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Mortgage Refi Details Emerging

November 28, 2011

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General
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John D’Ambrogio

The Tribune’s own Mary Ellen Podmolik released some of the details of their revamped refi program – aimed at helping homeowners who actually PAY their mortgage but can’t refi because they are underwater – Sound familiar, Chicago area transferees of the last decade?

The Home Affordable Refinance Program has already escorted almost 900,000 Americans through the process, but the Obama administration wants more help.

All good news, right?  Well – Mortgage lenders are not MANDATED to participate, and you may or may not qualify, despite having an upside down mortgage?  Confusing?  Hmmmm…Below are experts from Mary Ellen’s excellent Q and A session -

QUESTION: Who might be eligible?

ANSWER: Borrowers whose loans are owned or guaranteed by Fannie Mae or http://www.freddiemac.com/ and with 20 percent or less equity in their homes.You can check on your mortgage, here –  www.freddiemac.com/mymortgage or http://wwww.fanniemae.com/loanlookup. Also, the loan had to have been guaranteed before May 31, 2009.

Q: When can applications be submitted, and when does the program end?

A: The program begins Dec. 1 and runs through Dec. 31, 2013.  Not all participating lenders, however, will be ready to take applications when the program begins.

Q: Can borrowers apply to any lender?

A: Yes – Kind of. Participation is voluntary for lenders, but one key component of the reworked program is designed to make lenders more comfortable with writing a new loan on an underwater property. Going forward, a HARP lender is not considered responsible if a loan it refinances goes bad because of mistakes in the original purchase loan. The change was considered critical to attracting lenders to the program and fostering competition among lenders for business. However, lenders still have underwriting guidelines to follow.

Q: What about missed mortgage payments?

A: A borrower can be 30 days late on one payment in months seven to 12 of the past year.

Q: What about maximum loan-to-value ratios?

A: For 30-year, fixed-rate loans, there is no maximum LTV ratio. For fixed-rate loans of more than 30 years and less than 40 years, the maximum LTV is 105 percent.

The maximum also is 105 percent for adjustable-rate loans with an initial fixed period of 5 years or more and terms up to 40 years.

Q: Can a borrower refinance from a 30-year to a shorter-term loan, even if it means increasing the monthly payments?

A: Yes. In fact, the government is encouraging that because interest rates are usually lower.  However, the borrower has to meet add’l criteria, like having a credit score of at least 620 and must have a debt-to-income ratio of no more than 45 percent.

Q: Can lenders solicit my business?

A: Um – Yep.

All in all, it’s certainly a move in the right direction – Especially a part about giving opportunities to those of us who have tried to play by the rules!

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