If you'd like a lower rate on your mortgage, HARP might be able to help.
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Another cruel irony of the housing bust? While hundreds of thousands of mortgage borrowers have been able to squat in their homes without making a single mortgage payment in months or even years, many responsible homeowners who have good credit and consistently meet their monthly obligations haven't been able to refinance in order to avoid losing their homes.
Many of today's homeowners purchased their homes during a time of easy credit, when mortgage products, like interest-only loans and option adjustable-rate mortgages were issued to the marginally qualified. And many were told that — if they made their payments faithfully — they could easily refinance out of these products into affordable fixed-rate loans once the payments started to balloon.
But that day has never come for some borrowers — no matter how good their payment record or credit score.
Many lenders are refusing to refinance underwater mortgages — loans that are higher than the value of the home — because it would mean big losses for them if the borrower defaults.
According to data submitted to federal regulators and analyzed by the Wall Street Journal, nearly 27% of mortgage applicants were denied mortgages in 2010, up from 23.5% a year earlier.
The cruelest twist? Lenders typically wait until a homeowner is in default before they are willing to modify their mortgage.
For some homeowners, the clock is ticking. In 2011, $1 trillion in adjustable rate mortgages are scheduled to reset. And many are scrambling to refinance their mortgages while rates are still low — to no avail.
Senator Barbara Boxer (D-Calif) has co-sponsored a bill, the "Helping Responsible Homeowners Act," for borrowers who want to refinance but are in "negative equity," owing more on their mortgages than their homes are worth.
Boxer's legislation also requires banks to offer interest rates comparable to what they're giving to borrowers who are not underwater. And it bans risk-based fees for mortgages issued by Fannie Mae or Freddie Mac that can be as much as 2% of the loan principal.
Now, President Obama is pushing his revised HARP program. The mortgage non-sense just never seems to end. Stay tuned, we'll keep you updated on these programs.
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Underwater Mortgage Relief (HARP)
More homeowners who are underwater on their mortgage should be eligible now to refinance through the government's Home Affordable Refinance Program (HARP) as a result of changes to the program announced last week.
Started in 2009, it lets homeowners refinance their mortgages at lower rates. Borrowers can bypass the usual requirement of having at least 20 percent equity in their home. But few people have signed up. Many "underwater" borrowers — those who owe more than their homes are worth — couldn't qualify under the program. Roughly 22.5 percent of U.S. homeowners, about 11 million, are underwater, according to CoreLogic, a real estate data firm. As of Aug. 31, fewer than 900,000 homeowners, and just 72,000 underwater homeowners, have refinanced through the Obama administration's program. The administration had estimated that the program would help 4 to 5 million homeowners.
That didn't happen, however, mainly because those who'd lost the most in their homes weren't eligible. Participation was limited to those whose home values were no more than 25 percent below what they owed their lender. That excluded roughly 10 percent of borrowers.
So What's Changing?
Homeowners' eligibility won't be affected by how far their home's value has fallen. And some fees for closing, title insurance and lien processing will be eliminated. So refinancing will be cheaper. The number of homeowners who need an appraisal will be reduced, saving more money. Some fees for those who refinance into a shorter-term mortgage will also be waived. Banks won't have to buy back the mortgages from Fannie or Freddie, as they previously had to when dealing with some risky loans. That change will free many lenders to offer refinance loans. The program will also be extended 18 months, through 2013.
How many homeowners will be eligible or will choose to participate is not entirely clear. The government estimates that up to 1 million more people could qualify. Moody's Analytics says the figure could be as high as 1.6 million. Both figures are a fraction of the 11 million or more homeowners who are underwater.
When Will It Start?
Fannie and Freddie will issue full details of the plan to lenders and servicers on Nov. 15, officials say. The revamped program could be in place for some lenders as early as Dec. 1.
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Should You Buy or Rent?
The fact is, when you rent, you are buying. You're buying a service: the use of a house for a specified period of time. And as long as the rent you're paying is in line with what others are paying for comparable living quarters, then you're getting that service at the market rate.
Granted, you don't have some of the potential plusses of ownership if you're renting, such as seeing the value of your home climb over the years. But renting has other advantages. You can move more easily, and you're not on the hook for real estate taxes and upkeep. And the money that would have gone into your house can be spent on other things or go into other assets.
Besides, as recent experience has shown, house price appreciation is hardly a given. Many people who bought during the most recent housing bubble now owe more on their mortgage than their home is worth.
Housing bubbles typically don't pop like stock bubbles. Instead, home prices usually deflate slowly. Transactions dry up before prices drop because homeowners tend to hang on rather than sell at a loss — as long as they can make their mortgage payments.
