Minnesota Mortgage Blog - MN Mortgage and Real Estate News

WHITE HOUSE WIDENING MORTGAGE REFINANCE RELIEF PROGRAM

The Obama administration has made changes recently to the current homeowner bailout program available to homeowners who are underwater on their home mortgage loans in an effort to stem the foreclosure problem.

The program is designed to allow homeowners to refinance to today's lower interest rates when under normal and traditional underwriting guidelines, they would not be able to do so.

The current program would allow strapped borrowers with mortgages up to 105% of their homes value as long as they were not behind on their mortgages. The changes just made allow borrowers to now have up to 125% loan-to-value and still be able to refiance.

BUT HOLD ON. While this sounds great on the surface, and while there has been a lot of consumer interest, the program has not come even close to expectations, helping significantly fewer people than Washington anticipated. It is because of these failures that they have expanded the loan-to-value limits.

This programs failures comes on the heals of two previously highly announced homeowner bailout programs called FHASecure and Hope For Homeowners, which both failed miserably in helping consumers.

Why do they fail? A huge issue on the current program has been that so many people owe more than 105% of the current value of their home. So this change should help qualify more people.

With this and the other programs, there is no lender mandate forcing lenders to participate. Many lenders understand giving people 100% (or higher) loans were part of the original problem, and simply refuse to offer the loans.

Underlying guidelines, shall we say "the small print" is also preventing many people from taking advantage of these programs.

In the end, while this announcement should help a lot more people, I also see this program being labeled a failure.

NOTE: If you previously tried refinancing, and you were OVER 105%, but UNDER 125%, please contact us to apply again! (we lend in MN, and WI only)

For more information on the "Making Homes Affordable Program", simply follow this link:

http://www.metzlermortgage.com/makinghomesaffordablerefi

The new "Mortgage Disclosure Improvement Act" (MDIA) starts next week (July 30 2009) and will likely seriously delay closings - especially over the next few months as unprepared lenders everywhere drop the ball until they all get comfortable and familiar with the new APR (Truth-in-Lending) disclosures. 

The Federal Reserve Board changes to consumer protection regulations for APR disclosure, while mandated with good intention, will certainly cause delays right at the last moment as FINAL numbers used to prepare the ACTUAL APR are not always known until the last moment. The new rules have such a tight tolerance that lenders will almost ALWAYS have to be redisclosed, and DELAY THE CLOSING while everyone waits for the 3 day waiting period to pass.

The Federal Reserve Board approved final rules that revise the disclosure requirements for mortgage loans under Regulation Z (Truth in Lending) . Regulation Z is a consumer protection regulation that requires lender disclosure of the cost of financing a home, and has been revised to provide greater consumer protection.  The revisions are an amendment to the Truth in Lending Act (TILA) called the Mortgage Disclosure Improvement Act (MDIA) .   The MDIA covers primary residences and second home applications made on or after July 30, 2009, and requires that lenders provide disclosures earlier in the mortgage process.   The MDIA requires the following waiting periods:

• Lenders must give good faith estimates of mortgage loan costs ("early disclosures") within three business days after receiving an application for a mortgage loan (unchanged from current rules). The only fee that can be collected within this three day period is a nominal credit report fee.  
• Lenders must wait seven business days after they provide these early disclosures before closing the loan (usually not a problem, as it takes longer than that to get every done anyway).
• If there are any changes during processing to the terms or cost of the mortgage, lenders are required to give a new disclosure with a revised annual percentage rate (APR), and wait an additional three business days before closing the loan. A change that results in an increase to the APR of 0.125% requires re-disclosure. Closing can occur no sooner than three business days after re-disclosure. "Business days" include Monday - Saturday (excluding holidays).

The burden of proof is on the lender to deliver disclosures and most will not want to make exceptions in fear of closing a loan that is out of compliance.   Responsible lenders have already been doing this disclosure/re-disclosure all along. On most transactions, the actual increased time required to process loans due to MDIA may be three to seven days.  

Plan on additional delays in closing your next real estate transaction as lenders adhere to the new law. 

We are ready and fully prepared for the changes. Remember the lender choice reflects heavily on your future referrals. Once a deal is on the table, time becomes a critical factor.  Any delay or hiccup could mean that the deal doesn't get done.  There's nothing more frustrating than having a deal on the table that falls apart because it doesn't seem to be a priority to the lender who is too busy for your deal while he works on some refinances, or hasn't figured out the new laws.

That's why I make it a habit to make your problems, my problems; your obstacles become my obstacles.  And I work tirelessly to get your deals funded.  For properties in Minnesota or Wisconsin Only, 7 days a week, call (651) 552-3681, or E-mail me your questions.

- Joe Metzler, MMS