mortgage

A successful MHA refi

Friday, July 17
Written 10:30 a.m. EDT

FINALLY, SUCCESS: A note, sent yesterday, from a reader named Matthew:

Holden:

FYI, I finally got the Obama refinance closed today. I ended up getting it through Quicken Loans. I just wanted to tell you because I know you track this process and have seen that it has been difficult to implement this program. Here are just a few speed bumps along the way:

1) Initially, I had to educate Quicken that the MHA refi COULD go through even on a property that had a second mortgage.

2) At first Quicken didn't realize I had to get an appraisal, but then we had to get an appraisal for the subordination of the second mortgage.

3) Because the second mortgage was through Countrywide, it took over 4 weeks after the appraisal to get that done because of the issues with transferring the accounts from Countrywide to Bank of America.

4) BoA also agreed to subordinate only if the total loan (first and second) was 98 percent LTV, but that ended up being fine for my house.

5) Our credit scores were 780 and 720, but we had to pay for 2.3 points because I guess the 720 wasn't high enough? I didn't understand that, but so be it. We are still saving money.

6) We finally closed today -- saving $200 a month and total of around $20,000 over the life of the loan compared to what I would have paid with the 27 years left on my original loan.

We started this process in mid-May, and rates went up some since then, but we still got a 4.99 percent with points.

Just a little note from the trenches on getting an Obama Refinance.

Congratulation's Matthew. If I may make an unsolicited suggestion, I would say this: Instead of restarting with a 30-year payment plan, find out what you have to do to pay the loan off in 27 years, which is how much time you had left on the original loan.

This is a two-step process. First, figure out how much extra you would have to pay (per month or in a lump sum every year) to pay off the loan in 27 years. Second, ask Quicken what you need to do in order to have your extra payments count toward principal.

DITTO: My colleague, Greg McBride, has a post on his Fed Outlook blog that I want to point out. He says the Obama administration's Making Home Affordable program is focusing on yesterday's problem and not the big issue of today and tomorrow.

The administration's modification program is designed to help people who got adjustable-rate mortgages they can no longer afford and who can't refinance because of a spotty payment history and declining property value. The administration's refinance program is designed to help people who have a good payment history but want to refinance to take advantage of low, fixed rates.

Those were the problems of 2007 and 2008. The big problem in 2009 and 2010 is, and will be, unemployment. McBride writes: "One aspect of Making Home Affordable that is sorely missing is what I would term a 'national forbearance program for the unemployed.'"

He adds:

So what would my so far mythical "forbearance program" entail? Only homeowners that could show they were current on their mortgage payments up until the point of a job loss would be eligible. These people are not deadbeats. They deserve the benefit of the doubt. And what I would like to see is a plan that relieves them of making mortgage payments during a period of joblessness. (And OK, maybe you limit it to a one-year time frame. I'm not going to quibble too much about the details at this point when we don't even have the current framework in place). Only once they return to full-time work would they be required to make mortgage payments. And if they go back to work at a reduced pay rate, they could be fast-tracked toward a potential loan modification at that point to bring the payments (but not the total debt owed) in line with their new income.

He's absolutely right. Don't be surprised if, later this year, someone in the administration or in Congress tries to put something like this in motion.

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Holden Lewis

Much ado about mortgages

A bunch of agencies are trying to expand the number of would-be homeowners who can qualify for mortgages. But I'm skeptical that these efforts will help many people.  ... Read more

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