For this reason, some real estate experts think the critical relationship is not between home prices and rental costs, but between the housing market and income levels.
That's not to say a house can't be a good investment. It can. But whether it is depends on a variety of factors, ranging from the price you pay to the prospects for the market you're in to the tax advantages you get and how long you remain in the house.
Ask yourself these questions before you make either move, renting or buying:
1 – Why do you want to own? – If you can't come up with several concrete ways your lives would be better as homeowners, then it may not be worth it to go through the trouble of moving and taking on the extra financial responsibility.
2 – Why Buy Now? – One should never try to time the housing market and buy at the bottom. And while the newly revamped HARP (Home Affordable Refinance Program) could help homeowners who are underwater refinance to a lower rate, the program is not likely to improve the housing market's prospects immediately. Therefore, home prices are not likely to skyrocket anytime soon.
3 – How Stable is Your Job? – It's worrisome enough to lose your job knowing you have the obligation to pay rent for the remainder of a lease. But it's even more upsetting to face unemployment knowing that you've got a mortgage and possibly equity at stake in a home.
4 – How Would Buying Affect Your Finances? – Before joining the ranks of owners, take some time to add up how much you would likely have to come up with for a downpayment and other costs. Subtract that amount from your savings balance and then ask yourself whether you would be okay with that as a cushion. Use a mortgage estimate calculator to find out how much house you can afford, and see how your monthly obligations owning compare to rent expenses.
After going over these questions and discussing the issues involved, you should come away with a clearer sense of whether to buy and, if so, when. Even more importantly, your decision won't be based on the absurd notion that renting is the equivalent of throwing money away. Buying is not for everyone, but you need to make sure it's the right move to make for your particular situation.
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Decorating Ideas for the Holidays
With Thanksgiving right around the corner, and Christmas soon to follow, decorating your home is one of the first things you can do to get ready for the holidays. However, not all decorations are created equal, and you want to make sure everything you do makes a statement while creating a warm and inviting atmosphere for your house guests. Here are five ways you can decorate your house for the holidays to look like the magazines without breaking the bank.
1. Make a dramatic centerpiece. Whether it is for your living room or dining room, a large centerpiece filled with fall colors, pine, and warm colored candles can instantly be the focal point of the room. For more ideas on how to make one rather than pay a florist, check out this article.
2. Make a fall wreath for your front door. Before your guests even step foot into your home, wow them with a beautiful wreath on your front door. This can be made easily with a few craft store items, and if you use dried materials you can even use it year after year. Here are instructions on how to make a fall wreath.
3. Place warm colored candles around the house. This is really easy: grab 3 tall candles of different lengths and tie them together into a bow with a piece of straw. Then place it on a candle holder. Make sure the candles are fall colors like orange, red, and yellow. This can be placed in the bathroom, in bedrooms, or anywhere longer candles fit in well. Here are more tips on Decorating with Candles.
4. Buy a couple of throw pillows to place on the couch. Have a neutral colored couch? Awesome. Get some fall colored pillows and place them on the couch. You could even add a fall colored throw, after all this season is all about colors. With the centerpiece, candles, and pillows, you'll instantly notice the room coming together.
5. Have a staircase rail and banister? Wrap white colored lights with multiple thick ribbons and wrap that around the staircase going up. The lights will illuminate the autumn colored ribbons, creating a warm glow. There are lots of ways to decorate for Christmas, and these tips will help spur your creative ideas.
Struggling Refinance Program Extended
The Obama administration recently announced that borrowers with little or no equity in their homes will have yet another year to take advantage of a refinancing program that so far has made little progress.
The initiative, known as Home Affordable Refinance Program (HARP), was set to expire in June. But, so far, it has reached fewer than 200,000 of the up to 5 million borrowers federal regulators hoped it would help.
The program is aimed at the millions of borrowers whose home equity has been diminished by falling home prices, or who owe more than their homes are worth, making it impossible for them to take advantage of historically low mortgage rates. Originally the program targeted borrowers whose loan balances were slightly higher than their property's value. The program was later expanded to include borrowers who owe up to 25 percent more than their homes are worth.
These underwater borrowers are at greater risk of foreclosure, and the administration hoped that lowering their payments would decrease their chances of falling behind.
But the program ran into several problems. Many borrowers were too underwater to qualify and the program was limited to loans backed by Fannie Mae or Freddie Mac, the mortgage financing companies. The initiative was also dogged by delays as lenders struggled to update their computer systems to accommodate the program. Another obstacle was that many homeowners have second mortgages or private mortgage insurance, which can get in the way of refinancing a primary loan.
And for some borrowers, the costs associated with refinancing, such as closing costs, were not worth the lower interest rates, especially for homeowners worried they might lose their jobs or might hit another financial crunch later.
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