HARP Refinances Doubled in 2012

The Home Affordable Refinance Program (HARP) topped 2 million mortgages refinanced in November, with half of those coming in just the past year after new guidelines were adopted.

Nearly 1 million low- and negative equity mortgages were refinanced from January through November under the program, which had struggled to live up to expectations since its launch in spring 2009. New rules adopted in late 2011 made the program more attractive to lenders, who began to approve more refinance applications as a result.

The 130,000 mortgages refinanced through HARP in November were the second-highest total in the program’s history, trailing only the 137,000 refinanced in June 2012. HARP accounted for nearly one-quarter of the total dollar volume of home loans refinanced during November.

Big increase in underwater refinancing

Among the biggest beneficiaries of the new guidelines have been homeowners who are underwater on their mortgages. Over 40 percent of HARP refinances in 2012 were classified as underwater mortgages, compared to less than 10 percent during the first two-and-a-half years of the program.

Furthermore, 24 percent of those who refinanced through HARP in November were underwater on their mortgages by at least 25 percent of their home value (125 percent loan-to-value ratio). Prior to 2012, HARP guidelines did not permit refinancing mortgages that far underwater.

Not surprisingly, HARP refinances are most heavily utilized in states that saw the greatest impact from the downturn in the housing market. HARP accounted for 68 percent of all mortgages refinanced in Nevada during November, 56 percent in Florida and 47 percent in Arizona. In those states, two-thirds or more of all HARP refinances were for underwater loans.

New rules cut fees, protected lenders

Prior to the adoption of the new guidelines, the vast majority of mortgages refinanced through HARP were classified as low equity, with loan-to-value ratios of 80 percent or greater (less than 20 percent equity). The new guidelines gave lenders certain exemptions from financial liability, making them more willing to take on such loans, eliminated some fees for borrowers and removed the 125 percent loan-to-value cap, opening the program up to homeowners who were deeply underwater.

Since its inception, HARP has been available only for mortgages that are backed by Fannie Mae or Freddie Mac. President Obama has proposed expanding the program to other borrowers, but it’s not clear whether he will get the necessary support from Republicans who would prefer to limit government involvement in the mortgage and housing markets.

FHA STREAMLINE REFINANCE SAVINGS

FHA Commissioner Carol Galante announced significant price cuts to the FHA Streamline Refinance Program that could benefit millions of borrowers whose mortgages are currently insured by FHA. Currently, 3.4 million households with loans endorsed on or before June 1, 2009 pay more than a five percent annual interest rate on their FHA-insured mortgages.


If your existing FHA mortgage was endorsed prior to June 1 2009, your mortgage insurance premiums have been “grandfathered”. You can refinance to an FHA Streamline Refinance program and pay reduced rates for both upfront MIP and annual MIP. To qualify, borrowers must be current on their existing FHA-insured mortgage which were endorsed on or before June 1, 2009.


Beginning for FHA case numbers assigned on or after June 11, 2012 and for loans endorsed prior to June 1, 2009, the new FHA upfront mortgage insurance is equal to 0.01 percent, or 1 basis point . So for example if your FHA refinance is for a new $100,000 mortgage, the FHA will assess a $1 upfront mortgage insurance premium (MIP ) to be paid by you at closing. The FHA automatically rolls the $1 payment into your new loan balance. This is a huge discount over the FHA’s standard UFMIP payment of 1.75% beginning April 9.


Meanwhile for FHA Case Numbers assigned on or after June 11, 2012 and for loans endorsed prior to June 1, 2009 costs for the other type of FHA mortgage insurance-annual MIP moves to a standard 55 basis points. Currently the standard annual MIP is as high as 120 bps starting April 9, 2012. Example on a new $100,000 mortgage the Annual premium or monthly MI would be $46 vs $104. This is a savings of over 65%.


