The Ken Caiani Group

Canceled debt is normally taxable to you, but there are exceptions. One of those exceptions is available to homeowners whose mortgage debt is partly or entirely forgiven during tax years 2007 through 2012.

The IRS would like you to know these 10 facts about Mortgage Debt Forgiveness:



1. Normally, debt forgiveness results in taxable income. However, under the Mortgage Forgiveness Debt Relief Act of 2007, you may be able to exclude up to $2 million of debt forgiven on your principal residence.

2. The limit is $1 million for a married person filing a separate return.

3. You may exclude debt reduced through mortgage restructuring, as well as mortgage debt forgiven in a foreclosure.

4. To qualify, the debt must have been used to buy, build or substantially improve your principal residence and be secured by that residence.

5. Refinanced debt proceeds used for the purpose of substantially improving your principal residence also qualify for the exclusion.

6. Proceeds of refinanced debt used for other purposes -- for example, to pay off credit card debt -- do not qualify for the exclusion.

7. If you qualify, claim the special exclusion by filling out Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness, and attach it to your federal income tax return for the tax year in which the qualified debt was forgiven.

8. Debt forgiven on second homes, rental property, business property, credit cards or car loans does not qualify for the tax relief provision. In some cases, however, other tax relief provisions -- such as insolvency -- may be applicable. IRS Form 982 provides more details about these provisions.

9. If your debt is reduced or eliminated you normally will receive a year-end statement, Form 1099-C, Cancellation of Debt, from your lender. By law, this form must show the amount of debt forgiven and the fair market value of any property foreclosed.

10. Examine the Form 1099-C carefully. Notify the lender immediately if any of the information shown is incorrect. You should pay particular attention to the amount of debt forgiven in Box 2 as well as the value listed for your home in Box 7.

For more information about the Mortgage Forgiveness Debt Relief Act of 2007, visit www.irs.gov. IRS Publication 4681, Canceled Debts, Foreclosures, Repossessions and Abandonments, is also an excellent resource.

You can also use the Interactive Tax Assistant available on the IRS website to determine if your canceled debt is taxable. The ITA takes you through a series of questions and provides you with responses to tax law questions.

Finally, you may obtain copies of IRS publications and forms either by downloading them from www.irs.gov or by calling 800-TAX-FORM (800-829-3676).

Links:
Form 982
Form 1099-C
Publication 4681

Mortgage Rates are continuing to keep record lows as the Mortgage Backed Securities Market (MBS) rally continues to push higher.  The most recent round of economic reports show some modest improvements. This normally would be a bad thing for mortgage rates rates, but the continued overhang of the Eurozone Debt Crisis is proving to be a big obstacle for Investors.

The hot topic is Greece which is in it's second fight for an International bail out.  If most Investors don't agree with the plan and don't believe that it will actually save Greece, then you will see a flight for quality into Mortgage Backed Securities and Treasuries.

The continuing problems in Europe along with Mr. Bernanke's comments, are fueling the current rally. As bond prices rise, mortgage rates drop. The current price on the FNMA 3.5% coupon - a key benchmark that Lender's use to price rates (See chart below) - 104.06 is amazing!


This short term rally in the MBS markets could be the perfect time for you to take advantage of the lowest rates we might see in our lifetime.

Could this be the final answer to successfully refinancing millions of underwater mortgages? President Obama is proposing a brand new refinance program for borrowers who are current on their mortgages, regardless of who owns their loan.  Now the trick is convincing Congress that this is the answer.

"I'm sending this Congress a plan that gives every responsible homeowner the chance to save about $3,000 a year on their mortgage, by refinancing at historically low interest rates.  No more red tape.  No more runaround from the banks," the President announced in his State of the Union address.

The big difference between HARP and what the President is proposing is that this plan would not be limited to those with loans backed by Fannie Mae and Freddie Mac, according to senior administration officials. The two mortgage giants own or guarantee about half of the nation's mortgages. It would be open to all borrowers current on their loans.


CoreLogic, a company that tracks 85% of all mortgages, estimates that 28 million homeowners could cut the interest rates on their loans by more than one percentage point if they could refinance.

Details will be unfolding in the coming weeks, but several sources say the plan is to ask Congress to allow the government mortgage insurer, the Federal Housing Administration (FHA), to back refinances of underwater mortgages. This would be a voluntary, borrower-initiated plan, and not a blanket refinance of all borrowers.

