Over the last couple of years, the government has made many attempts at trying to help home owners keep there homes.  Many of these attempts have been disappointments at best or all out failures at their worst.  There are a couple of programs though that are working to help home owners lower their mortgage payments, and get them into good, stable 30 year fixed mortgages.  The two programs I speak of are the DU Refinance + and the Freddie Mac Open Access and they are part of the Making Home Affordable Program.  These two programs are designed for home owners who have seen a decline in their properties value, but have still kept making their payment on time.

Here is a brief synopsis of how the program works and what is required to qualify for it.  These loan programs will allow a home owner to refinance their 1^st mortgage into a 30 year fixed mortgage without mortgage insurance, even if their new first mortgage is more than 80% of their homes value (up to 125% of the homes value).  You have to qualify the same way you would with a regular refinance and the rates will (in many cases) be similar to what you would get if you were refinancing with an 80% loan to value (LTV).  There are two main requirements for this program though.  First, your loan must be serviced by Fannie Mae or Freddie Mac.  To check this go to the website http://www.makinghomeaffordable.gov/loan_lookup.html and follow the links.  Remember too that just because you are not making your monthly payment to Fannie or Freddie, doesn’t mean they aren’t the servicer.  Either check the website above or give the Kunselman Team a call and we can look it up for you.  The second qualifying factor for this program is that your original first mortgage had to be for less than 80% of the homes value at the time you got the mortgage.  So if you have had or currently have mortgage insurance on your mortgage, you don’t qualify for this program.  That being said, there may still be options for you as long as you have not missed any of your payments.  You are allowed to have a 2^nd mortgage on the property (this is perfect for all of you who got an 80/20 when you bought or refinance) as long as the existing 2^nd mortgage company is willing to re-subordinate their mortgage.  You cannot get cash out on this refinance but you can save a lot of money by lowering your interest rate.

The Kunselman Team has helped many home owners with these amazing programs, and have lowered some peoples interest rates by over 1.50%.  The Making Home Affordable Programs are shining diamonds in the trash pile of the many failed government programs out there and while it won’t work for everyone, it may just work for you.  So give The Kunselman Team a call to see if you qualify and take advantage of the low interest rates before they go up.

1. The $8000 first time home buyer tax credit that didn’t have to be paid back is introduced.
2. Foreclosures declined but short sales were on the rise.
3. Stated income loans went away, making it difficult for self-employed income borrowers to get a new mortgage.
4. New mortgage guidelines tightened up.
5. Large investors (unless they are cash buyers) got bumped out of the market.
6. Resurgence of the small/first-time investor.
7. Resurgence of the USDA 100% financing mortgage for rural areas.
8. The Government injected lots of capital into the mortgage backed securities keeping interest rates low.
9. The Government injects billions into the banks in the form of the TARP (Troubled Asset Relief Program) with the intent to modify existing mortgages.  The banks modify only a very small percentage of these mortgages.
10. Fannie Mae and Freddie Mac introduce the DU Refinance + and the Home Access Programs designed for home owners to refinance who initially had 20% equity when they first got their mortgage and have seen their home values decline.  Program is a moderate success.
11. Rates went up and rates went down.
12. The Home Valuation Code of Conduct (HVCC) is introduced in May.  Appraisals must now be ordered through Appraisal Management Companies (AMCs). Many reports indicate this system is very flawed and has lead to higher costs to the borrower in obtaining a new mortgage.
13. The Mortgage Disclosure Improvement Act (MDIA) is introduced in August.  It gives borrowers more information upfront before any money can be collected, but adds costly time to the mortgage process.
14. The Government extended the $8000 First Time Home Buyer Tax Credit to June ’10 and added a $6500 repeat home buyer tax credit.  Experts say there will not be any more extensions.