"This is one way that FHA can make a real difference to help homeowners who are doing the right thing, paying their bills on time and want to take advantage of today's low interest rates," said Galante. " By significantly reducing costs for these borrowers, we can make certain they cut their monthly mortgage burden which will benefit the housing market and the broader economy in the process."

Please contact me if you have any further questions please contact me directly at 314-400-6378

5 Things That Can Sink a Mortgage App

A low credit score and lack of income aren’t the only things that can keep you from qualifying for a mortgage. Here are five other things that can sink you as well.

Are you getting a divorce?

A divorce proceedings in the works won’t automatically disqualify you from obtaining a mortgage or refinancing, but it can make the picture more complicated. Basically, the lender doesn’t want to get left high and dry in a battle over marital property, or refinance a mortgage when one of the two earners will no longer be contributing to the monthly payments.

In fact, people often refinance a mortgage as part of the divorce process as a way of getting one partner’s name off the loan. To do this, however, you have to be in agreement as to who’s going to get the house and the other party needs to be willing to sign off on the deal.

Don’t even try to omit the fact you’ve in a divorce proceeding or simply “neglect” to include it – if your lender finds out, which it probably will during the background check, you’ll be turned down for sure. You could also be charged with mortgage fraud for intentionally lying on a mortgage application.

Did you change jobs recently?

Lenders like to see evidence of a stable employment history before approving you for a mortgage. Typically, that means you should have been in your current job for at least two years before applying for a mortgage or mortgage refinance.

That’s not a hard and fast rule. If you’ve recently taken a new job in the same field at higher pay, it probably won’t hurt you. However, if you’re venturing out in a new career direction – even if you’re earning more – lenders are likely to be reluctant until you’ve established yourself. And if you’re starting a new business, it’s going to take even longer before lenders will be assured you’ve got a reliable income.

Under no circumstances should you change jobs during the loan application process – sit tight until after the mortgage closes, or you’ll have to start all over again. And if you’ve been unemployed for any reason, you’ll probably have to be in a new job for two years before mortgage lenders will be willing to consider you again.

Are you in a lawsuit?

Being a party to a lawsuit makes lenders nervous. If you’re being sued, there’s the chance you may get stuck with a large settlement that may make it difficult to meet your monthly mortgage payments. If you’re suing someone and lose, you could be end up with some hefty attorney bills, not to mention the chance of a countersuit.

Being a potential beneficiary of a class-action lawsuit doesn’t count. To be involved in a suit, you either have to have filed a suit against someone in court, been served as a defendant or have hired an attorney to represent you.

Your mortgage application will ask if you’re involved in a lawsuit of any kind. Again, you have to answer truthfully – this is another situation where you could end up getting charged with mortgage fraud if you misrepresent the facts on your mortgage application.

Are you making major repairs?

When you’re in the midst of major renovations or home repairs is not a good time to try to refinance. While repairs and upgrades can enhance the value of your home, the same work left unfinished will diminish it. Given that completion dates for home improvement projects can be a moving target, lenders will prefer to see the work completed before signing off on a new mortgage.

Some people may seek a cash-out refinance or home equity loan if they find themselves running out of money in a home improvement project they intended to fund by other means. But unless you’ve got a lot of equity already tied up in the home, you’re probably better off seeking to refinance or take out a home equity loan before starting the project.

You recently took on new debt obligations

One of the last things you want to do before applying for a mortgage or mortgage refinance is to take on a big pile of new debt right before doing so. The classic example of this is buying a car – driving up your debt-to-income ratio right before seeking a new mortgage.

Lenders typically want to see your total debt payments be no more than 43 percent of your monthly income, with the mortgage no more than 31 percent. A new car is one major purchase that will sharply drive up your debt load, as will other large purchases – it’s probably best to wait to buy new furniture and carpet until after you’ve secured the mortgage or refinance.

Also, be careful about other ways of incurring debt obligations – if you’re co-signing a loan for an adult child to buy a car, for example, that debt registers against your credit, even if you’re not the one who’ll be making the payments. If the primary borrower defaults, you’ll be the one they come to next, and your mortgage lender takes that into account when figuring your debt load.

