James Wirth

Please see the bottom of this post for updates and lots of great comments below that!

Original title of this blog was "The Home Affordability Refinance Program" (corrected from 'affordability' to 'affordable') once the program title had been verified.

As announced in February, the terms of the $75 billion foreclosure mitigation plan were released today. You can read the CNBC article here.

Here are my Cliff Notes:

The Home Affordable Refinance Program will be available to 4 to 5 million homeowners whos mortgage is currently owned by Fannie Mae or Freddie Mac and aimed primarily at people facing 'imminent hardship.' Borrowers would be required to demonstrate the hardship to their servicers, such as job loss, reduction in income or a looming payment increase that cannot be met. Cash incentives are offered to loan servicers for their participation.

Eligibility, etc.

~ Specifically for owner-occupied, first-lien loans currently owned by Fannie Mae or Freddie Mac.

~ Loan must have been originated on or before January 1, 2009. Modifications can be made between now and Dec. 31st, 2012. Only one modification per customer.

~ Full income documentation must be provided, including an affidavit of financial hardship.

~ Incentives will be offered to servicers to modify at-risk borrowers who have not yet missed payments.

~ Participating servicers (not sure who is and who isn't participating yet) will be required to service all eligible loans whenever premitted by contract and will use a "net present value" test to determine the benefit. If the test shows a modified scenario would be beneficial to the borrower they will be required to modify the loan accordingly.

Servicers will follow a specified order sequence to reduce the montly payment to no more than 31% of gross monthly income (DTI):

Rate reduction;
Extending the term to up to 40 years;
Forbearing principal (adding part of the re-payment to the end of the loan term);
Principal forgiveness or Hope for Homeowners refinance are also acceptable.

The incentives include:

-- $1,000 up-front fee for each modification plus "pay for success" fees on still-performing loans of $1,000/year;

-- $1,000 principal reduction per year for up to five years to homeowners who make their payments on time;

-- One-time bonus incentive payment of $1,500 to lenders/investors and $500 to servicers for modifications made while a borrower is still current on payments;

-- Additional incentives for extinguishing 2nd liens;

-- The "Hope for Homeowners" program that has yet to make any noticeable difference will also pay similar incentives.

Feel free to comment on your opinion about this plan. I think it's a good, needed step. It's only for Fannie Mae/Freddie Mac-owned mortgages but that is the bulk of them and lenders such as Countrywide who have large portfolios of loans that haven't been sold to Fannie/Freddie are showing signs of being willing to work with homeowners to modify loans as well.

The modifications themselves are handled directly through the loan servicer so whoever collects the monthly payment for the borrower is who they want to call. The program will be highly regulated (audited by Freddie Mac), so there doesn't seem to be any reason to hire a 'modification consultant' or pay a fee to anyone to participate in the program. Of course, I'm happy to review it with anyone who has questions.

Thanks for reading! --James Wirth

Here are follow-up posts I've written on this subject:

Update: Making Home Affordable Part II posted 3/30/09

Rant: Don't disqualify someone because they had a stated income loan! posted 4/16/09

Update: Making Home Affordable FREQUENTLY ASKED QUESTIONS posted 5/12/09

YES: I realize this is not the first time I've referenced Star Trek in a blog entry;

NO: I've never been to a Star Trek Convention. Not that there's anything WRONG with that...

Sing with me now: 'Star-Trekkin' across the Universe...'

What a week this has been! Here are a few highlights:

Stocks up, rates worse, stocks down, rates worse...

Guideline changes-- mortgage insurance is getting tighter, good for FHA...

Tax credit -- can claim it on 2008 taxes???

Seattle rated #1 in how many different ways?

Through it all, I know this for certain: Now is a GREAT time to buy!

Buyers, remember: on the way down, you have the leverage; on the way back up, the seller has it. And the only way to see the bottom perfectly is through your rear-view mirror so stop reading this and get out there! GO GO GO!

Thanks for reading! :) --James Wirth

Rates have had a bad run over the last couple of days and we're back solidly into the fives. Well, 5 at least...

5% Rate / 5.152% APR
P&I payment: $2,238.55
Loan amount: $417,000
Equity: 20% / Credit Score: 740
Loan Program: 30 Year Fixed

Hey, looks like we are back to a maximum conforming jumbo loan amount of $567,500. 10% down for a conventional loan, 3.5% down for an FHA loan...

And for first time home buyers, the 2009 tax credit can be applied to 2008 taxes if you haven't already filed or you can file an amended return!

As always, thanks for reading --James Wirth

Ok, if that's not enough to get the fence sitters off their duff and into their Realtor's car, also consider this:

There are currently 15 million students in colleges and they're not all going to move back home after graduating;

60% of current marriages will soon need two households due to divorce;

According to a Harvard study we need 2.7 million MORE homes than are currently in existence by 2011;

In order to get an interest rate comparable to today we'd have to go back to England 315 years ago. Talk about historic low;

The only way to see the bottom of the market is by looking in the rear-view mirror. The leverage for the buyer is on the way down; the seller has it on the way up. On which side will you make your offer?

Thanks for reading! --James Wirth

Foreclosures: bail out or fail out?

While many of the details have yet to be made clear regarding the foreclosure rescue plan, there is certainly no lack of media coverage. The article was written for the New York Times and carried by the Seattle PI (they are cutting back after all), calling the $75 Billion dollar plan 'more ambitious than expected.' So far so good... Read the article here.

Mortgage rates-- it's a photo finish!

Rates finished basically even on the week. Here's how we ended the day:

4.875% Rate / 5.026% APR
Loan amount: $417,000
Down payment/equity: 20%
Loan program: 30 Year Fixed
Minimum credit score: 720

Tax Credit! Tax Credit! Get your Tax Credit!

These details are more readily available than much of the rest of the stimulus law: First Time Home Buyers making $75K for a single person or $150K for a married couple get full benefit when they buy a primary home between January 1st and Dec. 1st, 2009. The credit is $8,000 and is applied on their 2009 federal income tax filing.

Cha-Ching!

Thanks for reading! --James Wirth