Steps to Help Homeowners Avoid Foreclosure

[MTG_BANKER_OH]

http://www.hud.gov/news/release.cfm?...t=pr07-123.cfm
LENDERS PLEASE NOTE: FHA WILL PUBLISH A NEW MORTGAGEE LETTER WITH GUIDANCE ON THE NEW FHASecure PROGRAM ON OR ABOUT TUESDAY SEPTEMBER 4th, 2007 at: http://www.hud.gov/offices/hsg/mltrmenu.cfm

[Boscoe]

That's a joke. What about the hundreds of thousands who don't have "good credit"? What's his response to that?"

[BassBoy]

MTG BANKER OH is obviously from Ohio, and so am I, and there's been a major increase in foreclosures in Ohio. Ohio's foreclosure rate is the highest in the country due to predatory lending practices and I believe that the information MBO provides may be of great help for those Ohio homeowners who have fallen prey to it. You ask a good question Boscoe about what if the homeowner's credit is bad, but I believe that this product may have loan programs for those with bad credit (because of the teaser loan crap) in order to obtain an affordable, conventional loan.

[chucko]

So wait...your ARM has to reset, you have to have missed payments and hosed up your credit before you can refi with this? That sounds really crappy to me.

Why not just let people with ARMs resetting refi before thye fall behind and destroy their credit?

For me, I discharged BK in Jan of 2005. My 2 year ARM resets next august, and so far my credit has been perfect. I sure as hell don't want to muck it up just so I can refi.

[tradewiz50]

So wait...your ARM has to reset, you have to have missed payments and hosed up your credit before you can refi with this? That sounds really crappy to me.

Why not just let people with ARMs resetting refi before thye fall behind and destroy their credit?

For me, I discharged BK in Jan of 2005. My 2 year ARM resets next august, and so far my credit has been perfect. I sure as hell don't want to muck it up just so I can refi.

Your committing financial suicide if you screw up your credit after a BK discharge.

[chucko]

Your committing financial suicide if you screw up your credit after a BK discharge.

That's what I'm saying. A lot of the people with these ARMs are people out of BK who tried to get a home. Those will be the people who will see their mortgage payment perhaps double when the ARM resets, and they will be the most desperate to refinance. They can pay their current mortgage, but if it goes up 50% or doubles, they are in deep trouble. From what I understand here, you have to be behind on payments to refi, which I think is going to leave a lot of people in the situation I described above in the dust. It's a poor ass solution because you're making people wait until their credit is shot to refi? Why not help the people with ARMs period? Instead of catching people as they are falling, lend a hand and help before they fall.

[MTG_BANKER_OH]

I will know more details on it tomorrow, our underwriter is going to a conference regaurding this new product and the exact items they are looking for to be eligible for this product.

I think with this product they are looking for people that had an ARM that they were making payments on until the loan adjusted where they could no longer make the payments. My guess is they are looking for good mortgage history until the ARM adjusted higher.

The other catch is the current lender will have to take a loss on their previous loan if the equity is not there in order to refinance, which I say good luck in trying to get some lender to do this without a fight.

I have heard countryiwde is willing to do this, I do not know the details. They hold many subprime loans, and have done many subprime loans in the past 5 years. I am guessing they are getting some break from the government on this.

This program will not solve everyones problems with ARM loans, it will be a full doc loan, their thinking is if you are not late on the mortgage you should be able to refinance, which is not always true.

I do not think they are going to allow people to refinance that have disreguarded their credit entirely but paid the mortgage either. It is going to stick very closely to the FHA guidelines.

Here is some more info on this it just came out:

http://www.hudclips.org/sub_nonhud/html/nph-brs.cgi?d=MLET&s1=07-$[no]&op1=AND&SECT1=TXTHLB&SECT5=MLET&u=../html/shortcut.htm&p=1&r=1&f=G

[MTG_BANKER_OH]

U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
WASHINGTON, DC 20410-8000

ASSISTANT SECRETARY FOR HOUSING
FEDERAL HOUSING COMMISSIONER

MORTGAGEE LETTER 2007-11
September 4, 2007

TO: ALL APPROVED MORTGAGEES
ALL FHA ROSTER APPRAISERS

SUBJECT: The FHASecure Initiative and Guidance on Appraisal Practices in
Declining Markets

The Federal Housing Administration is pleased to announce an initiative that will
enable homeowners to refinance various types of adjustable rate mortgages (ARMs)
that have recently reset. This mortgagee letter describes how lenders and
homeowners may refinance mortgages that, due to the increased mortgage payment
following the reset, have become delinquent. The mortgagee letter also reiterates
guidance to lenders about making objective decisions regarding the underlying
collateral in declining markets. The FHASecure initiative, which is a temporary
program designed to provide refinancing opportunities to homeowners and to
increase liquidity in the mortgage market, requires that the loan application be
signed no later than December 31, 2008.