The costs, according to administration officials, would be modest, and the President would request that a portion of his financial crisis responsibility fee offset any of those costs, so there would be no addition to the federal debt. "A small fee on the largest financial institutions will ensure that it won't add to the deficit, and will give banks that were rescued by taxpayers a chance to repay a deficit of trust," Mr. Obama added.

Refinancing has been particularly limited in five states that have seen the biggest home-price declines: Arizona, California, Florida, Michigan and Nevada. In those states, some 6.4% of borrowers with credit scores between 680 and 719 refinanced in 2010, compared with 9.7% of borrowers in the remaining 45 states, according to Federal Reserve data.

Loan servicers could be faced with a flood of applications and could have to add resources to handle it all, but officials say the opportunity to generate revenues from the refinances would be incentive enough. Still many servicers have balked at the idea of mass refinancing, as the new loans could present more risk and less reward.


In 2010, the White House rolled out a program that would refinance borrowers into FHA-backed loans if lenders and investors were willing to forgive principal. The voluntary program hasn't been widely used. The Bush administration and Congress in 2008 passed a separate bill to allow more homeowners to refinance into FHA-backed loans, but only a few hundred borrowers took advantage of the program.

Any new role for the FHA would be likely to face skepticism from congressional Republicans because the agency faces mounting losses and has thin capital reserves. At the end of September, independent auditors estimated that the agency had just $2.6 billion in reserve to cover unanticipated losses on $1.1 trillion in loan guarantees.

So, stay tuned to what Congress will do with this proposal from the President.  The predictions for this to be approved are very dim.

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Earlier this week I was asked what impact the 2012 Payroll Tax Extension was going to have on the mortgage rates.

In December 2010, the U.S. government passed the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010.  The act was meant to stimulate the national economy by lowering taxes, among other plans.

One such stimulus was a one-year FICA payroll tax reduction. FICA stands for Federal Insurance Contributions Act. FICA taxes fund Medicare and Social Security. The act lowered FICA taxes from from 6.2 percent to 4.2 percent for 2011 only.

From Title IV of the bill’s final form, these costs will be recouped via the mortgage market.  The section is titled “Mortgage Fees And Premiums”.  In it, Congress instructs Fannie Mae and Freddie Mac, and the FHA to take following specific measures :

• Fannie Mae and Freddie Mac : Increase loan guarantee fees by 10 basis points or more versus current levels, and do not decrease other costs to compensate

• FHA : Increase mortgage insurance premiums by 10 basis points

The extra fees amount to roughly $10 per month per $100,000 borrowed.  In high cost cities where local jumbo loan limits reach as high as $625,500 and $729,750 for conventional and FHA mortgages, respectively, mortgagors should expect to pay as much as $73 more each month.  The lender must forward those monies to the U.S. Treasury.


The U.S. Government changed your Mortgage Rate, not the banks or greedy loan officers.

Mortgage rates have had a nice run since the economy hit the skids in 2007.  Mortgage rates have been in free-fall, plunging from near 7 percent on a 30-year fixed-rate mortgage to today’s levels near 4 percent.

But as rates have dropped, loan costs have increased sometime causing your specific rate to be higher than the market place!

• In 2008, the government introduced loan-level pricing adjustments (LLPAs) on all loans.

• In 2009, the government upped its LLPAs 7 times throughout the course of the year

• In 2010, closing costs jumped as banks met government compliance standards.

• In 2011, the FHA more than doubled monthly mortgage insurance premiums.

Each time loan costs rise, it mutes the effects of falling mortgage rates.  Low rates don’t matter if high costs wipe them out.  For 2012, the government’s payroll tax extension’s net effect is to raise mortgage rates by roughly 0.10%.  According to Freddie Mac’s weekly mortgage rate survey, this would immediately push conventional mortgage rates higher.

For FHA-insured homeowners, the increase in the monthly mortgage insurance premium will render scores of homeowners FHA Streamline Refinance-ineligible.  All borrowers must meet a 5% minimum savings requirement per FHA Streamline Refinance guidelines.

Long story short, expect your rate or cost of your new mortgage to increase.

Are you asking yourself, how do I track mortgage rates?  Where do mortgage rates come from and how are they created?  If you are shopping for a mortgage and don't have a trusted adviser that has software that tracks the MBS market like we do at The Ken Caiani Group, then you could be losing thousands of dollars over the life of your loan.