Making Sense of Closing Documents

The flood of documents to be signed at closing is one of the most confusing parts of the mortgage process. A typical borrower can expect to be presented with over two dozen documents to sign at a mortgage closing. How do you know what you’re signing?

Like anything else, you need to prioritize. While some documents are critical and need to be carefully scrutinized, others are routine and can be quickly dispensed with. The question is, which are which?

Fortunately, federal law gives you the right to receive copies of all closing documents 24 hours in advance of closing, so you can review them to ensure everything’s in order. Unfortunately, many borrowers fail to take advantage of this right, trusting instead that everything will be in order.

Key mortgage closing documents

The key documents are going to be the ones that set forth the actual terms of the transaction itself. These include the HUD-1 Settlement Statement, Truth in Lending disclosure and the mortgage agreement itself. Copies of these should be reviewed prior to closing and the actual documents you sign should be checked again at closing itself.

The HUD-1 is a detailed listing of all the costs of the transaction, and specifies who is paying each – for example, the seller typically pays certain costs associated with a home sale. The division of costs between buyer and seller – such as for city and county taxes – should reflect what was agreed upon in the sales contract. Also, any payments to the lender should match those provided in the Good Faith Estimate – and are so marked with the designation “from GFE.”

The HUD-1 will also detail a number of other “third-party fees,” such as various types of insurance, real estate agent’s commission and different taxes. Most of these will also have been listed on your Good Faith Estimate, though they can vary by as much as 10 percent from those figures.

The final Truth in Lending (TIL) disclosure details all the terms of your mortgage, including the amount borrowed, interest rate, payback term, total interest to be paid over the life of the loan, etc. Some of these will correspond to figures on the GFE and should match. The TIL also provides a figure called the Annual Percentage Rate (APR), which is a way of expressing the total cost of your loan. Basically, the APR is your mortgage interest rate plus an adjustment to reflect the cost of any fees paid to obtain the loan.

The mortgage agreement

Another major item is the actual mortgage agreement, which is usually in two parts. The first is the actual mortgage note itself, which again states the terms of the loan, gives you the money and commits you to repaying it. It also sets forth such things as when payments are due, grace periods, penalties for late payments and the steps the lender can take if you fail to make payments.

A second document, variously called the mortgage or deed of trust, establishes the right of the lender to repossess the property if you violate the terms of the note, most notably by failing to pay the mortgage, taxes or insurance.

Finally, the deed is the document that actually transfers ownership of the property to you. Although fairly straightforward, it’s important to make sure everything is in order, including your name, the name of the seller and the description of the property. You won’t take this home with you after closing, but it will be sent to you once it is recorded with the county.

Formal notifications

Another group that should be paid close attention to are notifications, which spell out certain conditions in your loan or home purchase that might not be covered in the other agreements or which are spelled out separately for emphasis. These will likely include a notice of your right to cancel, which gives you three days to cancel a refinanced mortgage and recovery your money if you change your mind for any reason, and a notice of no oral agreements, which basically means any verbal promises from your lender carry no weight.

Another is your initial escrow statement, which details the estimated charges for insurance premiums, taxes, PMI and anything else to be paid from your escrow account over the coming year. Any documents that provide additional information about the terms of your loan or home purchase, or about your or your lender’s rights and obligations, should be reviewed and understood prior to closing.

Getting your ducks in a row

Another batch of documents might be termed “ducks,” since they’re about getting your ducks in order so the mortgage and property sale can proceed. These include your title and homeowner’s insurance, property survey, private mortgage insurance (PMI) if needed, sewer and water certification, termite inspection and homeowner’s association agreements if required, certificate of occupancy for a new house and all the other things that have to be done before the sale can proceed. These should be reviewed before the sale to make sure they’re in order, but don’t demand close scrutiny.

