Reverse Mortgages Now Available When Purchasing

A reverse mortgage is a tool designed to allow senior citizens to use the equity in their home to supplement their monthly income. The loan was designed to allow the owner to remain in their home while still creating income. But the program did not help if the senior wanted to move in order to down-size, live in a home that had no stairs, be closer to family, etc.

As of January 1, 2009, FHA is allowing their version of a reverse mortgage, called the Home Equity Conversion Mortgage (HECM), to be used to purchase a new home. Under this program, you may use a HECM to purchase a primary residence if you are able to use cash on hand to pay the difference between the HECM proceeds and the sales price plus closing costs for the property you are purchasing.

If you want free information about reverse mortgages call AARP toll free at (800) 209-8085.

Fed Announces Plan to Reduce Foreclosures

The Federal Reserve will take aggressive action to renegotiate mortgages that are likely to enter foreclosure, Fed Chair Ben Bernanke said in a letter to Congress Tuesday.

Under the program, which only affects mortgages owned by the Fed, the central bank will be able to reduce what a home owner owes on a mortgage, lower the interest rate, lengthen the term on the loan, or take other steps that might persuade home owners to keep paying. Borrowers will deal directly with their mortgage servicer.

The Fed says that the mortgages most likely to be affected are those with loan balances that are more than 125 percent of estimated value of the property.

"It's a step beyond what FDIC is doing with its own portfolio," said mortgage expert Alan White, an assistant professor at Valparaiso University School of Law. "Principal write-downs are still the critical issue" in keeping borrowers in their homes.

Source: Washington Post, Neil Irwin and Renae Merle (01/28/2009)

Loan Modification Information

Here are links to information sheets on loan modification programs for specific lenders:

. HOPE For Homeowners (H4H)
. Countrywide Financial (Bank of America)
. Citigroup, CitiMortgage
. JP Morgan Chase & Co.
. IndyMac Federal Bank, FDIC
. Federal Government Loan Modification (Participants include: Fannie Mae, Freddie Mac, Federal Home Loan Banks, Hope Now participants, Department of the Treasury, Federal Housing Administration and the Federal Housing Finance Agency, and Wells Fargo.)

Mortgage loan modifications typically are handled on a case-by-case basis. Homeowners having difficulty meeting their mortgage obligation or interested in finding out more about a loan modification program should start by contacting their lender. Prior to calling a lender or loan servicer, homeowners should have the following information available:

. Loan number
. Income information and documentation
. Most recent mortgage statement
. Bank statements
. Letter demonstrating financial hardship

Fannie Mae Allows Tenants to Remain in Foreclosed Homes

Fannie Mae announced Tuesday that it would allow qualified renters of foreclosed properties owned by a government-controlled mortgage company to stay in their homes.

Under the National Real Estate Owned (REO) Rental Policy, renters of homes acquired by Fannie Mae will be offered a new monthly lease at market-rate rent or if they desire, financial aid to help them move.

The properties must meet state and local building and safety codes.

Fannie Mae also said it will hire real estate practitioners or property management companies to manage the properties while the units are for sale.

Source: Reuters News (01/13/09)

Short Sales May Get Shorter

A short sale is one where the seller tries to sell their home for a price that is lower than the amount of liens held against the property. In order for a short sale to go through, the lender (and if there is more than one lien on the home, all lenders) must approve any offer. This can take months. For a more detailed understanding of this process, read Short Sales Can Take a Long Time. The problem has become so acute that many Realtors and buyers refuse to even consider placing an offer on a short sale. The result is that most of these short sales end up as foreclosures.

In an effort to reduce the number of foreclosures, Fannie Mae has launched pilot projects in Phoenix and Orlando to pre-approve short sales. In this program, the lender agrees on a price and the loss it will take prior to a deal even being made. This program focuses on homes that have a Fannie Mae-backed loan serviced by Countrywide Financial Corp.

Mortgage Interest Rates Drop Below 5%

On Monday, The Federal Reserve Bank of New York started buying mortgage backed securities from Freddie Mac, Fannie Mae and Ginnie Mae. This is part of the government's $500 billion program to jump-start the housing market. Whether or not it will work remains to be seen.

But there has been one very positive result already. Some of the nation's largest banks, including Chase and Wells Fargo, have starting offering mortgages at below 5% for 30 year, fixed rate loans.

If you are considering purchasing a home or refinancing an existing mortgage, you may want to apply now. Banks are swamped and it is taking 2 months to process the applications.