Call us for detail 888-327-6199.

Every mortgage loan has closing costs. There are a number of ways to pay for those.

One way is to pay them through the interest rate. Please see our blog article from Tuesday January, 17th to learn more about this option.

Here are a couple more options to consider:

ROLLING CLOSING COSTS INTO YOUR LOAN
If you lack the funds to pay your closing costs at the closing table this can work well for you. Your closing costs are spread out over the term of your loan. By dividing the closing costs by the amount you are saving in your payment you can determine the amount of months it will take you to "break even" and realize the actual savings of your refinance. We typically suggest 24 months or less for break even. Another thing to take into consideration is how long you will be staying in the property.


BRINGING A CHECK FOR CLOSING COSTS TO CLOSING
Bringing a certified or cashier’s check is a good strategy if you're refinancing to lower your interest rate and plan to keep your home for a long time (4 years or more). This allows your current mortgage balance to stay the same and allows you to realize monthly savings immediately.

                                               For A Live Rate Quote Click Here

Each individual situation is completely different.  It's important to decide what your goals are in order to structure your refinance in a way that meets your goals and ultimately benefits you. Many things can influence which option is best such as years you are planning on staying in your home as well as cash available.

As mortgage servicing policy changes loom, no-cost mortgages could be a thing of the past.

A no-cost mortgage refinance allows the borrower to refinance without paying closing costs.

Currently, these types of refinances are available across the board from conforming loans to government loans as well.  These loans are also available for multiple terms from 30 year fixed to ARM's.

Just as borrowers can pay discount points to lower their rates they can basically pay their closing costs by accepting a higher rate.  The more closing costs and discount points a borrower pays the lower the interest rate is.  The opposite is true as well, the less closing costs and discount points a borrower pays, the higher the interest rate is.

By obtaining a no-cost mortgage loan a borrower does not roll in any closing costs on top of the loan and your new mortgage loan is essentially the same as the principal balance of your current mortgage loan.

Mortgage servicers respond to borrower inquiries and collect monthly payments and in turn pay Fannie Mae or Freddie Mac. Fannie Mae and Freddie Mac pay mortgage servicers roughly 25 basis points on their portfolios annually, or $250 per $100,000 serviced.

These fees can add up. For example, the largest residential mortgage servicer has over $1.8 trillion in mortgages under management which earns it roughly $4.5 billion in annual servicing fees. These costs are used to hire and retain call staffs and process payments, among other costs. Technology has afforded the servicers the ability to achieve tremendous economies of scale which, in turn, maximizes profits.

In theory, with each new loan serviced, every loan serviced becomes more profitable and this value of "servicing a mortgage" spills over into the mortgage origination side of the business. "Origination" is the process of starting a new loan and the profits that mortgage servicing generates creates huge competition for new loans.

It works like this : Loan servicers contract with lenders to originate loans on their behalf, making commission-type payments called Servicing Release Premiums. A Servicing Release Premium is the premium paid, literally, for releasing loan servicing rights to another entity.

Servicing Release Premiums are based on the long-term value of the loan so, when servicers want to aggressively build their respective portfolios, they offer larger premiums to lender for making originations.

It's these premiums that offset your closing costs in zero-closing-cost mortgage and it's part of the reason why your mortgage "gets sold" all the time. It's not about you, it turns out -- it's about your servicing.

The nation's largest loan servicers want to manage as many loans as possible to drive down their cost-per-borrower, which increases their overall profits.

With the new mortgage servicing policy changes mortgage servicing just became a lot less desirable.

In late-September, under the header "Servicing Compensation Initiative pursuant to FHFA Directive", the Federal Home Finance Agency released a paper called "Alternative Mortgage Servicing Compensation Discussion Paper".

The FHFA is the regulator for Fannie Mae and Freddie Mac.

In it's 36-page discussion document, the FHFA outlines new, potential mortgage servicing models for the mortgage industry.

