%, then the life of the loan can be extended up to 40 years. Only then would the plan forbear principal at no interest to meet the target.
More details need to be ironed out, and I know I have many questions still, like does the 31% include tax and insurance payments? How is income calculated for homeowners whose income is self-employed/commissioned/bonus income? My guess is it will be the same automated underwriting system criteria we've had in Desktop Underwriter for Fannie Mae loans.
So, as unpalatable as all the stimulus bills and bailout programs have been, SOMETHING needs to be done to stem this fast descent we're seeing with our economic downturn. Do you think these programs will help? If not, do you have better ideas?
See you at the closing table!
Karen Cooper - OR/CA Mortgage Consultant - www.Quality4Loans.com