A reader sent this in:
An article in today’s Wall Street Journal sounds like the HARP program should be named CRAP, because Fannie/Freddie are holding the line by not allowing HARP refi’s on loans over 6% to appease their bond holders, and the Bond rates increased yesterday on this news.
All while our guviment is out there saying they are trying to ‘help’ homeowners that are stuck with high loan rates and high LTV’s that do not allow them to refi, as long as they are current. Other recent news showed Fannie/Freddie Execs are getting massive payouts, while homeowners bend over and take it.
I am in this group over 6% trying a ‘streamlined’ Wells refi but Fannie will not approve it under HARP and I am being forced to paydown approximately $22,000 to keep the new 1st plus 2nd HELOC that is being subordinated under a combined 95% LTV.
Here’s an excerpt of the WSJ article:
NEW YORK—Mortgage-backed securities issued by Fannie Mae and Freddie Mac jumped Wednesday, as investors grew more confident that new incentives to boost refinancing for borrowers stuck with high-interest-rate loans would have a limited impact.
Fannie Mae 6% mortgage-backed securities—backed by 6.5% home loans—rose 8/32 to 109 14/32, outpacing gains in Treasurys by about 7/32 after accounting for the change in interest rates, according to Credit Suisse’s Locus analytics. Prices fell late in the day, after Fitch Ratings warned about the European debt exposures of large U.S. banks, which are some of the biggest buyers of mortgage-back securities.
“There was a big fear that you’d see a big rise in prepayments, and, based on what [Fannie Mae and Freddie Mac] said, that has receded,” said Todd Abraham, co-head of the government- and mortgage-bond group at Federated Investors in Pittsburgh. “It doesn’t look like they’ve done anything big here.”
The changes to HARP came after more than a year of speculation that the administration would enact major overhauls of mortgage programs to help lift home buying out of its five-year slump. The talk persisted even as banking groups and some investors warned that rewriting rules could discourage buyers of the securities and result in higher interest rates.
If you have an underwater house with a note over 6%, why are you making payments still?
If you didnt’ have a reason to stop, this should be it.
chuck
PS and, for that matter, if you’re underwater and UNDER 6%, why are you still making payments? This sounds like you’d be the last to get foreclosed on… something to think about when you make your rent payment to the bank this month.
This is clear evidence that the folks that run Fannie and Freddie and their federal regulators have zero interest in helping borrowers. Their only loyalty is to their bondholders.
I have several rental properties with loans over 6 percent. Nothing is underwater, most have at least twenty percent equity. Since no one will refinance these loans down to more reasonable (i.e. market) rates, I am going to run a hard-nosed cash flow analysis on each property. Where I can do better by selling and reinvesting my money elsewhere, after consideration of transaction costs, I will do that.
Even though the transaction costs are high, perhaps every homeowner with a mortgage rate above 6.5 percent should do the same analysis. If everyone out there that is trapped by this outrageous behavior by their GOVERNMENT sponsored entities wrote the loan guarantor a letter (with a copy to the servicer and their congressperson) demanding the loan be refinanced or the property will be sold, maybe the prepayment tsunami threat would have an effect on these stewards of the public purse.
For every real estate speculator (nothing wrong with that, done it myself many times) demanding access to a crazy low-rate refi and getting national MSM attention, how many financially responsible folks are out there getting bupkiss on their fixed income instruments and being completely ignored?
Another Investor,
What are the barriers that you or other investors are encountering as far as refi? Is it a problem because you owe more than 4 or just have too many loans out in the banks opinion or are there other common barriers?
On the commercial side, there is effectively zero financing to do a purchase, but there is a herd of lenders fighting to do a sensible refinance.
Since there is no government backing/support for the commercial debt market (except for multi family which is why they are trading at near peak value) lenders are being conservative. However, we are still getting 65%-75% loans at sub 6% rates.
Simply amazingly low rates when you consider we can get a stabilized yield of 10%+/- on decent assets, and refinance 70% at 6%. 400bp spread is incredible.
Keep the government out of the commercial world as its working fine without them.
Teeee-Booowwwwww!!!!!!!!!
I have considered a strategic default, but still need to live somewhere. My LTV is slightly under 100% and my ‘rent’ payment to the mortgage company is less than I would pay to rent housing for my family of six. Including insurance and taxes, my housing cost is ~40% less than the house next door rents for (owned by a Navy couple that were sent to Spain) and I still have the mortgage interest deduction until Congress decides to slam that door shut. There also is personal responsibility to repay the debt that I incurred, rather than pawning it off on the lender or Taxpayer bailouts.
It is simply amazing that politicians tell us their HARP program is designed to help those ‘stuck’ with high interest rates, while this article indicates otherwise.
Tebow is the talk of the town. Was at the game last night and the place was rocking! Didn’t realize what a dated stadium the Q is till I went to Mile High…what a difference.
Hurts to say it, but in the last 4 games since Tebow was named starter: Tebow 3-1, Rivers 0-4. No one could have made that bet in vegas.