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New "Upside-Down" Refi Program


retmar
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Not sure how many of you have heard of the new "Upside-Down" Refi program recently announced. It was in our paper last Thursday, 9/9/10.

The parameters, as noted by HUD, are you must be:

1. Upside-down on mortgage.

2. Be current on existing mortgage.

3. Occupy property as primary residence.

4. Qualify under standard FHA underwriting requirements.

5. Have at least a 500 FICO.

6. Loan must not be FHA insured.

7. The first lien holder must write off at least 10% of unpaid principal.

Other items to note is that monetary incentives are available to encourage lenders to participate. And lenders of 2nd's are also encouraged to permanently lower their loan balances to make sure the program works.

One of my concerns on this is that after the balance on the 1st is lowered, it can't be more than 97.75% of current value. I have reservations on this part alone as too many are more than double the value of their homes to the negative, to where a 10% will not make much of a difference overall.

All who read this, if you are aware of this new program, please share what you know. I especially want to hear from those in the industry or those who have personal experience with this, and, who can place some real facts for the rest of us.

Yes, I'm interested, as we are more than double our home value. In short, if it is beneficial, I will pursue this program.

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I read a bit about it late last week. I think one of the parameters is that once the 10% is reduced, the homeowner cannot be more than 115% ltv on all loans. So that means that going into the program, the borrower cannot be more than 125% ltv. Additionally, any subordinate lienholders (2nd and 3rd position loans) must agree to stay in their subordinate position.

FHA realizes that default rates spike once a homeowner is more than 15% underwater (statistically), so they don't want to just transfer defaults from shareholder owned banks onto taxpayer insured loans. The 15% is the "danger zone".

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http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/10-23ml.pdf

Eligibility

Participation is voluntary and requires the consent of lien holders. In order for a loan to be eligible, the following conditions must be met:

1. The homeowner must be in a negative equity position;

2. The homeowner must be current on the existing mortgage to be refinanced;

3. The homeowner must occupy the subject property (1-4 units) as their primary residence;

4. The homeowner must qualify for the new loan under standard FHA underwriting requirements and possess a "FICO based" decision credit score greater than or equal to 500;

5. The existing loan to be refinanced must not be a FHA-insured loan;

6. The existing first lien holder must write off at least 10 percent of the unpaid principal balance;

7. The refinanced FHA-insured first mortgage must have a loan-to-value ratio of no more than 97.75 percent;

8. Non-extinguished existing subordinate mortgages must be re-subordinated and the new loan may not have a combined loan-to-value ratio greater than 115 percent;

9. For loans that receive a "refer" risk classification from TOTAL Mortgage Scorecard (TOTAL) and/or are manually underwritten, the homeowner’s total monthly mortgage payment, including the first and any subordinate mortgage(s), cannot be greater than 31 percent of gross monthly income and total debt, including all recurring debts, cannot be greater than 50 percent of gross monthly income;

10. FHA mortgagees are not permitted to use premium pricing to pay off existing debt obligations to qualify the borrower for the new loan;

11. FHA mortgagees are not permitted to make mortgage payments on behalf of the borrowers or otherwise bring the existing loan current to make it eligible for FHA insurance; and

12. The existing loan to be refinanced may not have been brought current by the existing first lien holder, except through an acceptable permanent loan modification as described below.

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Thanks for the info, "jq"!

You had items not written in the article I had. I'll work from these and see what I come up with. Our mortgage falls within, but our overall in and out may be on the edge. Yes, it fluctuates each month when you figure in utilities. I've got a close friend who can figure this out for me. As to taxes, we only file to keep IRS happy, and to assure we can obtain a copy when needed. Our income is tax free overall, as our SS payments when figured come in way below the minimum. All I do is include a copy of our 1099's and show a zero due, then we sign. My VA and my Combat Related Special Compensation (in lieu of my retirement pay) are both exempt.

I am watching close on our SS payments and the minimums from the IRS this year as Obama is not giving us a raise again this year. Two in a row now. Hopefully, the IRS stays with the same numbers. To add, I've been drawing VA Compensation for over 40 years and received a raise, varied amounts, each year, until Obama came in. Our SS is the same, but, we've only been drawing them since 2001. I worry about my wife as when raises were denied last year, they still raised Medicare Part B. But, only the new enrollees would pay the new amount. All existing would not be raised. BUT, we all know that they must catch up with each other some time in the future. When? I don't pay Part B due to the VA. My worry is that if check out before her, it is absolute her income will take a hard hit. The house is no problem as the wife knows to just walk away, unless our youngest daughter wants to take it over. Actually, she and one of her sisters have both said for us to not worry as they would jump in where needed.