Finally, a last batch of documents are for routine matters, many of them simply confirming that you have received or signed off on other forms, that you have had certain terms of the agreement explained to you or that you understand certain terms of the agreement. They don’t demand a lot of attention from you, but you should at least recognize what they refer to. If not, don’t sign off on them until you’re sure about what you’re signing.

Many Uses for a Mortgage Calculator

A mortgage calculator is a handy way to figure out how much of a mortgage loan you can afford, or what your monthly mortgage payments would be if you borrow a certain amount. But there are lots of other ways they can be useful in handling your mortgage-related finances as well.

Think refinancing. Think tax time. Think accelerating your mortgage payments or paying off your loan early. Think comparing different mortgage options to determine which is best for you.

The basic function of a mortgage calculator, of course, is to determine what the monthly mortgage payment will be on a home loan of a given size, interest rate and duration. You plug the numbers in and the calculator gives you the answer. Some also include features that allow you to calculate related costs such as homeowner’s insurance and taxes to figure out what your total monthly housing bill will be.

Using the mortgage amortization schedule to your advantage

But a mortgage calculator can also do much more, particularly if it can provide an amortization schedule showing how fast you’re paying off the loan. An amortization schedule will not only show how much you’re paying in principle and interest each month, but also updated totals for each over the life of the loan.

This is a powerful tool, because it quickly shows how changing various terms of a loan affect how much you pay, how fast you pay it off and how much your interest payments are. Running different numbers through the mortgage calculator can help you determine which are the best mortgage options for you and help you adjust your financial strategies. Some examples are:

Mortgage shopping/ interest rates, points and closing costs

Discount points allow you to reduce your interest rate by paying a fee up front, typically equal to 1 percent of the amount borrowed for reducing the interest rate by one-eighth of a percentage point. Similarly, you may be comparing two mortgage offers, one of which has higher closing costs but a lower interest rate than the other. Which is the better deal?

Paying additional costs upfront for a lower interest rate is a strategy that typically takes several years to pay off. Using a mortgage calculator amortization table to compare the two loans, you can see at what point the costs of one loan will fall below that of the other, and decide whether the difference is great enough to make it worth your while.

Accelerated payoff

Thinking about paying off your mortgage faster? Wondering how much sooner you’ll pay off your 30-year mortgage if you make a small, but consistent, increase in your monthly payments during the early years? The amortization table will not only show your new payoff date, but will also illustrate how much faster you’re building equity, if your goal is to sell, refinance or eliminate private mortgage insurance (PMI) in a few years.

Refinancing

The big question about mortgage refinancing is whether the closing costs needed to obtain a new loan are worth the lower interest rate you can obtain by refinancing. Using the mortgage calculator, you can add in the new closing costs, along with the reduced interest rate and new payment schedule, then use the amortization chart to see how long it will take you to reach the “break even” point. You can also see what your total savings would be over the life of the loan, as well as your total interest payments compared to your current mortgage.

Interest payments

Interest payments are an often overlooked aspect of mortgage costs, especially when refinancing. You’ll save money by reducing your interest rate or paying your mortgage off faster – BUT – you’ll also lose the tax breaks those interest payments provide. Since mortgage interest is what allows many homeowners to itemize their deductions in the first place, it’s good to know just when your interest payments might fall below the cutoff on an accelerated payoff or refinanced mortgage. Also, tax impacts tend to lessen the overall savings of reducing your interest payments, so it’s good to take that into account.

These are just some of the ways you can use a mortgage calculator and amortization schedule to your advantage. Basically, if you’ve got a question about the pros and cons of different approaches to handing a mortgage, you’ll find it in the amortization tables. It’s worth your while to get familiar with them.

Feel free to use the Cornerstone Mortgage's on line calculator. Here is the link. http://www.cornerstonestl.com/calculators/index.html

Five Tips to Help Raise Credit Scores

Start by getting free copies of your three major credit reports at the government-authorized site annualcreditreport.com.

