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More refi help on the way

By Polyana da Costa ·
Friday, May 11, 2012
Posted: 2 pm ET

Despite numerous government initiatives to help homeowners refinance their mortgages, the red tape still prevents millions of borrowers from taking advantage of today's low rates.

Congress needs to remove these barriers for borrowers, and it must act quickly, says Secretary Shaun Donovan of the U.S. Department of Housing and Urban Development.

"There is a real urgency here," he told reporters Friday. "We don't know how long we will have these record-low interest rates."

Donovan and President Barack Obama are urging Congress to approve legislation to expand existing refinance programs. The measures would provide incentives to lenders and borrowers to increase refinance activity.

Expanding FHA's streamline refis

One of the bills proposes opening up Federal Housing Administration, or FHA, streamline refinances for those who have mortgages that are not insured by the FHA or owned by Fannie Mae or Freddie Mac. The current FHA streamline program is available only to borrowers who already have a mortgage insured by the FHA. If passed, this refinancing program would be available to borrowers who are current on their mortgage and live in the home that is being refinanced.

Another proposal would help borrowers who have mortgages owned by Fannie Mae and Freddie Mac. The borrowers would have access to a streamline refinance process, similar to FHA's streamline program.

Incentive to rebuild equity

The administration wants to encourage borrowers to rebuild equity in their homes. One of the bills would allow borrowers to refinance without having to pay for closing costs, if they rebuilt equity with the money they saved by refinancing. The borrower could use the savings to refinance into a 20-year mortgage, rather than a 30-year mortgage. Borrowers who chose this option wouldn't have to pay closing costs on the loan.

These measures would not only help borrowers, but it would also help the economy and the housing market, Donovan says.

"A broad range of economists and housing markets analysts, including prior economic advisers, have advocated refinancing as a critical step," he says.

Do you think these bills are likely to pass? And would they help the economy?

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May 23, 2012 at 4:57 pm

I am in exactly the same boat. My loan closed on May 11th, endorsement date is June 6th. I am missing out on the streamline refi at no fault of mine. Another spokesperson at FHA comments that because of the cutoff some 145K eligible borrowers don't true and very frustrating. It is just unfair ....

May 16, 2012 at 12:23 am

A problem with the current FHA Low MIP program dates:
You MUST know this.
The FHA are telling us that it has NOTHING to do with the closing date of your loan, even though Polyana suggests this in her recent articles.
It is based on the date that the FHA "endorsed" your mortgage insurance certificate with the lender. In our case with Guild Mortgage Company in San Dieso CA, they took an astounding 120 days to get our loan endorsed by the FHA after closing.
Our loan closed May 5th, 2009 (inside the cutoff date) for the low upfront MIP program. However, the FHA say that because it wasn't "endorsed" for the MIP until later they won't allow it. Most articles on this subject suggest it is from the date you took out your mortgage ..... wrong !!! No wonder this country is in so much trouble. Can these people get anything right!!!

Jeffrey Vetter
May 14, 2012 at 11:01 pm

I sure hope that Congress can finally get this passed as soon as possible as there are many people who did not overbuy and are now underwater due to cracks in the system that some honest hard working people who fall through just due to unforeseen problems. I was working and earning over $60K a year. Bought a nice simple home for 116900 in 2001 on an FHA loan with a rate of 7%. About 8 months later I twisted my ankle at work. Was nothing major at the time, but after about 3 months was being bothered by exttreme swelling and pain that got worse over time.It took the docs about two more years to figure out that a had a rare disease called RSD or CRPS. Kept trying to work throughout the whole time in between. In 2004 the final prognosis was that I had a 100% total perm. disability. This was agreed to by 9 different doctors. Employer found out about perm. damage and terminated me in late 2004. They had been paying workers comp. up to that time but stopped when they ley me go. I filed for SS disability and was aproved in less than a month. Filed for a workers comp. hearing and somehow the insurance company worked the system and drew the case out for about 4 years. I finally just got wore out fighting them and settled in 2009 for a lousy $700 a month payment. In meantime I was worried about falling behind on my bills so in 2006 Beneficial Finance called be and said they could do a refi and bill consolidation if the house appraissed at enough and it did by about $500. I was reluctant to do this as I did not want to give up FHA loan. Beneficial said that wasn't a problem and they would keep my loan as an FHA loan. So we did the deal along I was being assurred it was FHA, so now had loan of $143000 at 10%. I have paid over $1205 a month for 6 years and only reduced principle to $139000. I applied for a loan remod 5 times in the past 4 years when rates started to drop. Went to a different lender and thats where I found out that Beneficial had lied to me and I did not have an FHA loan. Being that I wasn't behind on payments they would not approve a hArdship remodification as I did not qualify for their progtram, as according to them , food, clothing, heat, telephone, and a car are all considered luxury items. Beneficial also known as HSBC is one of the worst subprime loan writers in the country and they were not one of the 5 lenders in the recent settlement they did not have to do anything. Now I sit with an underwater loan, and current on payments, as a matter of fact I have not missed or been late on any payments on anything but have spent almost all my retirement savings. They will not budge an inch to help. And being underwater and not having FHA loan no other lenders won't refi or even consider helping. So, doing the right thing and keeping current on everything I'm in effect being punished for doing the right things. I feel hopellessly trapped in this mess even though HSBC had lied I have no recourse on them even. So I sure hope Congress can get their act together and agree to these terms as I know there are many others sitting in the same boat as I am. Thank you for allowing me to sound out about this as I feel I have no real confidence in government right now. Stand up and show me that we still have a government that shows they have aresponsibility of representing us citizens instead of having their own agendas. Where is the middle classes bailout????