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Obama Homeowner affordabilty and stability plan


Obama Homeowner Affordability and Stability Plan- Executive Summary
 
The deep contraction in the economy and in the housing market has created devastating consequences for homeowners and communities throughout the country. 
 
Millions of responsible families who make their monthly payments and fulfill their obligations have seen their property values fall, and are now unable to refinance at lower mortgage rates. 
 
Millions of workers have lost their jobs or had their hours cut back, are now struggling to stay current on their mortgage payments – with nearly 6 million households facing possible foreclosure. 
 
Neighborhoods are struggling, as each foreclosed home reduces nearby property values by as much as 9 percent. 
 
The Homeowner Affordability and Stability Plan is part of the President’s broad, comprehensive strategy to get the economy back on track.  The plan will help up to 7 to 9 million families restructure or refinance their mortgages to avoid foreclosure.  In doing so, the plan not only helps responsible homeowners on the verge of defaulting, but prevents neighborhoods and communities from being pulled over the edge too, as defaults and foreclosures contribute to falling home values, failing local businesses, and lost jobs. The key components of the Homeowner Affordability and Stability Plan are:  
 
Affordability:  Provide Access to Low-Cost Refinancing for Responsible Homeowners Suffering From Falling Home Prices
 
Enabling Up to 4 to 5 Million Responsible Homeowners to Refinance: Mortgage rates are currently at historically low levels, providing homeowners with the opportunity to reduce their monthly payments by refinancing. But under current rules, most families who owe more than 80 percent of the value of their homes have a difficult time refinancing. Yet millions of responsible homeowners who put money down and made their mortgage payments on time have – through no fault of their own – seen the value of their homes drop low enough to make them unable to access these lower rates. As a result, the Obama Administration is announcing a new program that will help as many as 4 to 5 million responsible homeowners who took out conforming loans owned or guaranteed by Fannie Mae or Freddie Mac to refinance through those two institutions.
 
Reducing Monthly Payments: For many families, a low-cost refinancing could reduce mortgage payments by thousands of dollars per year:
 
Consider a family that took out a 30-year fixed rate mortgage of $207,000 with an interest rate of 6.50% on a house worth $260,000 at the time. Today, that family has about $200,000 remaining on their mortgage, but the value of that home has fallen 15 percent to $221,000 – making them ineligible for today’s low interest rates that now generally require the borrower to have 20 percent home equity. Under this refinancing plan, that family could refinance to a rate near 5.16% – reducing their annual payments by over $2,300.
 
 
Stability:  Create A $75 Billion Homeowner Stability Initiative to Reach Up to 3 to 4 Million At-Risk Homeowners
 
Helping Hard-Pressed Homeowners Stay in their Homes: This initiative is intended to reach millions of responsible homeowners who are struggling to afford their mortgage payments because of the current recession, yet cannot sell their homes because prices have fallen so significantly. Millions of hard-working families have seen their mortgage payments rise to 40 or even 50 percent of their monthly income – particularly those who received subprime and exotic loans with exploding terms and hidden fees. The Homeowner Stability Initiative helps those who commit to make reasonable monthly mortgage payments to stay in their homes – providing families with security and neighborhoods with stability. 
 
No Aid for Speculators: This initiative will go solely to helping homeowners who commit to make payments to stay in their home – it will not aid speculators or house flippers.
 
Protecting Neighborhoods: This plan will also help to stabilize home prices for all homeowners in a neighborhood. When a home goes into foreclosure, the entire neighborhood is hurt. The average homeowner could see his or her home value stabilized against declines in price by as much as $6,000 relative to what it would otherwise be absent the Homeowner Stability Initiative. 
 
Providing Support for Responsible Homeowners: Because loan modifications are more likely to succeed if they are made before a borrower misses a payment, the plan will include households at risk of imminent default despite being current on their mortgage payments.  
 
Providing Loan Modifications to Bring Monthly Payments to Sustainable Levels: The Homeowner Stability Initiative has a simple goal: reduce the amount homeowners owe per month to sustainable levels. Using money allocated under the Financial Stability Plan and the full strength of Fannie Mae and Freddie Mac, this program has several key components:
 
A Shared Effort to Reduce Monthly Payments: For a sample household with payments adding up to 43 percent of his monthly income, the lender would first be responsible for bringing down interest rates so that the borrower’s monthly mortgage payment is no more than 38 percent of his or her income. Next, the initiative would match further reductions in interest payments dollar-for-dollar with the lender to bring that ratio down to 31 percent. If that borrower had a $220,000 mortgage, that could mean a reduction in monthly payments by over $400. That lower interest rate must be kept in place for five years, after which it could gradually be stepped up to the conforming loan rate in place at the time of the modification. Lenders will also be able to bring down monthly payments by reducing the principal owed on the mortgage, with Treasury sharing in the costs.
 