The key points of the document, though, as you'll want to understand them, are this :

- The FHFA wants to make sure servicers receive "adequate compensation" for their work

- The FHFA believes that, under the current servicing model, 25 basis points exceeds its "adequate compensation" target for loan servicers

- The FHFA proposes a new model in which servicer compensation drops 50% to 12.5 basis points for non-delinquent mortgages

With the proposed changes, mortgage servicers are nervous, and dialing back their aggressiveness. Should loan servicing values drop by half, as the FHFA proposes, the mortgage servicing business is a lot less lucrative, and worthy of examination.  At least one major servicer has left the business altogether, and the others don't want as many new loans as in the past. Today's Servicing Release Premiums reflect this change.


Before the release of the FHFA's discussion paper, to get a $300,000 no-cost mortgage in a moderate closing cost state, a borrower could have taken the market's "base rate" and added 0.250% to it. The extra quarter-percent would have yielded enough Servicing Release Premium to wipe out your closing costs in full.

To get a no-cost mortgage today, take that same base rate and add 0.625%.

In the conforming mortgage market, no-cost mortgages are now next-to-impossible. Mortgage servicers are wary of over-paying for new loans and, as such, they've drastically cut back on Servicing Release Premiums. Before long, everyone will pay discount points for a home loan.


Some information provided by: Mortgage Reports.com

First-time home buyers, here are some Down Payment Assistance programs with links to get more information:

Aurora’s Home Ownership Assistance Program (HOAP)
Since 1985, Aurora's HOAP program has been dedicated to making home ownership a reality for Aurora’s low and moderate-income families. As a HUD-approved counseling agency, the HOAP program offers free pre-purchase, foreclosure, pre-foreclosure sale, and reverse equity mortgage counseling, as well as financial assistance to homebuyers. The HOAP staff conducts educational seminars to first-time homebuyers (in English and Spanish), which covers the process of buying and owning a home. https://www.auroragov.org/AuroraGov/Departments/Neighborhood_Services/Community_Development/021459?ssSourceNodeId=967&ssSourceSiteId=621


Boulder County Housing Authority
The Boulder County Housing Authority helps foster the availability of quality, affordable housing and related services for lower income residents of Boulder County. http://www.bouldercounty.org/government/dept/pages/commservhome.aspx



City of Boulder Division of Housing
The City of Boulder Division of Housing is committed to making homes in the community available to those who find it difficult to purchase or rent a home in today’s housing market. This site provides information on programs and how this organization is working toward making affordable housing a reality in Boulder. http://www.bouldercolorado.gov/index.php?option=com_content&task=view&id=419&Itemid=222


Colorado Housing Assistance Corporation (CHAC)
CHAC is a private nonprofit agency founded in 1982. CHAC offers loan programs and supportive financial counseling to help Colorado families turn dreams into reality. http://coloradohousingassistance.org/


Colorado Housing and Finance Authority (CHFA)
The Colorado Housing and Finance Authority was created in 1973 by the Colorado Legislature to address the shortage of affordable housing in the state. CHFA helps homebuyers by offering 30 year fixed loans to those who qualify, which are affordable alternatives to other loan types such as ARMs or interest-only loans. http://www.chfainfo.com/


Denver Homeownership Assistance
Denver’s Homeownership Assistance offers a variety of programs which include an affordable housing program, foreclosure assistance, home repair/ rehabilitation assistance, and mortgage/ refinance assistance. http://www.denvergov.org/


Funding Partners (including the H20 program)
This nonprofit works to increase affordable housing for families and individuals within Colorado. They have multiple down payment assistance programs and have been helping homebuyers since 1996. http://fundingpartners.org/


City of Longmont Housing Assistance
The City of Longmont offers a variety of housing assistance for both renters and those wanting to purchase. For example the city offers: home ownership training courses, down payment assistance, and affordable housing. http://www.ci.longmont.co.us/cdbg/housing/



New West Side Economic Development (NEWSED)
NEWSED uses an Individual Development Account (IDA) program to help people in Metro Denver work toward homeownership. In this program a Housing Counselor conducts an intake and gathers information and documentation. When a client is approved a saving account is opened with a goal of $1,000 contributed by the client. When the goal is reached an amount of $4,000 is awarded. IDA program takes anywhere from 6 to 24 months to complete. http://www.newsed.org/


Thistle Community Housing & Blue Vista Community Housing
Thistle is a nonprofit organization committed to ending grow displacement of Front Range residents who can no longer afford to live in the area. Thistle offers affordable rentals, as well as, homeownership opportunities through a Community Land Trust system. A CLT program works by offering affordably priced homes, below market sales value, by limiting resale prices. An example community, which has both market rate and CLT homeownership opportunities, is Blue Vista. Blue Vista is located across the street from the Longmont Rec Center, & has easy access to I-25, 287 & the Diagonal Highway. http://www.mybluevista.com/


