New refinance program targets ‘underwater’ owners current on payments

WASHINGTON – Nov. 30, 2011 – Matt Hamilton has dutifully paid the loan on his Maitland house and a Longwood rental condo, but until now he could not refinance them to obtain more-affordable interest rates because the properties are financially underwater.

Starting Thursday, Hamilton and many of the other quarter-million Orlando-area residents with “underwater” mortgages can apply for a new Fannie Mae and Freddie Mac refinance program geared for pretty much everyone who owes more on a home than it’s worth – including landlords and second-home owners.

“It’s been difficult because I’m so far in the h*** that no one wants to refinance me,” said Hamilton, a product developer for Longwood-based Onlinelabels.com. “But if you look at my payment history, I am a safe risk.”

The federal government’s previous foreclosure-prevention efforts, such as the Home Affordable Modification Program (HAMP), lowered the interest rates on mortgages of homeowners at risk of foreclosure because they had lost income. But the new Home Affordable Refinance Program (HARP) is seen as a possible game changer even for homeowners who are underwater but who have stayed employed and continue making their payments.

Homeowners who have missed mortgage payments in the past six months need not apply. And not all the details – such as loan limits – have been disclosed yet. But this is one of the first refinance programs that doesn’t require an appraisal to determine the value of the house.

“It’s a reward for the responsible borrower who swallowed a bitter pill but still kept moving,” said Travis BeMent, mortgage-loan originator for Home Loans Today of Orlando. “There’re a lot of people out there ready to pounce on this.”

The HARP application process begins Thursday, just as new reports show that more than half of the mortgaged homes in Metro Orlando are saturated with more debt than they are worth. In all, 254,146 mortgaged homes in the four-county metro area are in that situation, according to a report released Tuesday by the mortgage-research company Corelogic.

Even though Orlando has a greater share of underwater homes than Florida overall or the nation as a whole, the percentage of “negative-equity” houses in the metro area actually decreased slightly during the third quarter: 51.6 percent of the mortgaged homes in Orange, Seminole, Osceola and Lake counties were worth less than their loans in the July-through-September period, down from 53.1 percent in the second quarter.

About 44 percent of the mortgaged houses in Florida, and 22 percent of those in the nation, were underwater in the third quarter, according to Tuesday’s report.

Many of those mortgages were sold to homeowners who purchased at the peak of the market in 2006-07, when sales prices were double what they are today and when interest rates ranged from 5.7 percent to 6.5 percent, according to the Orlando Regional Realtor Association. Today, interest rates on a 30-year mortgage are less than 4 percent.

One cautionary note about HARP: Interest rates could change by the time a qualified property owner’s refinancing application is processed, BeMent said. Fannie and Freddie are not expected to have the ability to process the new loans until as late as next March.

But HARP, he noted, also offers a break to homeowners who want to refinance for 15 or 20 years instead of 30 years. To qualify, an owner must have a mortgage backed by Fannie Mae or Freddie Mac and will likely need a credit score of at least 620.

Orlando lawyer Jeremy Sloane hasn’t missed any payments on a rental home he owns in east Orange County’s Avalon community, but he still loses money on the property every month because the mortgage he took out in 2006 far exceeds the rent he collects, now that prices have collapsed. He said he has already talked to FBC Mortgage about the new federal refinancing program.

“At the end of the day, I don’t think it’s anyone’s responsibility but myself to make the payments, but the frustrating part was that other people have been able to get out of their situation and not take a loss,” Sloane said. “This program will hopefully make it a lot more palatable renting out that house and not taking a loss.”

Comment

You need to be a member of GLOZAL - A Global Real Estate Network to add comments!

