One of the partners at FreeHomeRefi.com recently sent a letter to the President-elect Barack Obama.
A Letter to the President Elect
This is part of our ongoing commitment to rejuvenate the housing market in the United States and find reasonable solutions for all homeowners. We will continue to be hard at work finding solutions to the current mortgage situation. Feel free to comment or post ideas and we will keep you updated on our talks with President-elect Obama. You can also send your thoughts to the President-elect’s website.
The Letter sent to President Elect Barack Obama:
I’ve been in mortgage banking for almost 20 years and there is a fairly simple solution to much of the economic problem. You MUST immediately create a streamlined home refinance program through Fannie/Freddie so that credit qualified consumers can refinance their existing home loans to lower the rate & term without an appraisal/LTV requirement (much like the FHA program). There is enormous demand for this product but many can not qualify due to the drop in home values. People will stay in their homes, even if they are upside down, without a wholesale reduction in principle as has been proposed by many economists which only further depletes the value of trillions of dollars in mortgage securities.
This program would stimulate reductions in mortgage payments giving more disposable income for consumers to spend/save to stimulate the economy. It will also convert problematic mortgage assets (Option ARMs, high margin ARMs, etc.) to more stable, fixed rate loan programs adding/shoring up enormous value to the trouble MBS market, stimulate job growth in the mortgage banking sector and stabilize housing and home values.
The pricing for this program should be tiered based on credit score (as pricing is now) and allow even those that have had credit issues to qualify (i.e. allow low FICOs, mortgage lates, etc.). All prepayment penalties should be waived. This will provide REAL relief. The majority of the Loan Modifications that have occurred (that I’ve seen) are poorly structured and have actually taken further advantage of naive consumers resulting in little or no tangible benefit which is why we are now seeing staggering statistical default rates (50+%) on those modifications. This streamlined home loan refinance program would create a necessary structure to create real relief without the immediate necessity for reduction of principle balances.
It should be structured such that mortgage lenders/brokers compensation is capped so that consumers can not be taken advantage of but the mortgage industry is able to make a fair compensation for their work (i.e. can not charge/finance more than 1% origination, no discount points unless actually paid to buydown the rate, cap maximum rebates, limit other fees, etc.).
We have a site (www.FreeHomeRefi.com) which advocates transparency in mortgage lending by forcing lenders to always offer consumers a No Cost option so consumers can not get confused with all of the fee games that are typically played by unscrupulous lenders/brokers. It is impossible for lenders/brokers to bury hidden fees when there are no fees. No way to bait & switch.
This loan program should be rolled out immediately along with other, simple mortgage incentive programs to stimulate home buying. (I’m happy to offer guidance on this additional concept.)
I am available to offer my expertise in any way I can. I’d love to get to work helping America get back on its feet and put my industry (along with other related industries) back to work in a positive, stimulating way.
Sincerely,
Preston Kenney
