The U.S. Department of Housing and Urban Development this past week extended the Home Affordable Refinance Program to borrowers who are up to 25 percent upside-down on mortgages guaranteed by Fannie Mae and Freddie Mac.
The previous threshold was 105 percent, or owing 5 percent more than the value of the home.
To qualify for refinancing under the federal government’s Home Affordable Refinance Program, the borrower’s loan must be secured by government-sponsored entities Fannie Mae or Freddie Mac. About 20 percent of all “seriously delinquent” homeowners have Fannie or Freddie loans. The best way to find out if your loan is a Fannie or Freddie loan is to ask your lender. If you are a do it yourself type, there is an eligibility database available at: http://www.makinghomeaffordable.gov to see if you qualify. However, I have seen several cases where the database says that the borrower is ineligible when in fact they are—so be cautious about that.
The general guidelines according to HUD are:
- The home must contain no more than four single-family units. That means certain small multifamily properties can qualify.
- Mortgage payments must be current, with no late payments more than 30 days past due.
- The outstanding primary-mortgage loan’s principal must be no more than 125 percent of the home’s current value, up from the previous limit of 105 percent in February.
The question on everyone’s mind is will this work? Will this be enough to stem the tide of foreclosures that continue to deflate real estate prices (real estate is deflating at a slower pace though)
While this will obviously help more homeowners, it will not help to slow the rise in unemployment which, in my opinion is the biggest threat to the economy currently.
What are your thoughts?
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Article Author: Steve HeidemanSteve has written 25 articles for us.
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Joshua Dorkin
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I believe the FHFA announced this change, not HUD.
If the homeowner already owes more than 5% of what your house is worth, after the refinance points and closing costs, the owner will be even further underwater. Sounds like more negative equity.
I WANT TO REFINANCE MY TEN UNIT APARTMENT BLDG AT
SAN JOSE, CA. APPRAISED VALUE IS $1,500,000.00. I WANT TO USE EQUITY TO BUY EXISTING SHOPPING CENTER
AT FRESNO, CA. PRICE IS $6,000,000.00. NET OPERATING INCOME IS $800,100.00. CAN YOU GIVE ME A LOAN FOR THIS SHOPPING CENTER AT 10% DOWN.