Upside-down homeowners who fall outside HARP, HARP 2.0 and FHA Streamline Refinance guidelines will be glad to hear that there may be a new refinance program in the works designed to give them help. This week in Congress, a new refinance plan to help otherwise “eligible” borrowers was discussed.
Rebuilding American Homeownership
Upside-down homeowners today have many ways to access the market’s low mortgage rates. But if they have loans that are not currently backed by a government agency, it could be a big stumbling since there is not yet an available program to deal with such homeowners.
These are the different agencies and their respective programs:
- Loans backed by Fannie Mae and Freddie Mac have the HARP Refinance.
- Loans insured by the FHA have the FHA streamline Refinance.
- Loans insured by the VA have the VA IRRRL program.
- For loans insured by the USDA, there’s the USDA Streamline Refinance.
If an underwater homeowner has a loan that isn’t backed by one of the agencies above, the homeowner is basically out of luck when it comes to getting a refinance. This is really an unfortunate fact considering that there are millions of responsible U.S. homeowners from Silicon Valley, California to Manhattan, New York, whose mortgages are backed by private lenders and small banks. Many of these homeowners could potentially qualify for a refinance because they meet other qualifications mentioned in Refinance Program Guidelines.
Homeowners with loans that are not backed by the four government agencies that were mentioned previously will be glad to hear that there are talks about a HARP-like program entitled “Rebuilding American Homeownership”.
RAH : Likely costs tax-payers nothing.
A Refinance Trust would be relied upon by the Rebuilding American Homeownership program to fund its mortgages. This Refinance Trust would be backed by the U.S. government and funded via bond sales. The Jacksonville, Florida RAH Program aims to prescribe mortgage rates that are low enough to reward refinancing homeowners but high enough to mitigate default risk.
There will be no need to spend U.S. tax dollars because the Jacksonville, Florida RAH trust can pay for itself while turning a profit.
A 2% spread between bond yields and consumer mortgage rates is being called for in the Jacksonville, Florida RAH proposal. Even in the most dire of financial situations, this spread would render the program profitable under almost any circumstance.
NAR likes the Rebuilding American Homeownership Program
The National Association of Realtors and many premier economists are endorsing the Jacksonville, Florida RAH program. A great thing to know about the program is that it will not use U.S. tax dollars to help people reduce their mortgage payments.
For now, there’s no guarantee that the Rebuilding American Homeownership plan will go into affect. However, millions of responsible homeowners that are upside-down will greatly benefit from the RAH program if it does pass.
Chris Brown is the premier expert on HARP loans and Government FHA and VA loans. Please visit The Mortgage Chili Blog