A recent article entitled Mortgage giants may help borrowers by AP Business Writer Marcy Gordon describes new programs being developed by Fannie Mae and Freddie Mac to help borrowers keep their homes in the light of rising foreclosure rates. Fannie Mae is calling their new program "Homestay" and is designed help borrowers by offering fixed rates and adjustable rates with longer fixed terms than the traditional subprime 2 year fixed loan.
There was no mention of whether these programs will be offered for purchases or are just going to be for refinance transactions. The article also points to the liquidity of the market as a possible reason for higher delinquencies, due to the distance between the ultimate servicer of a loan and the borrower. It appears Fannie and Freddie are looking to offer a more flexible and consumer friendly type of loan.
Personally, I think this is a great opportunity for Fannie and Freddie to positively impact the mortgage market. Maybe rolling out a program that rewards a subprime borrower with 12 consecutive timely payments by reducing their rate(similar to their "timely rewards option" on EA loans) slightly or offering a lower rate by completing a credit counseling course would be a great first step.
Any thoughts?
Michael Byrne
Mortgage Specialist
NJ Mortgage Banker USDA Loans Jumbo Loans FHA Loans VA Loans my site
Zillow Blog My Blog stated income loans Loan Officers: Do More Loans
Foreign National Mortgage Financing Rehab Loans Conforming Jumbo Loans
Co-Op Financing Union Plus Mortgage Super Jumbo Loans Harp Loans
"A referral is the greatest compliment I can receive"
My honest guess is that this program is being designed in response to the growing nation-wide call for a temporary moratorium on foreclosures---whether it comes from congressional action, or the voluntary acts of the mortgage lenders and the investors who hold the paper on these mortgages....
It's easy to blame the lenders/banks/investors who are now foreclosing on these delinquent mortgages (after all, nobody really likes banks--they look at them as a necessary evil)... However, we must remember that these same banks have the MOST to lose if mortgage delinquencies rate keeps increasing at the same rate they have been since the middle of last year.
It is in the lenders best interest to find a more desirable solution to mortgage delinquency than foreclosing on the loan (whether it be loan modification, forbearance or short-sale).
And, don't we all work in a way that looks out for our own best interest?
Paul- Thanks for the great reply. I think Fannie and Freddie will be in for a surprise when they re-underwrite some of these loans that got funded in past few years.
HI,
I THINK IT IS A GREAT IDEA THAT WILL BENEFIT EVERYONE. (LENDER,BORROWER)
THE LENDER IS NOT IS BUSINESS TO GET THE HOMES BACK AND MOST OF THE BORROWERS
STILL NEED THE HOME TO LIVE IN. I THINK THAT DUE TO ALL PROBLEMS IN THE INDUSTRY IT WOULD BE A WIN WIN SITUATION IF EVERYONE QUALIFIED FOR THE PROGRAM BY MODIFIYING
THE LOANS. THIS WOULD BE BETTER THAN LET BORROWER GO 7 OR 8 MOS WITHOURT PAYING AND THEMN FORECLOSING ON THE PROPERTY, HAVING THEM VACATE AND THEM POSSIBLY VANDALIZED AND MAKING THE VALUES AND THE COMMUNITIES GO DOWN. EVERYONE REGARDLESS OF CREDIT SHOULD HAVE A CHANCE TO SAVE THEIR HOMES. THE INDUSTRY HAS BEEN SO BAD AND WE ARE REALLY IN A RECESSION SO WHY INCREASE THE SCORES THIS MEANS MOST OF US DON'T QUALIFY.
I AM NOT SAYING GIVE US MONEY OFF OR SHORT SALE RESTRUCTURE THE LOAN AT A LOWER RATE ALL THE WAY AROUND THE BOARD. THE LENDERS WILL NOT HAVE TO FILE BANKRUPTCY AND THE BORROWERS WILLHAVE THE HOMES. THE LENDERS ARE STILL GETINNG PAID IN FULL AND THEY STILL ARE MAKING A LOT OF MONEY. THIS HELPS EVERYONE. IF YOU ARE BEHIND ON THE MORTGAGE MODIFICATION TAKES 3 MOS OR MORE IN MY CASE WITH CHASE, SO HOW GOOD IS MY CREDIT NOW. I WANT MY HOME AND WILL DO WHATEVER IT TAKES TO KEEP IT. THE GOVENMENT NEEDS TO APPROVE THE HOMESTAY FOR EVERYONE NOT PEOLPE WITH GOOD CREDIT SCORES IF YOUR CREDIT SCORES AR EGOOD YOU REALLY HAVE NO ISSUES.
FHA SECURE ONLY HELPS A SELECT FEW WHAT ABOUT THE OTHERS FACING FORECLOSURE. NEIGHBORHOODS FULL OF EMPTY HOUSES, HOMELESS PEOPLE, BANKRUPT LENDERS IS NOT THE ANSWER. WE NEED WORKOUT PLANS FOR EACH AND EVERYONE THAT IS BEHIND ON THEIR MORTGAGE FOR ONE REASON OR ANOTHER. OUR GOVERNMENT IS SUPPOSE TO HELP ALL OF US NOT A SELECT FEW.