Mortgage Blog

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

The drastic swings of the stock market and the current state of the economy may soon have a serious effect on your home mortgage.  The credit markets are tightening and it is already becoming more difficult to obtain a mortgage for a purchase or a home refinance.  So how does the stock market effect your ability to obtain a mortgage and what can you do about it?

There are several factors at work here.  My first recommendation is to get out of your adjustable rate mortgage immediately.  Stop what you are doing and call your mortgage banker or broker to begin the refinance process immediately.  You cannot afford to risk the rate adjustment that is inevitably in your future.  So why do I say that you need to do this immediately?

The underwriting and qualifying guidelines are becoming increasingly tighter which can make it extremely difficult, if not impossible, to obtain a mortgage in the future.

The Economy and your ARM

Mortgage products are falling off the map daily and a 30 year fixed rate mortgage may be the only mortgage available in the coming months or years.  The spiral of home values and the falling economy are pushing the riskier mortgage products out of the market.  You may still have 2 or 3 years left on the fixed term of your adjustable rate mortgage, but you simply cannot afford to wait.  The implications of not being proactive could have huge implications on your financial stability moving forward.

Times are tough and they will probably get much tougher before they get better.  We have always been advocates of the refi your life idea and now that idea is becoming a neccessity for many Americans.  This is a great time to lower all of your monthly expenditures and eliminate unnecessary expenses.  Start with your mortgage.  That is the biggest asset in most folk’s lives.  Mortgage is probably the most volatile product in the credit markets today.  That is why it is imperative to get that taken care of before the impact on the credit markets expands any further.

A pre-payment penalty may be one of the most difficult decisions for a homeowner at this point in time.  Each homeowner will have to weigh the cost of the prepay against the risks in the mortgage refinance market.  If you can see the forest through the trees, it makes a lot of sense for most homeowners to take a deep breath and pay the penalty, especially if it means getting out of an adjustable rate mortgage.