Have you figured out why I'm interested in this new program?

If you find more, please share with us. The same for everyone else. If you find something, please share.

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Yes. read the HUD guidance that I posted the link for. It is pretty thorough:

Excerpt:

Additional Items of Note

- Mortgagees must make borrowers aware that, as with any loan forgiveness action, the short refinancing under this program may be reflected as a negative feature on a borrower’s credit score.

- Mortgagees must also advise borrowers that they need to consult with their tax advisors regarding the cancellation of debt and possible tax consequence.

Additional Excerpt:

If you have any questions regarding this Mortgagee Letter, please call the FHA Resource Center at 1-800-CALLFHA (1-800-225-5342)

Edited by jq26
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.

[...... Non-extinguished existing subordinate mortgages must be re-subordinated and the new loan may not have a combined loan-to-value ratio greater than 115 percent.....

That is right, there is a cap on the limit - was going to create a company dealing with Upside Down Mortgages, doing negotiations between Lenders. I stopped short of creating a website........88-)

Right now - any people offering relief on a mortgage more than 125% LTV - is mostly a scam.

Since the Fed reallocated the TARP fund money - existing Lenders no longer can receive TARP rebates for PMR's, so there is no incentive for LTV's greater than 125%.....

As for the Home Equity - last week I read a Hud memo that allowed up to 125% CLTV financing. Problem is that the CLTV is determined by the Lender underwriting the FHA loan. So much like FHA-Secure loan, it is a wonderful idea in theory but has some major practical limitations in the real world of lending. Ultimately it is up to the Lender to go over that.

As things get progressively more grim, heard the Fed will be announcing in October - a new PMR program to help home owners. Yet another Band-Aid they are putting on the fix yet another problem.

Jq26 - when it prime rate is going to inevitably dropping below 2% - when it happens it is going to be really interesting in the mortgage scene...

Times have changed - looking back five years ago - people were calling Lenders checking to see who had the best interest rate. Now people are calling Lenders who can do their loan....:cry:

..

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.Jq26 - when it prime rate is going to inevitably dropping below 2% - when it happens it is going to be really interesting in the mortgage scene...
BoA, Deutsche Bank, and PIMCO (the king of all bond funds headed up by El-Erian and Gross) are all predicting a 10yr yield of 1.75% in 1Q2011.

We'll see. It is just a prediction, but if it happens 15yr and 30yr rates will be in the low to mid 3s...imagine a 3.0% 15yr rate.

Or the economy could strengthen and we could see +5.0% again. But the FED would probably work to curtail that so that we don't see another leg down in the housing market.

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....30yr rates will be in the low to mid 3s...imagine a 3.0% 15yr rate.....

Wow - I wet my panties just thinking about that, 3% on the 30yr loan..!!! LOL!!!!....:mrgreen:

I think we need to look at how the Fed's regulates the monetary system here in the US if this is a realistic idea. Their primary control is in the raising and lowering of short-term interest rates. In doing this - they influence demand, with demand people are spending more money....

The problem is the government is running out of Band-aids and quick fixes. Banks have a too much money. Looking at the consumer price index - people are not spending money.

If this doesn't work - the next step could be lowering the amount of money required to keep at the end of the business day. Flooding more money out to the economy.

By lowering the interests more - people are hopefully more motivated to spend money because they can get a better deal on the loan. Spending money, in turn, stimulates economic growth, which is what the Fed is trying to do in that.

We shall see.....:wink:

...

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Essentially, the federal reserve is about to flood the system with money again by purchasing treasurys directly and inflating thier balance sheet. This is the second time they've done it. So we're calling it QE2 "Quantitative Easing Round 2".

IMO, no matter what the federal reserve or Treasury does, consumer spending isn't coming back like it was from 2001-2007. That was an anomaly based on home equity extraction, lax lending standards, and personal balance sheet mirages created by inflated home prices. Them days are gone.....

But things will get better eventually. Just keep plugging away.

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All of you, thanks for the info! A couple comments are necessary.

