A Costly Plan for Non-HARP Qualified Homeowners included in State of the Union Address
The State of the Union Address is when the President lets the country know how we are doing, and what his plans are to make things better. One of his big announcements in this year’s 2012 address was a plan to help homeowners struggling to stay afloat, and who don’t qualify for a Home Affordable Refinance (HARP 2.0). As it stands at the moment, the only way that homeowners can qualify for HARP is if their mortgage was scrutinized by Fannie Mae or Freddie Mac prior to June 1, 2009, as well as meeting some other qualifications. Mortgages that aren’t part of the Fannie Mae or Freddie Mac programs are instantly ineligible, as are home loans that are restricted by limits in the Los Angeles / Orange County area. That amount sits at $625,500, which means that even if you conform in every other way, but are even slightly over that limit, HARP will not be available to you.
President Obama’s plan is to rectify that situation for those homeowners who do not currently qualify for HARP, but who are up to date on their mortgage payments. This will allow them to have an FHA insured mortgage, which comes with a higher loan limit ($729,750 in Los Angeles / Orange County). Should it pass, the Obama refi program will only be available to those who have FHA loan amounts.
While FHA mortgages are great, they also tend to be more expensive than conventional loans. That is usually due to a little interference by Congress who is constantly tinkering with the upfront and monthly mortgage insurance fees. Both types of insurance are required on an FHA mortgage regardless of the total loan value.
As of 9:15 this morning, an FHA rate on a loan amount of $729,750 in Los Angeles – Orange County with a 720 or higher credit score is 3.750% for a 30 year fixed rate (apr 4.720). Principal and interest with the financed UFMIP is $3,465.87 and the monthly mortgage insurance premium is an additional $693.62 for a total (PIMI) payment of $4,159.49, not included property taxes and insurance. This payment equals an interest rate in the 5.50% range if you compare it to a conventional mortgage.
The one red flag that seems to be flying over the Obama refi plan is that it will be somewhat costly. The plan is to charge additional fees to banks, which are then almost positive to pass that payment down to their customers in the form of increased fees for everything that they do there.
There is still some way to go before the Obama Refi Plan makes it through Congress, which is never a slam dunk. Should it pass though, it’s reported that homeowners will have their home (primary residence only) subjected to an appraisal, and will also have to prove their income, as well as their employment. They will also more than likely have to show that their mortgage payment have been made on time for the previous 6 months.
It’s probably going to be a fight to get the bill to pass, not only with Congress, but also with the major banks. Rather than wait to see if the Obama Refi Plan passes, you can get pro-active and see if you qualify for an FHA streamlined refi which doesn’t require any sort of appraisal.
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