USDA Rural Development
The USDA runs the, Housing and Community Facilities Program. HCFP provides a number of homeownership opportunities to rural Americans, as well as, programs for home renovation and repair. HCFP also makes financing available to elderly, disabled, or low-income rural residents of multi-unit housing buildings to ensure they are able to make rent payments. http://www.rurdev.usda.gov/rhs/

Provided by www.propertycolorado.com

To prevent circumvention of the restrictions on FHA-insured mortgages to investors, FHA generally will not insure more than one mortgage for any borrower (transactions in which an existing FHA mortgage is paid off and another FHA mortgage is acquired are acceptable). Any person individually or jointly owning a home covered by a mortgage insured by FHA in which ownership is maintained may not purchase another principal residence with FHA mortgage insurance except under the situations described below. Properties previously acquired as investment properties are not subject to these restrictions.

FHA will not insure a mortgage if FHA concludes that the transaction was designed to use FHA mortgage insurance as a vehicle for obtaining investment properties, even if the property to be encumbered will be the only one owned using FHA mortgage insurance.


FHA does not object to homebuyers using FHA mortgage insurance more than once if compatible with the homebuyer's needs and resources as follows:

A. Relocations. If the borrower is relocating and re-establishing residency in another area not within reasonable commuting distance from the current principal residence, the borrower may obtain another mortgage using FHA insured financing and is not required to sell the existing property covered by a FHA-insured mortgage. The relocation need not be employer mandated to qualify for this exception. Further, if the borrower returns to an area where he or she owns a property with an FHA-insured mortgage, it is not required that the borrower re-establish primary residency in that property in order to be eligible for another FHA insured mortgage.

B. Increase in Family Size. The borrower may be permitted to obtain another home with an FHA-insured mortgage if the number of legal dependents increases to the point that the present house no longer meets the family's needs. The borrower must provide satisfactory evidence of the increase in dependents and the property's failure to meet the family's needs. The borrower also must pay down the outstanding FHA mortgage (secondary liens do not need to be paid off or paid down) on the present property to a 75 percent or lower loan-to-value (LTV) ratio. A current residential appraisal must be used to determine LTV compliance. Tax assessments, market analyses by real estate brokers, etc., are not acceptable as proof of LTV compliance.

C. Vacating a Jointly Owned Property. If the borrower is vacating a residence that will remain occupied by a co-borrower, the borrower is permitted to obtain another FHA-insured mortgage. Acceptable situations include instances of divorce, after which the vacating ex-spouse will purchase a new home, or one of the co-borrowers will vacate the existing property.

D. Non-Occupying Co-Borrower. A non-occupying co-borrower on property being purchased with an FHA-insured mortgage as a principal residence by other family members may have a joint interest in that property as well as in a principal residence of their own with a FHA-insured mortgage. (See HUD Handbook 4155.1 for additional information). Under no circumstances may investors use the exceptions described above to circumvent FHA's ban on loans to private investors and acquire rental properties through purportedly purchasing "principal residences".



Considerations in determining the eligibility of a borrower for one of these exceptions are the length of time the previous property was owned by the borrower and the circumstances that compel the borrower to purchase another residence with an FHA-insured mortgage. In all other cases, the purchasing borrower either must pay off the FHA-insured mortgage on the previous residence or terminate ownership of that property before acquiring another FHA-insured mortgage.

REFERENCE

Do you own an FHA or HUD insured home and want to do a short sale? Here are the FHA short sale guidelines: 


*You must list the property with a licensed real estate broker who is not related to you.

*You must be at least 31 days delinquent when you sell the home.

*You have to keep the house on the market for at least four months, possibly as many as six.

*The home must be owner-occupied, exceptions are made for death, divorce, unemployment, or job transfer.

*Realtor commissions cannot be more than 6%.You have to be pre-approved in order to be qualified for a short sale.

*There must be documentation proving your decreased income or inability to make the mortgage payments.

*HUD will reimburse the buyer for up to 1% of the mortgage as part of closing costs if the new mortgage is also FHA-insured.

