Government lending programs keep evolving
We are all aware that President Obama and the U.S. government are on a mission to jump-start the U.S. real estate market. Legislation signed on March 4, known as the Making Home Affordable program, is evidence of this. While the program has continued to evolve since its inception over the past few months, it is up and running and available to borrowers who fit the current guidelines.Essentially the new lending program allows for borrowers with less than 20 percent equity in their properties, stemming from property depreciation, to potentially refinance their mortgages in to a more favorable loan program and interest rate. As would be expected with a government-initiated lending program, there are criteria that must be met in order to qualify. First and foremost, Fannie Mae or Freddie Mac must hold the note of the existing mortgage. Holding the note and servicing the loan are two different things, and the company or bank that receives the monthly mortgage payment does not necessarily hold the note. In order to determine who holds the note and if the mortgage is eligible for the program, Fannie Mae, Freddie Mac or the current servicer must be contacted. If the note is deemed eligible for the lending program, the existing financing is the next variable. Only primary mortgages are eligible for refinance. Mortgages that carry mortgage insurance are ineligible at this point. Furthermore, mortgages with secondary financing attached (i.e. a second loan or line of credit) are permissible but the secondary financing must remain in place and be subordinated. Existing first and second liens can not be rolled together into one new loan.While these variables do prohibit some borrowers from taking advantage of the program, restrictions past this point are fairly limited. Occupancy types are not scrutinized and primary, secondary and even investment properties are allowed. Properties can be refinanced up to a loan to value of 105 percent, and properties located in Eagle County may take advantage of the program with loan balances up to $729,750. Surprisingly enough, an appraisal may not be required in many cases. As far as available loan programs, both traditional 30-year fixed rate mortgages and five- or seven-year ARMs are available as long as there is tangible benefit to the borrower. Interest-only loans are not available.Hopefully, there will be continued improvements to the program in time, but the program does present an enticing opportunity for many borrowers right now. As always, navigating the details and intricacies of the program and its availability should be done so with the assistance of a seasoned and educated mortgage professional. William A. DesPortes is a managing member of DesPortes, Selig & Associates, Professional Mortgage Services. He can be reached at 970-926-9393 or firstname.lastname@example.org.