Fannie and Freddie Get Into the Loan Modification Game

The Federal Housing Finance Administration (FHFA), the governing body for Fannie Mae and Freddie Mac, announced a plan last week to help streamline the modification of loans for potentially hundreds of thousands of homeowners who are seriously delinquent on their mortgage payments.

The plan would enable qualified borrowers to acquire more affordable loans that would make their mortgage payments no more than 38 percent of their monthly income.

To qualify for FHFA’s program, borrowers must:
- Be 90 days or more behind on their mortgage payments
- Live in their homes
- Cannot be in bankruptcy proceedings
- Must owe at least 90% of the value of their home
- Must have experienced a hardship or change in financial circumstances

To be considered for the program, seriously delinquent borrowers should contact their servicer and provide the requested information – monthly gross household income, association dues and fees, and a hardship statement. 

More information and FAQs can be found at http://www.fhfa.gov/GetFile.aspx?FileID=169

Workouts Coming to a Bank Near You

And we don’t mean the kind you have to wear sweatpants for.

Citigroup is the latest large bank to announce it is halting most foreclosures in an effort to help troubled homeowners stay in their homes. Additionally, Citi announced it will arrange workouts for as many as half a million homeowners it deems in danger of falling behind on payments – which could be as much as a third of the bank’s mortgages.

The bank will target homeowners in states that have been particularly hard-hit by foreclosures and unemployment rates, such as Arizona, California, Florida, Michigan, Ohio and Indiana, affecting as much as $20 billion in loans.

A “workout” reworks the terms of the loan – such as adjusting rates, reducing principal or increasing the terms of the loan, thereby lowering a borrower’s monthly payment. 

Citi joins JPMorgan, which announced a moratorium on foreclosures over the next three months as it implements a workout program that could affect as much as $70 billion in loans, and Bank of America, which will modify an estimated 400,000 loans held by Countrywide starting Dec. 1.

Additionally, the Federal Housing Finance Agency and the Treasury Department are expected to announce a loan modification program today.

But this may just be a drop in the bucket. According to the most recent data available from the Mortgage Bankers Association, through the end of June, more than 4 million American homeowners were at least one payment behind on their mortgages and half a million had started the foreclosure process.

Put an End to the Endless Cycle of Renting

The National Multi-Housing Council is at it again. The group’s anti-homeownership stance is understandable since it represents the landlords who get rich at the expense of renters who get stuck in the endless cycle of renting, and who getting absolutely nothing to show for their monthly rent payment.

But now, with our economy struggling and the housing market needing a desperate jump start, everywhere you turn organizations are binding together to figure out how to best benefit the American economy as a whole, and how to save people who are in danger of losing their homes. The federal government and FDIC are working on a plan to stave off foreclosures. The National Association of Realtors is asking Congress to alter the recently implemented $7,500 first-time buyer tax credit so it doesn’t have to be repaid. The National Association of Home Builders is proposing a tax credit of up to $12,000, and is asking that private lenders be allowed to offer credit-anticipation loans so buyers can use their tax credit as a down payment and repay it when their tax credit arrives from their next tax return. AHAA is working on reinstating down payment assistance so buyers, who have good credit and can afford their monthly mortgage payment but cannot save for a down payment because renting sucks up all of their monthly income and doesn't allow them to save, are able to own homes.

So many groups of people are working together to reinvigorate the housing market so we can get our economy moving in the right direction.

But the National Multi-Housing Council? It opposes the tax credits for home buyers and it says homeownership should not be prioritized over the rental market.

I guess the landlords are starting to sweat it because they see this multi-faceted effort being put forth to give deserving Americans the chance to own homes and stop dropping money down the bottomless rental pit. So, just in case anyone needs a refresher, here are several reasons to stop the never-ending rental cycle:

• Money paid goes toward equity. A portion of EVERY mortgage payment goes toward you owning that house. You may even choose to pay more toward equity in each payment so you can own your house sooner. When you rent, NONE of the money you pay goes to ownership. Renting is a bottomless pit, you never see that money again. 
• Owning a home creates generational wealth. When a person buys a house, he or she stops the never-ending cycle of dropping money down a bottomless pit. That person is able to pass ownership of that home on to his or her children and their children and so on and so on. Generations of family members have a place to call “home”. By paying that monthly mortgage, he or she is building equity in that home for generations. The money that would have been dropped down the bottomless pit of renting is now going towards bigger and better things – like money for savings, retirement or higher education, or even to help another family member buy his or her own home one day.
• Owning a home creates a sense of community pride. When you buy a home you buy into a community, and with that comes a sense of pride in your home and your neighborhood. Neighbors who own their homes have a stake in the community and form bonds with one another in ways that renters often don’t. Home owners work together to beautify their communities, maintain their property values, keep their communities safe, and watch out for each other. Furthermore, children benefit from this sense of community as well. Not only are your neighbors going to watch out for your children, but studies have shown that children who grow up in owned homes often perform better in school. Having a "home base" that they can come home to gives them a sense of security and pride.
• It’s your “house,” you can make it your “home”. You can’t grow your vegetable garden in the backyard of your apartment, because you probably don’t have a backyard. And if you do, you don’t have the right to garden in it because you don’t “own” it. You’re just borrowing it and paying for it, and you’ll have nothing to show when you leave, no matter how long you rented there. When you own your home, it belongs to you, you can make it your own.
• More choices. Want to live in a town or city where you can walk to amenities, transportation and conveniences? Looking for more room for kids to run, but with plenty of neighbors and family-friendly activities nearby? Want to get away from it all, find a place in the country? The choices are endless. There are literally millions of homeownership opportunities nationwide and every one comes with the opportunity to build up equity and own that home outright.