*HUD will not pay for points, home warranties, or lender’s title insurance.

*All short sales must be “arms-length” transactions.

*HUD will pay the lender up to $1,000 if the sale is closed within 3 months from the date of application

*HUD will pay up to $1,500 for the discharge of secondary liens after the primary lender’s incentive has been applied.

*The borrower must not be encouraged to default on their mortgage in order to participate in the short-sale program.

*The property may not be an investment property

Due to falling property values and rising unemployment, short sales are becoming increasingly popular as an alternative to foreclosure. Selling a property at a short sale is often preferable to a foreclosure for all involved parties because of potential short sale benefits.

Last week Fannie Mae and Freddie Mac unveiled lender instructions for the government’s revamped HARP program, kick-starting a potential refinance frenzy across new york and nationwide.  HARP stands for Home Affordable Refinance Program. The updated program is meant to give “underwater homeowners” an opportunity to refinance at today’s low mortgage rates.  In the two-plus years since its launch, HARP’s first iteration helped fewer than 900,000 homeowners. HARP II, by contrast, is expected to reach millions.  Lenders begin taking HARP II loan applications December 1, 2011.

To apply for HARP, applicants must first meet 4 basic criteria :

1. The existing mortgage must be guaranteed by Fannie Mae or by Freddie Mac
2. The existing mortgage must have been securitized by Fannie Mae or Freddie Mac prior to June 1, 2009
3. The mortgage payment history must be perfect going back 6 months
4. The mortgage payment history may not include more than one 30-day late payment going back 12 months 

If the above criteria are met, HARP applicants will like what they see.  For HARP applicants, loan-level pricing adjustments are waived in full for loans with terms of 20 years or fewer; and maxed at 0.75 for loans with terms in excess of 20 years.  This will result in dramatically lower mortgages rates for HARP applicants — especially those with credit scores below 740. Some applicants will find HARP mortgage rates lower than for a “traditional” conventional mortgage.

In addition, HARP applicants are exempted from the standard waiting period following a bankruptcy or foreclosure, which is 4 years and 7 years, respectively.  These two items are inclusionary and should help HARP reach a broader U.S. audience.

HARP contains exclusionary policies, too.

1. The “unlimited LTV” feature only applies to fixed rate loans or 30 years or fewer. ARMs are capped at 105% loan-to-value.
2. Applicants must be “requalified” if the proposed mortgage payment exceeds the current payment by 20%.
3. Applicants must benefit from either a lower payment, or a “more stable” product to qualify

And, of course, HARP can only be used once. Fannie Mae and Freddie Mac will adopt slight variations of the same HARP guidelines so make sure to check with your loan officer for the complete list of HARP eligibility requirements.

The HUD $100 down program is available again for Colorado and a number of other states.  This program is available into October of 2012.

The borrower must be the owner occupant and the sale must be for the full amount of the current list price.  If a higher bid is made on the home the borrower will be responsible for the difference over and above the sales price plus the $100.

There is typically a 3.5% required down payment, however, HUD will cover up to 3% of closing costs and prepaid expenses in some cases.

HUD’s $100 down payment incentive program can also be applied to an FHA 203k loan, which can be used to fund repairs and renovations on the home. The 203k program allows buyers to finance both the mortgage and additional money for rehabilitation needs with a single government-insured loan.

Eligible properties must be listed by January 4, 2008 or after.  The Good Neighbor Next Door Program is not eligible for the HUD $100 Down Program.

To search for a HUD home in your area click here.  The information about each home is detailed and includes the price, how long the property has been listed, and whether the original list price has been reduced. That can be handy information, suggesting you may be successful with a bid below the stated price.

If you have been unable to refinance your home due to your home’s value this may just help you. On October 24, 2011 the government announced changes to HARP (Home Affordable Refinance Program).

By refinancing, borrowers secure a lower mortgage payment which translates into lower default rates on homes across the country.

One of the biggest items in the HARP 2011 program is the elimination of the 125% LTV limit. No longer will your home’s value be an issue.

Appraisals will also be greatly minimized, as well as underwriting requirements when borrowers have been current on their mortgages for at least 6 months.