“Pay for Success” Incentives to Servicers: Servicers will receive an up-front fee of $1,000 for each eligible modification meeting guidelines established under this initiative. They will also receive “pay for success” fees – awarded monthly as long as the borrower stays current on the loan – of up to $1,000 each year for three years. 
 
Incentives to Help Borrowers Stay Current: To provide an extra incentive for borrowers to keep paying on time, the initiative will provide a monthly balance reduction payment that goes straight towards reducing the principal balance of the mortgage loan. As long as a borrower stays current on his or her loan, he or she can get up to $1,000 each year for five years.
 
Reaching Borrowers Early: To keep lenders focused on reaching borrowers who are trying their best to stay current on their mortgages, an incentive payment of $500 will be paid to servicers, and an incentive payment of $1,500 will be paid to mortgage holders, if they modify at-risk loans before the borrower falls behind.
 
Home Price Decline Reserve Payments: To encourage lenders to modify more mortgages and enable more families to keep their homes, the Administration -- together with the FDIC -- has developed an innovative partial guarantee initiative. The insurance fund – to be created by the Treasury Department at a size of up to $10 billion – will be designed to discourage lenders from opting to foreclose on mortgages that could be viable now out of fear that home prices will fall even further later on. Holders of mortgages modified under the program would be provided with an additional insurance payment on each modified loan, linked to declines in the home price index. 
 
Institute Clear and Consistent Guidelines for Loan Modifications: Treasury will develop uniform guidance for loan modifications across the mortgage industry, working closely with the bank agencies and building on the FDIC’s pioneering work.  The Guidelines will be used for the Administration’s new foreclosure prevention plan. Moreover, all financial institutions receiving Financial Stability Plan financial assistance going forward will be required to implement loan modification plans consistent with Treasury Guidance.  Fannie Mae and Freddie Mac will use these guidelines for loans that they own or guarantee, and the Administration will work with regulators and other federal and state agencies to implement these guidelines across the entire mortgage market. The agencies will seek to apply these guidelines when permissible and appropriate to all loans owned or guaranteed by the federal government, including those owned or guaranteed by Ginnie Mae, the Federal Housing Administration, Treasury, the Federal Reserve, the FDIC, Veterans’ Affairs and the Department of Agriculture. 
Other Comprehensive Measures to Reduce Foreclosure and Strengthen Communities
 
Require Strong Oversight, Reporting and Quarterly Meetings with Treasury, the FDIC, the Federal Reserve and HUD to Monitor Performance 
 
Allow Judicial Modifications of Home Mortgages During Bankruptcy for Borrowers Who Have Run Out of Options
 
Provide $1.5 Billion in Relocation and Other Forms of Assistance to Renters Displaced by Foreclosure and $2 Billion in Neighborhood Stabilization Funds
 
Improve the Flexibility of Hope for Homeowners and Other FHA Programs to Modify and Refinance At-Risk Borrowers 
 
 
Supporting Low Mortgage Rates By Strengthening Confidence in Fannie Mae and Freddie Mac: 
 
Ensuring Strength and Security of the Mortgage Market: Today, using funds already authorized in 2008 by Congress for this purpose, the Treasury Department is increasing its funding commitment to Fannie Mae and Freddie Mac to ensure the strength and security of the mortgage market and to help maintain mortgage affordability. 
 
Provide Forward-Looking Confidence: The increased funding will enable Fannie Mae and Freddie Mac to carry out ambitious efforts to ensure mortgage affordability for responsible homeowners, and provide forward-looking confidence in the mortgage market.  
Treasury is increasing its Preferred Stock Purchase Agreements to $200 billion each from their original level of $100 billion each.  
 
Promoting Stability and Liquidity: In addition, the Treasury Department will continue to purchase Fannie Mae and Freddie Mac mortgage-backed securities to promote stability and liquidity in the marketplace.   
 
Increasing The Size of Mortgage Portfolios: To ensure that Fannie Mae and Freddie Mac can continue to provide assistance in addressing problems in the housing market, Treasury will also be increasing the size of the GSEs’ retained mortgage portfolios allowed under the agreements – by $50 billion to $900 billion – along with corresponding increases in the allowable debt outstanding. 
 
