Monday, March 12, 2012

Understanding the New Housing Program


It seems like every week there is a new government program announced about the housing industry and last week was no exception. President Obama made an announcement about a new program. Let's break it down. The aim this program is to do two things:

1. Help borrowers refinance by lowering mortgage insurance premiums.
2. Help to members of the military who’ve been wrongly foreclosed on or denied a chance to refinance.

FHA
The FHA (Federal Housing Administration) is reducing its up-front premium to .01 percent, from 1 percent, to streamline refinancings of loans originated prior to June 1, 2009, and cutting the annual fee for these refinancings in half, to .55 percent, from 1.15 percent.

The two fee reductions together should save the typical FHA borrower about a thousand dollars a year, which is “on top of the savings that they’d also receive from refinancing,” President Obama said at the press conference. “That would make refinancing even more attractive to more families. It’s like another tax cut that will put more money in people’s pockets."

For example: a typical FHA borrower with $175,000 outstanding on a mortgage would be able to reduce the monthly payments to $915 a month, assuming a new mortgage at 4 percent. Without the fee reduction, the monthly payment after a refi would be $1,010 a month.

The fee cuts begin June 11. (Details from HUD.) Wondering if you qualify? Give me a call.

MILITARY
Under Servicemembers Civil Relief Act (SCRA) it is illegal for mortgage servicers to foreclose while a servicemember is on active duty. I think we can all agree that a soldier should not have to worry about losing their home while they are overseas fighting for our country. Yet many mortgage services carried out these foreclosures in spite of the law.

The administration says it will take the following five steps:
1. Conduct a review of every servicemember foreclosed upon since 2006 and provide any who were wrongly foreclosed upon with compensation equal to a minimum of lost equity, plus interest and $116,785;
2. Refund to servicemembers money lost because they were wrongfully denied the opportunity to reduce their mortgage payments through lower interest rates;
3. Provide relief for servicemembers who are forced to sell their homes for less than the amount they owe on their mortgage due to a permanent change in station;
4. Pay $10 million dollars into the Veterans Affairs fund that guarantees loans on favorable terms for veterans; and
5. Extend certain foreclosure protections afforded under the Servicemember Civil Relief Act to servicemembers serving in harm’s way.

If you have questions about whether you qualify for this program give me a call. Remember, there are great VA loan options for active and retired military!

On another note, there is a great company in Utah, Remember My Service, that is memorializing the service of our great military - you can check them out here.

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