Join GLOZAL - A Global Real Estate Network

Comment by The Heathrow Group, Inc on December 1, 2011 at 12:38pm: You cannot short sale without moving on and giving up the house. But with a short sale, you get to protect your credit, no bankruptcy, no deficiency, and you move on with you life and decide when to buy 'right-side up"

Comment by Joseph Francavilla on December 1, 2011 at 9:37am: modifications DONT WORK ... The best thing you can do for yourself or your client's thet have STOP PAYING THEIR MORTGAGES wait for your Foreclosure package to arrive .... Then defend !!! 9-10 times the package is incomplete and you can delay the actions on the improper sevicing ... Then ellect to go to mediation when you are DENIED BY THE BANKS AGAIN AT MEDIATION ...FILE CHAPTER 13 THE FED JUDGES KNOW ABOUT THE FED BAIL OUT MONEY UNLIKE a CIRCUIT COURT JUDGE ... The second MORTGAGE GET'S NOTHING AND THE 1st will either principal reduce your mortgage or you can short sale and WIPE OUT THE DEFICIENCY JUDGEMENT ... otherwise is the BANK has No Standing file for quite title and get your home free and CLEAR :)

Comment by Zoila Perez-Chanquet on November 30, 2011 at 11:42pm: I looked into refinancing about a month ago, since the guidelines had changed. I would save about $100 a month, but I really don't want to pay for closing costs. They should have the banks eat those costs since they got bail out money and did not bail anyone out! Even the loan officer did not find it to be such a great deal. I'll wait a bit more & see what the next plan will be.....

Comment by mary tesensky on November 30, 2011 at 7:26pm: yes, banks make money on doing short sales so there again, they are the winners! they really don't care about the homeowners that are having to go through the short sale process and also now those homeowners are becoming renters and the investors/landlords, are the winners.

Comment by The Heathrow Group, Inc on November 30, 2011 at 6:27pm: I believe private industry can make a significant impact on correcting this current market through the short sale process. In the last four years we have helped over three hundred families here in Central Florida remove thousands of dollars of real estate debt without filing bankruptcy. Professional Short Sale services is the only option I see on the horizon.

Comment by Christine Rubin on November 30, 2011 at 6:15pm: I have taken specialized training in HAFA which was developed due to the failure of

HAMP and HARP. I have been able to help only a minute number of sellers. One example of rejection was they the property was refinanced 10 months prior and, therefore, would not qualify. If they would become delinquent, however, then that's a different story.

Comment by Barbara J. Kobishop on November 30, 2011 at 5:24pm: I'm convinced that Government just does NOT care one bit about us little people suffering......and they sure don't care about us REALTORS!!!!

Comment by Byron T. Kacheris on November 30, 2011 at 5:22pm: Paulson, Giethner, Barney Frank, Chris Dodd only to mention a few (Gov't Sachs) were all in on it...the few control the many...

Comment by mary tesensky on November 30, 2011 at 5:17pm: here we go again----good old government trying something else AGAIN! the only winners on all of these "programs" are the banks, attorneys, and politicains! their wallets are getting bigger and our wallets are getting smaller every day. the government needs to stay OUT OF REAL ESTATE!! where were they when all of this mess; i.e. Countrywide, started 6 years ago!!! our values will never recover until all the foreclosures are put on the market and SOLD, by us-----the professionals. Obama and his adminstration needs to let US do our job!!!!

Comment by Joseph Francavilla on November 30, 2011 at 4:58pm: What about the people that had 6-12 month trial modification's for a limited time AKA A FORBEARANCE AGREEMENTS and when their time was up the banks decided to foreclose on them any way ... Because they weren't able to come up with all the back payments to be current on their original terms of their mortgage .... or because they lost their original note and they weren't authorized to give them a mod in the first place .. why cant the government credit them for their reduced payments they they made add the missed payment to the back of the loan and modify them at the current BPO price is that too much to ask the banks that received over 160 Billion in bail out !!! Lets not forget they receive 80% of the lost equity of the Mortgage when they short sale GUARANTEED !

New refinance program targets ‘underwater’ owners current on payments

You need to be a member of GLOZAL - A Global Real Estate Network to add comments!

NAR News

Things you can do