Support State Housing Finance Agencies: The Administration will work with Fannie Mae and Freddie Mac to support state housing finance agencies in serving homebuyers.
 
No EESA or Financial Stability Plan Money: The $200 billion in funding commitments are being made under the Housing and Economic Recovery Act and do not use any money from the Financial Stability Plan or Emergency Economic Stabilization Act/TARP.

0 comments • Joseph Metzler MMS UMB • February 18 2009 03:21PM

First-Time Homebuyer Tax Credit - Revised Feb 2009. $8000 limit

$8000 first time buyer tax credit

$8000 FIRST-TIME HOMEBUYER TAX CREDIT 

As Modified in the American Recovery and Reinvestment Act

Major Modifications Shaded  - February 2009 

SIGNED INTO LAW

 

FEATURE

CREDIT AS CREATED JULY 2008

APPLIES TO ALL QUALIFIED PURCHASES ON OR AFTER APRIL 9, 2008

REVISED CREDIT –

EFFECTIVE FOR PURCHASES ON OR AFTER JANUARY 1, 2009 AND BEFORE DECEMBER 1, 2009

Amount of Credit

Lesser of 10 percent of cost of home or $7500

Maximum credit amount increased to $8000

Eligible Property

Any single family residence (including condos, co-ops, townhouses) that will be used as a principal residence.

No change

All principal residences eligible.

Refundable

Yes.  Reduces (or can eliminate) income tax liability for the year of purchase.  Any unused amount of tax credit refunded to purchaser.

No change

Purchasers will continue to receive refund for unused amount when tax return is filed.

Income Limit

Yes.  Full amount of credit available for individuals with adjusted gross income of no more than $75,000 ($150,000 on a joint return).  Phases out above those caps ($95,000 and $170,000).

No change

 

Same income limits continue to apply.

 

First-time Homebuyer Only

Yes.  Purchaser (and purchaser’s spouse) may not have owned a principal residence in 3 years previous to purchase.

No change

Still available for first-time purchasers only.  Three-year rule continues to apply.

Revenue Bond Financing

No credit allowed if home financed with state/local bond funding.

Purchasers who utilize revenue bond financing can use credit.

Repayment

Yes.  Portion (6.67% of credit or $500) to be repaid each year for 15 years, starting with 2010 tax filing.

No repayment for purchases on or after January 1, 2009 and before December 1, 2009

Recapture

If home sold before 15-year repayment period ends, then outstanding balance of repayment amount recaptured on sale.

If home is sold within three years of purchase, entire amount of credit is recaptured on sale.  Applies only to homes purchased in 2009.

Termination

July 1, 2009 

(But note program changes for 2009)

December 1, 2009

 

 

Effective Date

Purchases on or after April 9, 2008 and before January 1, 2009.  Repayment to begin for 2010 tax year.

All revisions are effective as of January 1, 2009
 
 
EXPERIENCE THE DIFFERENCE - CALL ME FOR ALL YOUR FIRST TIME BUYER NEEDS.

3 comments • Joseph Metzler MMS UMB • February 13 2009 05:39PM

Current vs Pending Home Buyer Tax Credit Details

Metzler Group at Mortgages Unlimited

 Home Buyer Tax Credit BILL vs Current Home Buyer Tax Credit

 Prepared February 5, 2009 - Subject to Change

FEATURE

CURRENT LAW

HOUSE VERSION

H.R. 1

SENATE VERSION

(Isakson-Lieberman Amendment)

Amount of Credit

Lesser of 10 percent of cost of home or $7500

Same as current law

Lesser of 10 percent of cost of home or $15,000, but only for purchases beginning the date the President signs bill. 

Eligible Property

Any single family residence (including condos, co-ops, townhouses) that will be used as a principal residence

Same as current law

Same as current law

 

Refundable

Yes.  Reduces (or can eliminate) income tax liability for the year of purchase.  Any unused amount of tax credit refunded to purchaser.

Same as current law

No.  The credit can reduce tax liability to zero, but if purchaser's tax liability is less than the amount of the credit, the unused portion is not refunded to purchaser. 

Income Limit

Yes.  Full amount of credit available for individuals with adjusted gross income of no more than $75,000 ($150,000 on a joint return).  Phases out above those caps ($95,000 and $170,000, respectively).

Same as current law

None. 

 

 

First-time Homebuyer Only

Yes.  Purchaser (and purchaser's spouse) may not have owned a principal residence in 3 years previous to purchase

Same as current law

No.  All purchasers, not just first-time homebuyers, are eligible for credit.