Refinancing NonFHA Adjustable Rate Mortgages Following Resets

FHA is currently doing a significant business in refinancing non FHA mortgages for
borrowers who are current under their existing mortgage. This mortgagee letter
extends eligibility to borrowers who are delinquent under their current mortgage
following the reset of the interest rate.

FHA recognizes that many lenders are engaged in a variety of loss mitigation
activities to keep borrowers in their homes, and applauds these efforts. This
mortgagee letter explains credit policies for refinance transactions involving non FHA
adjustable rate mortgages.

These instructions are designed to permit homeowners, who previous to their reset,
demonstrated an ability to meet their mortgage obligations, an opportunity to
refinance into a primerate FHA insured mortgage. In many cases homeowners may
be permitted to include mortgage payment arrearages into the new loan amount,
subject to existing geographical mortgage limits and the loan to value limit shown
below.

Eligibility Highlights of the FHASecure Initiative

* The mortgage being refinanced must be a non FHA ARM that has reset.

* The mortgagors payment history on the non FHA ARM must show that, prior to the
reset of the mortgage, the mortgagor was current in making the monthly mortgage
payments.

* If there is sufficient equity in the home, under additional eligibility instructions
provided below, FHA will insure mortgages that include missed mortgage payments.

* Under certain conditions explained below, FHA will insure first mortgages where (1)
the existing note holder writes off the amount of indebtedness that cannot be
refinanced into the FHA insured mortgage; or (2) either the FHA approved lender
making the new mortgage or the existing note holder may take back a second lien
that includes closing costs, arrearages or previous secondary financing if the
indebtedness exceeds FHA prescribed LTV and maximum mortgage amount limits.

* Mortgagees must determine, as part of the underwriting process, that the reset of
the non FHA ARM monthly payments caused the mortgagors inability to make the
monthly payments and that the mortgagor has sufficient income and resources to
make the monthly payments under the new FHA insured refinancing mortgage.

Additional Information About the FHASecure Initiative

* Maximum FHA loan to value ratios

The maximum loan to value limits are shown below and are applied to the appraisers
estimate of value, exclusive of any upfront mortgage insurance premium.

Maximum Loan to value Ratios

States with Average Closings Costs At or Below 2.1 Percent of Sales Price

* 98.75 percent: For properties with appraised values equal to or less than
$50,000.
* 97.65 percent: For properties with appraised values in excess of $50,000 up to
$125,000
* 97.15 percent: For properties with appraised values in excess of $125,000.

States with Average Closings Costs Above 2.1 Percent of Sales Price

* 98.75 percent: For properties with appraised values equal to or less than $50,000
* 97.75 percent: For properties with appraised values in excess of $50,000

* Calculating the Maximum FHA Mortgage Amount

The amount of the FHASecure mortgage may not exceed either the geographical
maximum mortgage limits or the loan to value ratios shown above. FHA will permit
the inclusion of the existing first lien, any purchase money second mortgage, closing
costs, prepaid expenses, discount points, prepayment penalties, and late charges.
FHA will also permit arrearages (principal, interest, taxes and insurance) to be added
into the new loan amount.

* Subordinate Financing Under the FHASecure Initiative

If the new maximum FHA loan is not enough to pay off the existing first lien, closing
costs and arrearages, the lender may execute a second lien at closing to pay the
difference. The combined amount of the FHASecure first mortgage and any
subordinate lien may exceed the applicable FHA loan to value ratio and geographical
maximum mortgage amount. If payments on the second are required, they must be
included in qualifying the borrower. If payments are deferred, they must be so for no
less than 36 months to not be considered in the qualifying ratios. Borrowers need
not yet have missed any mortgage payments to be eligible for this type of
subordinate financing.

* Underwriting the Mortgage/Qualifying the Borrower

FHA encourages all approved lenders to use FHAs TOTAL Mortgage Scorecard to
obtain risk classifications on each mortgage originated under the FHASecure
initiative. If TOTAL renders an accept/approve, the mortgagees underwriter need not
perform a personal review of the borrowers credit history and capacity to repay.
However, in the more likely event that the risk class is a refer, the underwriter must:

1. Determine that the homeowner has the capacity to make future mortgage
payments as well as pay all other obligations. The payment to income ratio and
debt to income ratios remain 31 percent and 43 percent, respectively.
Compensating factors are to be provided by the underwriter when the ratios are
exceeded.

2. Analyze the homeowners overall credit history, especially payments on the existing
mortgage. The underwriter must determine that the homeowners mortgage payment
history during the 6 months prior to the reset showed no instances of making
mortgage payments outside the month due and that other recurring obligations were
paid on time. If the borrower was offered partial forbearance after interest rate
reset, the underwriter must determine that he/she has made payments under the
forbearance agreement in a timely manner.

3. Provide comments in the remarks section of the mortgage credit analysis
worksheet that he or she has determined that the cause of the borrowers inability to
make payments was directly related to the increased payment attributable to the
reset and not due to a disregard for obligations.

