Want To Refi? Maybe You Can Now

Californian poppy
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The program rolled out amidst much fanfare in March from the Obama administration, Home Affordable Refinance Program [HARP], was a major dud as far as California was concerned…The reason? As explained in this post at the time, instead of the typical 80% loan to value [LTV] for a refi, it offered government help for up to 105% LTV. Some places, even many places in the country, that’s a big help, but not here. We are too far underwater.

So, it was good to hear the other day that Obamanites have figured this out finally–the program has been pretty much a bust–and changed the rules so that now the government will help for up to 125% LTV. This means you can refinance if say your home is worth $300,000 right now, but you owe $375,000 and you’re paying 8% on an adjustable  If you’re eligible, you could get that refi at the new, lower rates, maybe in 5.5% on a 30-year fixed.

Who is eligible? First, your loan must be owned by Fannie Mae or Freddie Mac. To find out if your is, check the Fannie Loan Look-up or the Freddie Loan Look-Up.  Good so far? Well, now it comes to you and your house. You must have a job or at least income sufficient to take on such a loan. This is becoming more difficult when L.A. County’s unemployment rate is 12.6% as of May.  And, then, your home must be worth that $375,000 you think it is. Talk to a reputable lender and s/he can figure all this out for you in minutes over the phone.Call me at 626-641-0346 for a referral.

Don’t delay. Property values are still sinking. Next month might be too late.

Some will question whether this applies to rental property as well…I believe it does, as the previous loan limit of 105% LTV did. Small investors need help right now. Rents are not covering costs and the big initial down payment that many investors made to get their loans have disappeared as the value of the homes has sunk.

And, last, of course, you still owe $375,000 and you’re paying on $75,000 that isn’t there. If you have a financial turn of mind, you will see that doesn’t make a lot of sense.  So far, we haven’t seen too much relief for that problem.  Maybe down the road…

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Obama’s Plan: Help for Small Investors

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Yes you read that right. Obama’s plan will also help you refinance if you have rental properties. Last week Fannie Mae and Freddie Mac announced they would refinance rental and second homes as part of the Obama administration’s housing relief effort.  That is a relief! It seems that finally these lending giants have realized that helping small investors will also help renters and if nothing else provide homes for the foreclosed upon.

Here’s the skinny. First, the loans must be owned by Fannie or Freddie. If you don’t know, call your servicer to find out or go to Fannie and Freddie websites. If your loan is with another entity or a private lender, you will not be eligible.

Just as with owner-occupied properties, the loan to value ratio cannot exceed 105% and that is up to $729,750 loan amount.  Let’s say you bought a duplex or a fourplex a few years back for $500,000 with a first mortgage of $400,000 at 7.5% and that loan has now been acquired by Fannie Mae. You may well be able to refinance into todays 5% and 6% rates, thereby greatly increasing your cash flow. Even if the value of your property has dropped in the intervening few years, as long as the current market value is at least $420,000, you can do it.

Of course, you do have to be a good prospect for a refi. Your payment history on the loan should be close to perfect–no 30 day lates in the past 12 months. Even if you’ve had other financial woes which may have tanked your credit score, it’s still possible because Fannie and Freddie have agreed to waive their usual minimum score requirement and you won’t have to pay for new mortgage insurance [pmi].

You will have to show income to qualify–often investment income from the building is enough–and there will be the usual closing costs which will increase your loan balance.

All in all, though, this is a great deal!

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