As we all know, the real estate meltdown and ensuing massive recession decimated millions of Americans. Millions lost their homes, jobs and financial security. It’s been extremely painful and drawn out. We are just now starting to turn the corner & see light at the end of the tunnel. However, with the biggest recession in recorded history comes many painful lessons and reality checks for us all. We know that doing things the way we used to will not work moving forward. It’s a new world order and now more than ever we must become more fiscally mindful and educated. Additionally, we must seek innovative ways to clean up the mess. The government has attempted to do so with programs such as HAMP (Home Affordable Modification Programs) and forcing banks to do something to help the millions who are under water and can no longer afford either their existing mortgage and/or their mortgage that is about to adjust due to the variable nature of their loan. It’s safe to say that most consumers did not really understand the nuances of their mortgages and therefore just signed away their financial lives in hopes that everything would work out fine, as they were told by many mortgage professionals and real estate agents. This is not to say the consumer doesn’t play a role in this mess, because they also do and did not exercise due diligence.
Most of these loan modification programs and services have not worked. By any accounts, more than 50% of modifications that did get approved defaulted within 12 months because they were bandaids on symptoms rather than true remedies to the problem(s). On a more positive note, the recent HARP (Home Affordable Refinance Program) recently instituted has been more of a viable & beneficial solution for consumers who are underwater (their mortgages are higher than the value of their home) and on time with their mortgage payments but are trapped with a higher interest rate. This program allows that person who is underwater, on time with their mortgage payments and who’s loan is owned by Fannie Mae or Freddie Mac (the two largest owners of mortgages in the US), to refinance at today’s current rates with unlimited loan to value on a primary residence & second home, and to a 105% loan to value for investment properties. This is a huge difference to what has been out there for consumers. Yes, it’s restrictive in the sense that your loan must be owned by Fannie Mae or Freddie Mac but most loans are. The fact that there is no loan to value maximum on primary residences and second homes is also a huge benefit. In essence, this means it doesn’t matter what the current value of your home is! If you or someone you know is in this situation, we strongly recommend you:
1. Look up your property to see if your loan is owned by:
Fannie Mae http://www.fanniemae.com/loanlookup/ or by Freddie Mac https://ww3.freddiemac.com/corporate/
2. If your loan is owned by either of these two entities, then contact your mortgage advisor to get the process started to lower your interest rate and payment. NOTE: You must still qualify based on your income, debts and credit scores.
Ed Diaz is a current NHORA National Board Member