I had assumed our CR's would take a hit with this, but, we really do not care anymore. At our ages, and health, we have no intent of opening new accounts anywhere, except a new vehicle, at the most, and, then, only if our Charger tires out, but, still under 60K. We closed all of our accounts at beginning of this mess. Since our bank card has the "VISA" logo, we use it anywhere we go. No interest charges, no guessing, nothing. Watch our checking account and all is well. No chance of overextending ourselves as if funds low, no use card.

Regarding the Fed, to me, the only real "fix" is to toss them out, and, place our money back into "we, the people" hands. Give us back our Gold and Silver, which is the only "real" money in this country. Destroy these pieces of linen which are nothing more than credit on the bank. Repeal the UCC. Bring our money and use of back into the Constitution where it should have never left, referring to the 7th Amendment. In short, put substance back into substance, assure it is something for something, not color for color.

Funny thing to note on the comment as to this beginning in 2001. How many of you are aware the New York Times predicted this mortgage crisis in 1999? An article in the September 30, 1999 edition on Fannie Mae predicted this crisis, based on Clinton's wanting the lenders to ease the lending standards more. If you want to dig deeper on this, go back to Carter and his Community Reinvestment Act, and come forward.

If you want to follow the "trail of our money and the Fed", start with the Constitution, then to around 1791, then around 1818, and move forward. Read the Supreme Court decisions of the late 18th and early 19th Century on banks. Read HJR 192 signed by FDR on June 5, 1933, and the creation of the UCC, and then ask yourself why they considered it necessary.

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Gold and silver is impractical. I don't think you want to run to Costco to get diapers with a bag of gold or buy a vehicle with a dumptruck full of silver. Paper money is okay so long as it is backed by gold. In fact, it doesn't even have to be gold. It can be silver, platinum, even land. Some tangible asset. When we decouple it from any tangible item and back it with the "full faith and credit" of a government with a decaying asset base and a growing money supply like we have, you are giving money printers ultimate power and robbing the people of the country.

Curious why the UCC tie in? I have studied the UCC plenty. The UCC was more or less created to harmonize varying state laws to make for much more efficient interstate trade. If was difficult to trade when you had default state law that varied from state to state.

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The whole of my comment was in regards to what is the "real" and "Lawful Money" of the US. I purposely omitted the "paper" reference as I was trying to keep it short. I see now I should have included it.

Your mention as to Platinum and land is proper as it does represent something for something, but, only Gold, Silver, and Copper, are recognized as the only lawful money of the US. I could note the sections of the documents that explains this, but, would take a lot of space, so, read all of the documents, from the Declaration of Independence to the US Constitution, and all statutes, including the Statutes at Large. You will learn more than I could even begin to share here. You will also find it so interesting, you will not stop there. Even find books on the Common Law, and any other book that covers from our beginning until today. I read all authors on one subject, and also look for 1st printings, as many times, if the book includes the first, then there is a minimal chance of any alterations of content from original. I also look for Supreme Court Decisions on these topics, especially if referenced to in the books.

The UCC is a "Colorable" law, written by them to protect only them, thus, affording us minimal protection, as the only real law in this country is the Common Law But, to attempt to stay in harmony with the Constitution, they had to include a section to provide Constitutional protection. This is found in UCC 1-207. As you know, in a criminal case, you must be provided your rights (5th Amend), while, under the UCC, you must demand your rights. Your Constitutional rights can never be denied you, no matter the claims made, no matter whether civil or criminal. The one main difference and what they pray you don't know is that very section. Once they know you are reserving all of your rights, different things happen. By this, if they sue and go to court, and you have reserved your rights prior to, it is most always dismissed unless the judge is willing to produce, to you, the national debt, for example. To include, our courts today operate under Statutory Jurisdiction, which is not authorized. And, by flying a braided flag, they are under Admiralty, though claim Statutory, which is forbidden at the state level, as only federal can hear Admiralty. There is much to learn on this subject alone. No, you can't just say so, as the judge will have you for breakfast, lunch, dinner, and all snacks in between. You will have to play the game and draw the judge into his own undoing. Stand as a Lion in Lambs' clothing.

Remember, the 7th Amendment provides for a trial by a jury of peers for all debts over $20.

There is so much to write here, but, will rely on your taking the initiative to learn all of this.

Question: Is a citizen, a Free Man/Woman, not involved in commerce, required to obtain a Drivers License?

Almost forgot. "Legal Tender", as written on that piece of linen in your pocket, says clearly that it is not "Lawful Money", as it may be redeemed for lawful money at the Treasury or any Federal Reserve Bank.

Edited by retmar
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