Recapture/Repayment

Yes.  Portion (6.67% of credit) to be repaid each year for 15 years, starting with 2010 tax filing. If home sold before 15 years, then remainder of repayment amount recaptured on sale.

Yes and No.  Repayment will apply to 2008 purchases.

For 2009 purchases, the credit will not be repayable UNLESS the home is sold within three years of purchase. 

Yes and No.  For 2009 purchases, the credit will not be repayable UNLESS the home is sold within two years of purchase.  Repayment will continue to apply to all 2008 purchases and 2009 purchases before date of enactment.

Effective Date

Purchases on or after April 9, 2008.  Repayment to begin for 2010 tax year (return filed in 2011.)

Repayment elimination applies only to 2009 purchases

$15,000 amount and repayment feature effective as of date of enactment (date of President's signature).

Termination

July 1, 2009

July 1, 2009

September 1, 2009

Interaction with Alternative Minimum Tax (AMT)

Can be used against AMT, so credit will not throw individual into AMT.

Same as current law

Same as current law

Allocation Election

(Utilizing the credit over 2 years rather than only in the year of purchase)

No provision

No provision

A purchaser can make an election to take the credit over 2 years.  If the purchaser makes this election, the amount claimed must be the same in both years.

Down you have limited down payment funds? Do you need a zero downpayment type program? YES YOU CAN buy a home in 2009 with JUST $100 DOWN.

 Visit www.just100down.com to learn all about the HUD Repo program.

The Joe Metzler Group at Mortgages Unlimited Inc. lends for properties in Minnesota, Wisconsin, and Florida. Apply online at www.JoeMetzler.com

1 comment • Joseph Metzler MMS UMB • February 07 2009 08:18AM

Holding out for 4% Rates? Snooze and lose!

If you snooze, you may lose. Helping you avoid costly mortgage mistakes

The Fed's been at it again, offering words that sound encouraging at first blush, confirming that their buying program of Mortgage Backed Securities is in full swing and will continue as needed. Of course, the media will pick this up and offer their own interpretation, saying "Good news, the Fed's words on continuing their purchasing program mean that rates will continue to drop lower, and remain low into the summer..." But is this really what that means? Not so.

Here's the truth.

Yes, the Fed has been buying Mortgage Bonds, but if you look at what they are purchasing, they are buying a lot of FNMA 30-yr 5.5% and 5.0% Bonds...which won't have much of an impact on present interest rates. Why? First, see the Fed's purchases for yourself by hitting this link: Direct Link to View Fed Mortgage Bond Buying - http://www.newyorkfed.org/markets/mbs/index.html.

So why is the Fed buying these Bonds? Well if you think about it, it's very smart of the Fed...and maybe even a little sneaky...because 5.5% Bonds actually represent outstanding mortgages with rates of 6 - 6.50%, which are precisely the loans being refinanced at today's great interest rates.

Stay with me here...

With rates at present low levels, many of the mortgages in these FNMA 5.5% pools being bought up by the Fed will be refinanced and paid, thus giving the Fed a quick recoup on some of their investment. And this is likely a big reason why the Fed said they could continue this purchasing program beyond June, if necessary. Bottom line, the Fed buying these higher rate coupons will not necessarily help rates to move lower, as their actions do not impact the loans being originated at today's low rates.

CLICK to APPLY Securely 24/7

Here's the most important part.

 

Sometimes I talk to clients who are in a situation where it makes sense to refinance right now, and save $250 per month for example. But when they hear the media throwing around teases of lower rates ahead, they decide to hold off on making the decision to save the $250 per month right now, in the hopes of gaining another $30 per month in additional savings with a lower rate than where we stand presently. Now clearly, rates could turn higher, and this window of opportunity could pass them by entirely.

 

The clincher is this: 

Even if those clients ultimately are correct in timing the market, and eventually grab that lower rate and save another $30 per month - think of what they have lost by waiting. While they delayed, they lost the savings they could have gained by taking action sooner - or in the example used, $250 - for every single month they waited. So even if they got lucky and obtained the rate they were looking for, it could take years to make up what they lost by waiting.

 

I don't want anyone to miss an opportunity by either waiting, or not understanding what is at stake. Let's talk further on this - call or email me and let's discuss what this might mean for you.

Better yet, apply online right now. You'll be closed and safely enjoying these current and REAL low rates next month!

0 comments • Joseph Metzler MMS UMB • February 04 2009 06:25PM