* Tax consequences for a borrower when the note holder writes off a portion of the
amount to pay off the first mortgage

FHA recognizes that there may be tax consequences resulting from debt relief.
However, since FHA does not provide tax guidance, it recommends borrowers—and
mortgage lenders—in such situations seek competent tax advice.

* Other considerations of which the mortgagee must be aware when refinancing
these mortgages.

The FHASecure initiative for refinancing borrowers harmed by non FHA ARMs that
have recently reset is not to be used to solicit homeowners to cease making timely
mortgage payments; FHA reserves the right to reject for insurance those mortgage
applications where it appears that a loan officer or other mortgagee employee
suggested that the homeowners could stop making their payments, refinance into a
FHA insured mortgage, and keep, as cash, the amount of payments not made on
time.

Appraisal Practices in Declining Markets

Historically, FHA has provided a countercyclical force in helping to stabilize declining
housing markets and will continue to do so. In fact, much of FHAs business activity
this year has been in those states (e.g., Ohio, Michigan, Indiana) that have suffered
sustained depreciation of home prices due to job losses and increased foreclosures.
Nevertheless, recent property value declines in certain markets suggest the need to
reiterate our guidance to mortgage lenders to ensure that appraisers are providing
accurate property valuations. A declining market could be as small as a
neighborhood or as large as an entire state, and no standard definition exists other
than home prices are falling.

Appraiser Responsibilities

The purpose of the appraisal is to provide the lender/client with an accurate, and
adequately supported, opinion of market value. It is the appraisers responsibility to
determine whether a property being appraised is located in a declining market.

The neighborhood section of each property specific appraisal form contains a
housing trends section where the appraiser marks a box indicating property values
are increasing, stable or declining. Whichever box is selected, the appraiser is
certifying that he/she has performed an objective analysis of quantifiable data
supporting the observations made.

If a property is located in a declining market, the appraiser must provide an
explanation in the Market Conditions section of the appraisal report that includes
relevant information in support of the conclusions relating to trends in property
values, demand/supply and marketing time. The appraiser must also provide a
description of the prevalence and impact of sales and financing concessions and/or
down payment assistance in the subjects market area. Other areas of discussion
may include days on market, listtosale price ratios, and/or financing availability.

Lender Responsibilities

The mortgagees responsibility is to properly review the appraisal and determine that
the appraised value used to support the mortgage is accurate and adequately
supported.

Lenders are reminded that if the appraiser they selected provides a poor or even
fraudulent appraisal that leads the Department to insure a mortgage at an inflated
amount, the lender is held equally responsible with the appraiser for the violation if
the lender knew or should have known. FHA will pursue appropriate enforcement
actions against both or either party if necessary. Lenders accept responsibility,
equally with the appraisers for the integrity, accuracy and thoroughness of the
appraisal submitted to FHA for mortgage insurance purposes.

If you should have any questions concerning this Mortgagee Letter, call
1800CALLFHA.

Sincerely,

Brian D. Montgomery
Assistant Secretary for Housing
Federal Housing Commissioner

[Beach Bum]

This still won't help those of us in California who bought at the peak, like me, and have a non-conforming loan (above $417K...?).

This will do nothing to fix the problem out here where we paid too much for our houses in the last few years and used ARM's where the lenders qualified everyone using the teaser rates.

We bought a house for about $550K and our payments on the 1st, 2nd, taxes, HOA, only added up to about $2500/mo.
With our ARM about to reset, our new payment, will increase by about $2000/mo. to $4500/mo.

The basic problem is that we paid way too much for our townhouse (not even a SFR) and no refinance or loan adjustment will be able to change the current balance of the loan.

This is all political hoopla and will do nothing to actually solve the problem for most in this situation. (50% of buyers in the last 2 years used ARM's).

Both the buyers and the banks made bad decesions and the market is tanking as a result.

[jmstay]

MTG Banker OH:

You and yours made your bed...now lay in it and stop using this forum as a vector for continued predatory lending. Stop making it seem as if you are willing to offer up a majic pill to fix everything.....thats what lead to the headaches to begin with.

[lrprn]

MTG Banker OH:

You and yours made your bed...now lay in it and stop using this forum as a vector for continued predatory lending. Stop making it seem as if you are willing to offer up a majic pill to fix everything.....thats what lead to the headaches to begin with.

JM, MortgageBankerOH has been a wonderful resource for this forum and has helped several members sort out how to get another home at reasonable rates several years after they filed. He has NEVER used this forum to drum up business.

Please don't throw stones at this one member just because some mortgage bankers have screwed people. Doesn't mean they all have.

And please do not post to old threads like this again. It's against forum rules.

[jmstay]

Yes my friend, I am sure that this in NO WAY is an attempt to solicit business rather a kind gesture to reach out to those in need. All with no consieration to personal monetary gain.

Similar scenereo here, Willy Wonka teaching diabetics how to diet.

Beach Bum was right on, I am just less diplomatic. You are right though, I did not intend to attack him personally rather his kind....sorry MBOH can you relay that to your friends too?