1. Good Faith Estimate (GFE) 2010 is introduced January 1, 2010.  Six items now required before the loan originator can provide you with a GFE: Name, Property address, Estimated Property Value, Loan Amount, Income, and Social Security Number (Credit Report). Fees locked for 10 business days from issuance of GFE.  Designed to protect the consumer from an increase in fees and encourage comparing options.  Most likely, will lead to less comparing since a GFE can’t be issued until the loan originator can pull credit.
2. Legislation on the table to repeal HVCC.
3. Federal Reserve Board debating over Yield Spread Premium (YSP).  In the past, YSP was a credit that had been paid to the loan originator by the lender.  GFE 2010 changes YSP from a loan originator credit to a borrower credit.
4. HUD to suspend the 90 day anti-flipping rule for one year starting February 1, 2010.  Existing rule prevents a home owner from selling a home that they have owned for less than 90 days.  Lenders still have to approve this new rule.

Today’s “Know Your Mortgage” article is going to cover Yield Spread Premium or YSP. This is becoming a hot topic in the news right now because the Federal Reserve has purposed a new rule that would make it illegal for banks to pay yield spread to any loan originator. This rule, if passed will have a very detrimental impact on your ability to get a new mortgage. So in that light, I thought it would be good to explain what YSP is and how it facilitates mortgage lending.

Yield Spread Premium is money that is paid to a mortgage broker, by the bank, for originating the mortgage. The dollar amount (of the Yield Spread Premium) paid by the bank is determined by the rate of the new loan. The third and forth component of the pricing of a new mortgage is the origination and discount points. Both of these are costs paid by the consumer. It is the relationship between all four components that make up the majority of costs of a new mortgage. If you are paying discount points, the broker is not receiving any yield spread. If you are not paying any origination points, the broker is getting paid in Yield Spread Premium. Some of the benefits of Yield Spread Premium are:

 YSP allows the consumer to use other sources besides banks to get a mortgage done.
 YSP allows for lower closing costs because that lender is paying a portion of the closing costs.
 YSP allows for better flexibility on rates.
 YSP paid to mortgage brokers allows you the consumer to see how much money is being paid on your mortgage.

Yield Spread Premium allows for more consumer options by allowing non-bank companies to originate mortgages for the consumer. The largest collections of these companies are mortgage bankers and brokers. In fact, it’s very likely that many of you reading this today got your mortgage through one of these sources. Some of the ways that mortgage brokers and bankers help facilitate the mortgage process is by offering more programs, better rates and fees, and probably a shorter time frame. In addition, because most mortgage brokers are paid strictly commission, they will work harder for that business because they don’t get paid unless they get you into a loan that works for you.

Yield Spread Premium has also allowed for consumers to have lower closing costs and more flexibility on rates. When a loan originator works for a bank, they have very stringent pricing guidelines to follow. A mortgage broker on the other hand has the option of looking around with multiple lenders to see which one has the best pricing.

The other benefit that Yield Spread Premium brings to the table is that the consumer gets to know what is being made on their new mortgage. When you are working with a mortgage broker, Yield Spread Premium must be disclosed from the beginning of the loan process now in addition to on the final settlement statement. What that means is that you the consumer see from start to finish, what a mortgage broker is making on a new mortgage. Banks also have a yield spread premium but they are not required to ever disclose. This does not mean that money isn’t there. It just doesn’t have to be disclosed.

The Fed’s argument against YSP is that it gives incentive for brokers to give their clients worse loan programs because of their own personal gain. And even though, law requires full disclosure about the Yield Spread Premium, the Fed believes that the American consumer is not smart enough to protect itself so YSP must be eliminated. The reality is that many consumers “shop” around when looking for a new mortgage or they work with someone they know and trust. If you have had a bad experience in the past with a mortgage broker, odds are you either didn’t “shop” around or were not working with someone you trusted. If you don’t know any good mortgage brokers, ask a friend. If you don’t have any friends, check out your local real estate association. Any of these sources should be able to provide you with a list of reputable mortgage brokers.

To read more about the new Federal Reserve Board Ruling Regulation Z – Truth in Lending – Closed-end Mortgages [R-1366] check out http://www.federalreserve.gov/newsevents/press/bcreg/20090723a.htm. The purposed rule is currently in its public comment period, so please leave comments!

We hope that you found this information useful and as always, if you would like to see what it feels like to work with a mortgage team that can bring a little sanity to an insane world, give The Kunselman Team a call.