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Less than 20% Equity in your home?

In the current scenario, families who own less than 20% Equity in their home have a very difficult time to take advantage of the current lowest interest rates.  The new proposal would allow home owners who have Fannie Mae and Freddie Mac guaranteed loans to get a new loan up to 105% of their existing home appraised value.  This is available to credit worthy home owners only and the refinanced loan to be a 15 year or 30 year fixed mortgage.  The loan shouldn't contain any clause for prepayment penalty.  Full details of the plan is still awaited and will be published at a future date when available.

On the Verge of default?

Obama's plan also contains provisions to help struggling individual families and neighborhoods to reduce foreclosures and stabilize home prices.  The goal of the program is to "reduce the amount homeowners owe per month to sustainable levels." Homeowners who are current on their loans but are struggling can apply for this program. As such, this is one of the few programs designed to help homeowners who may face delinquency soon, but are current at the moment.

Tax Credit for First Time Home Buyers

According to the plan, first-time homebuyers who purchase home from beginning of the year until the end of 2009 may be eligible for the lower of an $8,000 or 10% of the value of the home as tax credit.  It's important to understand that the tax credit offered as a dollar to dollar tax deduction rather than a reduction in a tax liability.  Better still, the incentive is refundable, which means you can receive a check for the credit even if you have little income tax liability.  This tax credit is available only for the purchase of a primary residence either detached single family home or an attached home.  The First time home buyer is defined for the purpose as a home buyer who doesn't own their home in the past three years.  For more detailed information contact: raj@valleysaversmortgage.com 

 Sunday, July 20, 2008 9:46:10 PM

The Federal Reserve Board on Monday, July 14th 2008 approved a final rule for home mortgage loans to better protect consumers and facilitate responsible lending.  The rule prohibits unfair, abusive or deceptive home mortgage lending practices and restricts certain other mortgage practices.  The final rule also establishes advertising standards and requires certain mortgage disclosures to be given to consumers earlier in the transaction. 

The final rule adds four key protections for a newly defined category of "higher-priced mortgage loans" secured by a consumer's principal dwelling.  For loans in this category, these protections will:

• Prohibit a lender from making a loan without regard to borrowers' ability to repay the loan from income and assets other than the home's value.  A lender complies, in part, by assessing repayment ability based on the highest scheduled payment in the first seven years of the loan. To show that a lender violated this prohibition, a borrower does not need to demonstrate that it is part of a "pattern or practice."
• Require creditors to verify the income and assets they rely upon to determine repayment ability.
• Ban any prepayment penalty if the payment can change in the initial four years.  For other higher-priced loans, a prepayment penalty period cannot last for more than two years. This rule is substantially more restrictive than originally proposed.
• Require creditors to establish escrow accounts for property taxes and homeowner's insurance for all first-lien mortgage loans.

"These changes have made for better rules that will go far in protecting consumers from unfair practices and restoring confidence in our mortgage system," said Governor Randall S. Kroszner.

In addition to the rules governing higher-priced loans, the rules adopt the following protections for loans secured by a consumer's principal dwelling, regardless of whether the loan is higher-priced:

• Creditors and mortgage brokers are prohibited from coercing a real estate appraiser to misstate a home's value.
• Companies that service mortgage loans are prohibited from engaging in certain practices, such as pyramiding late fees.  In addition, servicers are required to credit consumers' loan payments as of the date of receipt and provide a payoff statement within a reasonable time of request.
• Creditors must provide a good faith estimate of the loan costs, including a schedule of payments, within three days after a consumer applies for any mortgage loan secured by a consumer's principal dwelling, such as a home improvement loan or a loan to refinance an existing loan.  Currently, early cost estimates are only required for home-purchase loans.  Consumers cannot be charged any fee until after they receive the early disclosures, except a reasonable fee for obtaining the consumer's credit history.

The new rules take effect on October 1, 2009.  The single exception is the escrow requirement, which will be phased in during 2010 to allow lenders to establish new systems as needed.