OWE MORE THAN YOUR HOME IS NOW WORTH? Fannie May May Soon Offer Help!
PLAN WOULD ALLOW "UNDERWATER" MORTGAGE BORROWERS TO RE-FINANCE INTO MORE AFFORDABLE HOUSE PAYMENTS!
It's a big problem in many housing markets across the country, where price speculation was rampant a couple of years ago - Arizona, Florida, Nevada, and some parts of California. High-leverage home loans, now combined with declines in market value, have put many homeowners in the uncomfortable position of owing more on their home loans than the current market value of their homes.
The problem is not rampant here in Chicago and the suburbs - but it is a growing concern here.
In another attempt to stem the recent tide of mortgage delinquencies and foreclosures, national mortgage funds provider and investor Fannie Mae would allow lenders to issue a new loan of the balance amount to homeowners in distress, but perhaps at a lower rate and a longer payout term. In effect, this would reduce monthly house payments for many, and hopefully allow them to better keep up with payments, and keep their home.
Fannie's new program would only be an option for those who have kept current on their payments so far, and whose loans are Fannie Mae guaranteed (most conventional, prime mortgage loans are). Under normal circumstances, borrowers who are underwater would not qualify for a re-finance, because the collateral equity in their homes would not support the money borrowed against it.
Re-finance loans of up to 120% of the home's current market value would be issued. Officials from Fannie Mae estimate 150,000 households across the U.S. would currently qualify for this program.
According to Jeff Hayward, a Fannie Mae Senior Vice President, "We're saying to the consumer, 'You're not trapped any more."
Lenders like this option from Fannie Mae because it does not require reduction of the amount of the current indebtedness from the homeowner. Keeping the loan balance the same, and simply making the re-payment program more attractive for consumers, is more of a win-win scenario.
The National Association of Realtors, along with the National Association of Home Builders, have praised Fannie Mae's proposals. Freddie Mac, the other large U.S. mortgage funder and underwriter, has yet to weigh in with its own proposal.
For more info, please read James R. Hagerty's article in yesterday's Wall Street Journal.
DEAN MOSS & DEAN'S TEAM CHICAGO