Specific details on the program will be released by Nov 15th. In the meantime, here are a few of the requirements of the program:

-Your loan must be backed by FNMA or FHLMC
-To determine if you are owned by FNMA or FHLMC  click here  to access the entire FHFA announcement.  This contains the links to both Fannie and Freddie so that you may look up your address to determine who owns your loan
-Only loans purchased by FNMA or FHLMC before May 31, 2009 are eligible
-You must be current on your mortgage for the last 6 months


Other important points to note:

-HARP can be used to refinance primary, investment and secondary properties even if you originally owned them as your primary residence
-Second mortgages must be subordinated by the lender that holds the note
-Closing costs may be added to your current balance as long as the maximum conforming loan limit is not
  exceeded
-Program ends on Jan 31, 2013

To read the entire FHFA announcement click here

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Why is it that your mortgage rate quoted to you is higher than the rate being advertised on TV , the internet and the radio? Rest assured, this isn't some elaborate Bait-N-Switch going on here. This is typically the result of your rate being being adjusted by the secondary market due to a certain set of risk factors. Even if you have never had a late payment you could still be penalized and not even now it. These penalties I am referring to are called LLPAs (Loan Level Price Adjustments).

After the collapse of the MBS or mortgage market in 2007, the GSE's (Fannie Mae and Freddie Mac) came up with Loan Level price Adjustments. No surprise really given the fact that they both have received billions of dollars in Federal Bailout funds. Meanwhile, Fannie and Freddie continue to fund or guarantee upward of two-thirds of new mortgage originations. Because of their sheer size and market dominance, they play pivotal roles in determining whether and how fast the housing market can rebound. So, this is one of the changes that is causing mortgages to become more expensive.

Loan Level Price Adjustments are charged to everyone who's loan is being bought by Fannie Mae or Freddie Mac. They are not profit centers for the banks, and they continually get adjusted. In fact they have changed several times since their inception in April of 2008, as a way to keep the GSE's solvent and operational.

Despite its 3-year history, however, LLPAs remain under-the-radar to most the American people. The first time that people tend to hear of them is at the point of application. Often, as an explanation about why the rate they're getting is than the "market rate" being advertised. The chart below shows what "Fee Adjusters" you will pay up-front or rolled into your rate based on your Lon-to-value(LTV).

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Below is the matrix for Adjustable Rate Mortgages

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Below is the matrix for High-Balance, Multi-Units and Condos

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There's a host of LLPA trigger traits. A fair sample set follows:

• Living in a condo with less than 25% equity in the home
• Having a credit score of less than 740
• Living in a 2-unit, 3-unit or 4-unit home
• Using a home as an investment property
• Doing a "cash out" refinance with less than 40% equity in the home
• Having a second mortgage to subordinate

And, and if this list wasn't long or punitive enough, starting April 1, 2011, regardless of credit score, all conforming loans with less than 25% equity will be subject to LLPA.

What's the justification for these add-ons? Although Fannie Mae officials declined to comment on the latest fee hikes, Edward J. DeMarco, acting director of the agency that oversees Fannie and Freddie, called the add-ons "necessary to protect [the companies] from the costs and risks" inherent in the mortgages they buy or guarantee. Fannie and Freddie "underpriced mortgage credit risk" in the boom years, he said in a letter to Capitol Hill critics.

So this risk based pricing concept can be related to other industries, like insurance. First you have a base rate for which you will qualify or be charged. Then, each individual risk factor is added to the base rate. More risk equals more cost. Depending on your loan traits, there may be non-Fannie /Freddie loans that can give the same great rates, but without the high-risk fees. In general, 1 in 4 borrowers has an alternative so be sure to ask me about it. We have wonderful contact within the banking industry and can refer you to institutions that are offering such programs based on your individual needs.

You can also view the Fannie Mae announcement here.

Just as you should get a yearly physical by your Doctor, The Ken Caiani Group provides an Annual Mortgage Review for all of our clients as one of the many benefits of working with us.  We all experience changes in our lives that involve our income, career, family, health, lifestyle, etc.  Additionally, there may be new types of mortgage planning products and services that could help enhance your financial situation.  The Annual Mortgage Review addresses the following:

Complete review of your credit report
Your credit not only impacts what you can qualify for with a home loan and what your interest rate could be, it also effects your insurance rates and credit card rates. Often times, it just takes a few adjustments to improve a credit score.  Other times, it could take a bit more elbow grease. Ken is happy to help develop a plan to improve your credit score.

