The enhancements will allow some homeowners who are not currently eligible to refinance to do so under HARP. The changes reduce costs for borrowers who want to refinance into a more affordable home loan. The HARP mortgage program also eliminate the cap that restricted borrowers who owed more than 125% of what their house is worth from utilizing this government mortgage aid program.

HARP Mortgage Eligibility – To be eligible, you must meet the following criteria below:

• Your home loan owned or guaranteed by Freddie Mac or Fannie Mae, sold to those agencies on or before May 31, 2009.
• The current LTV ratio on the 1^st home loan must be greater than 80%.
• You may not have already completed a HARP refinance
• You must have a flawless payment history on your mortgage in the past six months and can only have been late once on your home loan payment in the last year.

How do I take advantage of HARP? According to the FHFA, the first thing homeowners should do is verify that their home loans are owned by Freddie Mac or Fannie Ma.  If your mortgage servicing company acknowledges your connection with Fannie or Freddie, you should contact a HARP lender like Nationwide that offer the Home Affordable Refinance Program.

Are there borrowers who have wrongly been foreclosed upon? Jill Schlesinger doubt that in a recent article posted at CBS News online.  She believes it’s more likely that the many of these lenders “were sloppy” prior to bubble bursting.

U.S. laws indicate that the bank representative signing must have examined the details of the transactions and have personal knowledge of the facts contained in the affidavit. That probably did not occur in many of the closed loans that were originated in the last ten years. Schlesinger notes that “it’s not apparent that the banks were executing a nefarious plot to swindle homeowners out of their homes.” In most cases, bank and employees in lending operations were overworked and likely relied on the assertions from other employees that the homeowner was delinquent, without verifying the details contained in the affidavit.

Take the example cited in today’s Wall Street Journal—Homeowner Israel Machado is behind on a $400,000 home loan and has hired a lawyer not to dispute the fact that he’s delinquent, but “to convince the owners of the mortgage to cut Mr. Machado’s loan balance to between $150,000 and $200,000-the current selling price for comparable homes in his community near West Palm Beach. ‘The whole intent was to get them to come to the negotiating table, to get me in a fixed-rate mortgage that worked,’ Mr. Machado said.”  OK, so Machado had a mortgage and is seriously delinquent. Even if the bank employee signing the foreclosure documents goofed, it doesn’t really change the facts because the borrower is on course to lose his house because he is unable to make the monthly payment and financial institutions are reluctant to reduce the home loan principal balance that would allow him to stay in the house.  The FHA short refinance program offers principal mortgage reductions, but borrowers must have a stellar history on their mortgage payments while meeting other strict criteria for loan program eligibility. 

To Schlesinger, it looks like this subprime mortgage crisis is good for only one group: plaintiffs’ lawyers. Check out this ad from a Florida attorney:  If you are a defendant in a foreclosure case in which GMAC was or is the Plaintiff, or in which GMAC was or is the servicer, I welcome you to contact my office for a free consultation, especially if (the ad mentions a specific name here, which I have deleted) signed an affidavit in your case. Even if your foreclosure case is already over, there may be grounds to vacate it. In fact, you may be able to move back into your home (even if you’ve already been foreclosed).  It’s highly doubtful that any significant number of foreclosures will be reversed or that beleaguered former homeowners have the money to hire one of these attorneys based on the hypothetical promise. Of course that doesn’t prevent lawyers from preying on those who have already been through an emotional nightmare.  The original article was written by Jill Schlesinger for CBS.

According to mortgage data firm First American Core Logic, about 1 million option ARM loans are scheduled to reset higher in the next four years. About 75% of those home loans will adjust either next year or in 2011, with the peak coming in August 2011, when about 54,000 mortgages recast.

In most cases, borrowers with Option ARM mortgages will be hit with unaffordable monthly payments are another threat to the housing recovery and the economy, said Susan Wachter, a professor of real estate finance at the University of Pennsylvania’s Wharton School. Owners may surrender properties to the bank rather than make higher payments for homes that have plummeted in value, she said. “The option ARM recasts will drive up the foreclosure supply, undermining the recovery in the housing market,” Wachter said.  More than $750 billion of option ARMs or negative amortization mortgages were originated in the United States between 2004 and 2008.

Shirley Breitmaier chose the option ARM when refinancing her $315,000 previous home loan.  Her payments began at 3/8 of 1%, or less than $100 a month, according to Cameron Pannabecker, a mortgage broker who is working with Breitmaier. The option ARM loan allowed her to forgo higher payments by adding the unpaid balance to the principal. She will be required to start paying principal and interest to amortize the debt when the loan reaches 145% of the original amount borrowed.  Such terms aren’t typical for option ARMs, which were also known as “pay option” adjustable rate mortgages.  The mortgage rates on many payment option ARMS are “typically very low in the first one to three months” and can be as little as 2%, according to Federal Reserve.  Article was written by Brian Louis for Bloomberg.

The volume of bad credit mortgage loans continues to drop but the demand for bad credit mortgages continues to rise.  The growing disparity has significantly contributed to the foreclosure crisis. 

www.youtube.com/watch?v=ojwUEWbion4

20% of U.S. homeowners with mortgage loans are “underwater,” meaning they owe more money to their mortgage lender than their property is worth. Borrowers who have mortgage loans above the conforming and FHA loan limits are not eligible for the federal mortgage modification or refinance option.

www.youtube.com/watch?v=ex7CBmKLTBE

Beck says we are living in a society that rewards people for making a payment on time.  Many people took out home loans who owe more on their mortgage than their home is worth and that is unfortunate but bailing these homeowners out is dangerous to our banking system.

First American Core Logic announced that more than 8.3 million U.S. home mortgages had negative equity as of year-end, compared with 7.6 million just three months earlier.  Another 2.2 million mortgaged owner-occupied properties have homes worth only about 5% more than their debt, so they are approaching negative equity as home values slide. More than 20% of all mortgaged properties nationwide are underwater, with more owed on their mortgage loans than the homes are worth, according to a report being released today.   Borrowers are having a difficult time qualifying for a FHA refinance loans or cash refinancing for debt consolidation.

About one-third of homes nationwide are owned outright, and they were not included in the statistics. The near-negative equity homes, combined with the underwater homes, account for a full quarter of all U.S. mortgaged properties, the research company said. The numbers are ominous because negative equity is half of the formula that usually leads to foreclosure.  “Being underwater is a necessary but not sufficient condition for home loan default and foreclosure,” said Mark Fleming, chief economist for First American in Washington, D.C. “The other necessary but insufficient condition is inability to make your mortgage payment due to job loss, divorce, a significant change in the payment because of an adjustable interest rate mortgage. The new loan modification plans are more aggressive with incentives for lenders to renegotiate the principal amount owed on the property.

Over the past year, the total value of U.S. homes has fallen $2.4 trillion, going from $21.5 trillion in December 2007 to $19.1 trillion at the end of 2008. California, where more than $1.2 trillion of housing value evaporated last year, accounted for half that decline. That’s vastly disproportionate to California’s share of the mortgage market, estimated to be 16% to 20%, Fleming said.  However, despite the steep declines, California overall is in better shape than some neighboring states because it still has a stock of mortgages taken out over two decades ago on homes that now have accumulated significant equity. On average, Californians with mortgages have 30% equity in their homes. By comparison, the average equity for all homes that still have mortgages in Nevada is just 3% – the worst in the nation. “Las Vegas is a city that exploded over the past 10 years,” Fleming said. Now that values have tumbled, “the last 10 years is a do-over.”