Obama's Refinance Plan (Take Four)

Obama's First Refinance Program

Are you ready for another one of my rants? lol, I promise it will be a good one.


Well here we are folks...first we had the Obamafi 1 (aka HARP 1.0), this come out in 2009 where people with mortgages backed by Fannie and Freddie could refinance into new lower rate mortgages to help
reduce monthly payments and prevent more foreclosures.  The program was launched initially letting
homeowners refinance up to 105% of the homes value with NO add ons.

In the mortgage industry we have lingo - just like any industry - and the lingo related to add ons is loan level pricing adjustments; rate adjusters; bumps in pricing; and several other names.  But the gist of it is - based on certain "risk" criteria - the rate would be higher or lower depending on this information and would be built
into the pricing of the rate to derive at a finalized price.

Well it was well intended at first until the Fannie and Freddie added a bunch of adjusters and people who
needed it most couldn't benefit as they had the lowest scores and highest loan to value (loan amount divided
by value of the home).  So they were hit with massive bumps to the rate and it didn't even make sense to refinance. Well duh.....that's who it was for (the people who could benefit most) but what it ended up being is a cash cow fee generation system for Fannie and Freddie by putting these bumps into the rate and initializing an all out mini refi boom to extract needed cash to help the failing entities. 

Obama's Refinance Plan Take Two

At any rate...time went by and we had it adjusted to 125% loan to value.  Now we have HARP 2.0 or
Obamafi retake numero deuce where now the loan to value is unlimited!  That means your loan amount divided by the value can be 200% or more...doesn't matter, it's unlimited.  This again was another shot in the arm for the mortgage industry and banks are making money hand over fist on this program.  Mini refinance boom two.

This was designed to help all the people who couldn't get in the first time under HARP 1.0 and who were under water more than 125%.  A few programs exist; One was set up for loans serviced by your current lender (which had less restrictive guidelines since they already owned the mortgage) or you could switch lenders.  Now that this plan has been out for a little bit and because the risk is a little higher (actually it should be better because if they would make it beneficial for all everybody's payments would be much lower), some lenders are making it a requirement that the loan being refinanced is serviced by them.

You can find the differences here below:  See the vid.

NOTE: (Video is from youtube and posted by Kenney66)

Obama's Refinance Plan Take Three

The next plan involved changes to FHA's refinance programs.  You can find this HERE This allowed the homeowner with an FHA backed loan who qualified for the streamline refinance, AND, who's mortgage was originated prior to a certain date, could revert back to the old mortgage insurance annual premium calculation allowing them to take advantage of low interest rates. 

As you know FHA loans have been modified significantly over the past few years to help the ailing, failing, mortgage insurance fund as it is now WAY, WAY below Congressional mandated levels so the monthly premiums (also known as MIP and in the Conventional mortgage world PMI) have gone up and up and up so even if you could get a lower rate, the increase in the mortgage insurance didn't make it worth the money to refinance.  So the new program has spawned yet another mini boom. 

Obama's Refinance Plan (Take Four)

Obama's proposed new refinance program (you can find this HERE on the press release from the White House) is targeting all non GSE owned  loans (Fannie/Freddie) to be eligible to refinance into lower rate mortgages.  The proposed minimum credit score is 580 but will this be the same thing? High loan adjusters to the rate making it too pricey for people who really need it to take advantage? Time will tell if it's implemented.

They keep creating new mini refi booms coupled with Ben Bernanke's QE infinity program pretty much guaranteeing interest rates to stay low, we're seeing massive refinance volume. 

The volume has spike so high, lenders can't keep up and they won't hire new people to deal with the volume so you have horror stories of loans taking 90-120 days or longer to close! 

Again, this creating HUGE profits for the banks as they are selling these loans to Fannie/Freddie/and FHA and in turn the agencies are extracting more cash from the system to funnel it into the coffers because they're all BROKE as hell and bankrupt.  Just like this country is but nobody wants to realize or admit it. 

So What Next?

We're rolling into election time; we're starting to see reports of home prices increasing (I don't listen to a thing the government tells me) and the only people I see benefiting are the banks in this situation as people are refinancing which requires closing costs to be rolled back into their loans increasing your balance and stretching your term back out another 30 yrs. 

True, this scenario does help some and true this will benefit some people but if they really wanted to help people out then get rid of ALL adjustments; do it with no limited costs so that the people with the lower scores can benefit like they did when the HARP first came out but was quickly....and I mean QUICKLY changed to requiring all kinds of adjustments to the reates preventing alot of people from saving money on their payments.

So my question is: Where is the cookie for all the people who actually need it?!

That's my two cents on the matter. 

P.S. if you like this blog check out my other one http://www.livingwithnolimits.net

God Bless,