Are you paying for Private Mortgage Insurance (PMI)?
Private mortgage insurance used to be a way to finance homes when someone was putting less than 20% down and also if someone was buying using FHA financing.  With today's appreciation and the many new mortgage products now available, PMI is often no longer necessary.  PMI is of no benefit  to the homeowner and only protects the lender in the case of default on a mortgage.  NOTE:  PMI recently became tax deductible for new loans as of 2007 (with income limitations).

What are your family goals?
Do you have elderly parents or children who will be attending college soon?  Are you preparing for retirement?  Are you anticipating a change in your career?  Your equity can be a resource to help fund life goals.  In addition, if you have added to your family and need to restructure debt or reduce your monthly payments, restructuring your mortgage may be beneficial.

How long do you plan to stay in your current home?
If you only plan on staying for 2-5 years, often times a fixed period ARM may have a better rate than a 30 year fixed rate program.  This strategy could save a home owner thousands of dollars and it does need to be weighted against what a cost of a refinance would be and if a home owner would break even on the costs before they decide to move to a new home.  Likewise, home owners who currently have fixed period ARMs and feel they may move before their ARM term is over, should probably not refinance into a 30 year fixed rate.  

Do you have funds set aside in case of an emergency?
A home equity line of credit (HELOC) can be a great resource for home owners IF they can resist using their equity like a credit card.   The interest on a line of credit is only charged on the amount of the line used and can be very beneficial should you ever become unemployed or have an emergency.   It is to your advantage to set up a HELOC while your employment and income is favorable.   Should your employment or income suffer, it is much more difficult to secure a line of credit or any mortgage loan at a competitive rate.   If a home owner's equity is too tempting for them, then I strongly suggest they do not take out a line of credit against their home.   HELOCs rates are attached to the Prime Rate and will adjust when ever Prime adjusts.

How much has your home value appreciated?
Ken will provide you with a list of homes that have currently sold within your neighborhood to give you an idea of what your home may be worth in today's real estate market.  If you are considering selling your home, you should contact your Realtor for a Certified Market Analysis.  Many clients are pleasantly surprised with the appreciation they have received simply from being a home owner.  Knowing the equity in your home allows you to manage that asset to your best advantage.

Review of other financial planners and resources
Do you have a great CPA or Financial Planner?  Do you need a professional Realtor or an Estate Attorney to help you finally plan a will and set up a trust?  Ken is always keeping an ear out for other professionals that he can refer his clients to.  It's important to make sure you have the best team working for your best interests.

For more information click here.

With all of the issues that the mortgage and real estate industries have experienced since 2008, you can't watch TV, open the paper or surf the web, without seeing a headline that people would rather rent than buy. Now, analyzing numbers for clients is my job. It is easy for me to see that compared to other investment opportunities, renting might make sense for a while but buying is always a better choice to build wealth in the long run.

So, I came across this great article in the NY Times that shows an great graphical representation of how the numbers play out based on your individual situation.

To read the article and use the online tool click here.

Here is a list of helpful tips to ensure an effortless loan approval process. These DO’s and DON’Ts will help avoid any delays with your loan approval.


#1: DO NOT GIVE YOUR SOCIAL SECURITY # OUT FOR THE NEXT 30 DAYS!!!


- DO continue making your mortgage or rent payments
- DO stay current on all existing accounts (even if you are paying them off)
- DO keep working at your same employer
- DO keep your same insurance company
- DO continue living at your current residence
- DO continue to use your credit cards as normal
- DO call us if you have ANY questions

- DON’T make a major purchase (car, boat, fur, jewelry, etc.)
- DON’T apply for new credit (even if you seem pre-approved)
- DON’T open a new credit card
- DON’T transfer any balances from one account to another
- DON’T pay off charges without a discussion with us first
- DON’T pay off any collections without a discussion with us first
- DON’T buy any furniture
- DON’T close any credit card accounts
- DON’T change bank accounts
- DON’T max out or over charge on your credit card accounts
- DON’T consolidate your debt onto 1 or 2 credit accounts
- DON’T take out a new loan
- DON’T start any home improvement projects
- DON’T finance any elective medical procedure
- DON’T open a new cellular phone account
- DON’T join a fitness club
- DON’T pay off anything without discussing it with us first

If you encounter a special situation, it is best to mention it to us right away so we can help you determine the best way to achieve your financing goals.