Delawareans Underwater on Mortgages?
Underwater sounds like a diving game, but seriously speaking, when underwater is mentioned in the context of mortgage, it is no game.
Many Delawareans are underwater on their mortgages. Underwater simply means you may owe more on your mortgage than your home is worth. But a life preserver is available!
About one in four US borrowers, or 11 million homeowners, are underwater, according to data provider CoreLogic.
Proponents believe that reducing underwater borrowers’ loan balances would be the most effective antidote to the US’s housing woes, but critics believe that “such action would impose significant costs on lenders, investors and taxpayers, and would have unforeseen consequences on the future of US housing finance.” Easy to say, if you are not the one that is underwater.
Earlier this week Fannie Mae updated its seller guide to reflect the changes announced as part of the must anticipated HARP 2.0 Program. Many of the changes announced were already included in Fannie Mae’s release on the HARP 2.0 program in November, however it was indicated that Fannie eliminated the requirement that the lender determine if the borrower has a reasonable ability to repay the mortgage. This is quite a game changer for homeowners who may be underwater.
In the release, Fannie Mae stated that the “Reasonable ability to repay” terminology was removed from the requirements because the seller guide already describes the specific underwriting requirements that are applicable to each transaction. Thus, for the Fannie Mae Refi Plus, the lender is no longer required to determine the borrower has a reasonable ability to repay the mortgage based on a review of the information provided on the new loan applications. It will be interesting to see if Lenders/Underwriting guidelines reflect this new “reasonable ability to repay” guideline in its entirety. Still unclear is whether there will be a ceiling on the LTV, (loan to value).
Moving forward into unchartered water, many our our clients are waiting for the new HARP 2.0 release of underwriting guidelines to be resolved. Stay tuned. We will keep you informed as we move forward into 2012. It appears the target date for HARP 2.o implementation is going sometime in March.
Note, if you have a Fannie Mae or Freddie Mac loan that you took out before June 1, 2009, you may be eligible for HARP 1.0, which is in effect now. Give us a call to see if you qualify. But if you don’t, be patient, we are only 3 months away. Good Advice if you want to stay in your home: Keep paying your mortgage on time!
How do you know if your loan is a Fannie or Freddie Loan, CLICK HERE