Fixed Rate Loan Archives – Refinance – Mortgage Refinancing Rates And Information

HAMP Loan Modifications and “In-house” Modifications, What Is The Difference?

January 31st, 2010 No comments

A loan modification is a loan modification, right? If it helps you avoid a foreclosure on your home it is good news, right? Not necessarily. It is a little more complicated than all that.

HAMP is a Government sponsored loan modification program. This might not give you much peace of mind but the truth is that mortgagees that are part of this program must follow certain requirements in order to receive the incentives the Government offers for loss mitigation actions, another name for loan modifications.

These requirements have been recently (Nov. 23^rd 2009) updated and include:

1) Mortgagees must reduce the interest rate of a loan modification to the market rate. Market rate is defined by the Government as the most recent Freddie Mac Weekly Primary Mortgage Survey Rate for a 30 year fixed-rate conforming mortgage.

2) The Mortgagee must re-amortize the total unpaid amount due over a 360 month period from the due date of the first installment of the modified loan. This is code for: the bank has to offer you a 30 year fixed-rate loan at the market rate.

However, if you go for an in-house loan modification or even for a mortgage refinance your mortgagee is not required to follow these rules. This doesn’t mean the in-house mortgage modification will be bad or any worse than the HAMP loan modification. You might find your mortgage provider is really generous and wants to improve the Government’s deal out of the goodness of his heart. No? You don’t think that is likely?

The problem is that even the relatively good terms HAMP loan modifications offer are no guarantee you will get approved or that you will even get a decision on your loan modification before your mortgage forecloses. Lenders use this fact to push borrowers into choosing a bad loan modification in the belief that a bad loan mod in the hand is worth two in the bush. Is that true?

The alternative to the HAMP loan modification or in-house mortgage modification is to simply walk away from your mortgage, but that is another story.

In conclusion, only you can decide if a loan modification is the right move for you, but if you do decide to go for a loan modification it is most likely you will get a better deal if you go with a HAMP loan modification. Unfortunately many banks are using the fact that HAMP loan modifications are slow and hard to get to push their own in-house subprime loan modifications.

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Loan Refinance Simple Answers: Profitable Refinancing and Underwater Loans

October 3rd, 2009 No comments

If you ask a question about a complicated subject like loan refinances you want a simple answer that gives you the information you need not one that creates more questions. This is the goal of this series of articles here at www.blownmortgage.com.

Loan Refinance Question 4.) How do I know if a refinance under HARP (Home Affordable Refinance Program) is actually going to help me out?

This is a great question. Not all loan refinances are profitable. Many people have worked hard to get a loan refinance approved to later find out that the monthly payments have barely dropped or even raised while the principal (total amount borrowed) has actually increased, increasing the interest paid and the length of the loan. In other words if you get the wrong loan refinance it could actually cost you money instead of helping you out.

The key as always is to understand how the game is played. The advice is free and simple to follow so you should be fine as long as you follow the advice you are given by reputable sources and not dubious companies that promise to “save” your house, lower your interest rate, get loans waivered and of course cure cancer.

Ask for a “Good Faith Estimate” and a Truth in Lending Statement. These two disclosures will help you see your new interest rate, mortgage payment and the amount you will pay over the life of the payment, the real cost of your loan. Armed with these figures you can now compare them with your current loan terms. You can request your current terms from your mortgage provider if you have lost them. If there is no improvement then a loan refinance is probably not for you.

However make sure you take into account more subtle benefits than straightforward lower monthly payments. For instance even if there is little change in your monthly payments but you change your mortgage from an adjustable rate loan (ARM loan) to a fixed rate loan it could be worth your time. Fixed rate loans provide more security, taking away the risk of rising interest rates or interest only payments that increase the overall cost of your loan.

Loan Refinance Question 5) What happens if I owe more than my house is worth? Can I still qualify for a refinance under HARP?

Yes, up to a certain point. The whole point of the HARP program is to enable homeowners whose homes have dropped in value take advantage of the current lower interest rates. The important thing is that your primary mortgage (the mortgage that has first bidding rights if your foreclose) is less than 125 percent of the current market value of your house (sorry sentimental value doesn’t count here).

Let’s illustrate: If your mortgage is worth 99,000 dollars but your house is worth 80,000 dollars you are eligible for a loan refinance on the requirement of house value because 99,000 is just under 125% of 80,000 (which would be $100,000).

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