1. Check your reports for accuracy. Financial columnist Liz Weston, author of "Your Credit Score," says to look for credit cards or other accounts that aren't yours, negative entries that are more than seven years old, duplicate past-due items and incorrect Social Security number or date of birth.

2. Dispute errors. Credit bureaus are required by law to investigate mistakes you bring to their attention and report back to you. Typically, they ask the creditor that reported the past-due information to check its records. If the creditor can't verify the info or doesn't respond, the item should be deleted.

3. Pay your bills on time. Payment history makes up more than one-third of the typical credit score determination, Weston says, so paying bills on time all the time is essential to maintaining good scores. If you're forgetful, consider setting up automatic payments through your bank.

4. Pay down your debts. Lenders look at how much of your available credit on cards and credit lines you are using. If you are maxed out or close to it, lenders could assume you're on the financial edge and not lend you money.

5. Keep credit cards and other revolving accounts open. You may be tempted to close old accounts you're not using, but that won't help your credit scores and may actually hurt them. It reduces the amount of your available credit, which can lead to lower scores.

A New Life, New Home, New Mortgage

Are you entering a new phase in your life and looking for a new home to match? A major life transition often involves a new home, be it getting married, relocating to a new job or retiring. However, with mortgage credit being as tight as it is these days, there are some pitfalls you want to be sure to avoid.

First, don’t run up a lot of new charges on your credit cards. This is one of the most basic and obvious rules of qualifying for a mortgage, but it’s one that’s easily overlooked when you’re in a life transition. Wedding expenditures, expensive trips, an extensive new wardrobe, new golf clubs or other pricey toys – all can drive up your credit balances very quickly. Best to hold off on the spending until the new house keys are in hand.

Similarly, avoid opening new lines of credit. This can include new credit cards, but also can be other major purchases as well. A new car to go with that prestigious new job or a boat as a retirement gift to yourself may be what you’ve always wanted, but they could make lenders a bit uneasy when evaluating your loan application. You may not get turned down flat, but you could find yourself paying a higher interest rate than you might have.

One of the biggest rules of applying for a mortgage is, don’t quit your job immediately beforehand. Retirees, this means you! You’ll find it a lot easier to qualify for a new mortgage if you do it while you’re still earning your regular income, rather than trying to qualify on the diminished payout you’ll get from a pension or retirement account.

If you’re changing jobs, you might want to nail down the new house before you start the new job. While a boost in income can make it easier to qualify for the mortgage you’re seeking, the fact that it’s a new and untried position may cause some lenders pause.
If you’re getting married on the other hand, you may want to wait until the knot is tied before mortgage shopping. Or, at the very least, unite your finances before the ceremony. You’ll find it a lot easier to qualify for a mortgage with a combined income than if you’re trying to do one on just one person’s credit.

However, if one of the two of you has damaged credit, it’s best to apply for the mortgage and buy the home under the other person’s name and finances alone. That way, the two of you won’t be handicapped by the one partner’s lower credit score.

If you’re looking to upgrade from your current home, you may find it difficult to qualify for a new mortgage if you still owe on another. That’s particularly true if you’re underwater on the loan, or owe more than the property is worth, and especially so if you’re looking to buy a new home in the same community as the old. Lenders are leery of homeowners who are seeking to “buy and bail” – obtain a mortgage for a new house at today’s reduced market prices, then dump the old one once the new property is in hand. You may find that you need to put some more money into your old mortgage, at least bringing it to a positive equity position, before you can qualify for a new one.

A final mistake many people make is failing to check out their credit before applying for a new home. This can be a problem for well-established persons who are entering retirement or taking on new jobs, and who assume their finances are in order. However, anyone can have major errors on their credit reports. These can be corrected, but it takes time – it’s best to order your reports from all three major credit reporting agencies at least six months before you plan to purchase to allow time to call attention to and correct any mistakes.