by Dean Hartman on October 27, 2011
At a campaign stop in Nevada on Monday, President Obama announced an expansion of the HARP (Home Affordable Refinance Program) which would eliminate the current maximum LTV of 125%. The initiative is being looked at as a way to reward those homeowners who have been good payers of their mortgages but, because of declining home values, they could not take advantage of today’s lower interest rates.
While the actual details on the program will not be released until next month, here’s the buzz:
- It will only pertain to loans currently being serviced by Fannie Mae or Freddie Mac
- Because of the removal of the LTV cap, appraisals may not be required
- With the only qualifying criteria announced being that the last six payments be on time, it is possible that income documentation may be streamlined and credit scores might be more forgiving
- Fees allegedly will be reduced
- Incentives may be offered to people who shorten their repayment time
- It also sounds that the banks may be given some incentive by not holding them liable for the underwater portion of the new loan (a major incentive for sure).
The government is on the hook for these loans already. By lowering the payments (by offering lower rates), they will likely help these loans to continue to perform and make it less likely for the underwater homeowner to walk away.
The original HARP was expected to help 5 million families. After two years, it has yet to reach 900,000; therefore, estimates ranging from 800,000 to 1.6 million borrowers who may benefit need to be taken with a grain of salt.
Whether the Administration is looking for purely political rhetoric points or not, my advice to underwater homeowners is too keep an eye out for the final guidelines because you just might be able to lower your payments.
There appears to be some confusion regarding the amount of shadow inventory that currently exists and the impact it will continue to have on the real estate market. Today, we want to bring some clarity to both of these issues. First, let’s define shadow inventory because part of the confusion is in differing definitions. Originally, the term ‘shadow inventory’ was used by some to define a supposed ‘secret’ inventory; mysteriously hidden by banks from their investors and the general public. This definition caused banks to come forward and announce that they were not holding a ‘secret’ stash of foreclosures.