Some weeks, very little occurs in the lending/real estate world. Then you get weeks like this where a number of interesting items appear. Here are some of the highlights:
President Obama has named Carol Galante the Acting Commissioner of FHA. Former commissioner Stevens stepped down late May and the interim commissioner decided to move to another area within the agency. She has her work cut out for her!
A Mortgage Insurance firm is now offering a bonus for paying your mortgage on time over 5 years. Some are against this stating that it rewards people for doing what they are supposed to do. Others argue that we are already rewarding people for not doing what they are supposed to, so why not? Interesting debate.
Senator Barbara Boxer introduced a bill this week that seems to have some merit along with a number of popular supporters such as Bill Gross ( who, incidentally, is now back buying treasuries again); Mark Zandi(an economist), and Senator Johnny Isakson ( A Republican ).
Not only does the bill have the support from across the aisle, it actually seems to address some of the problems facing homeowners today and problems discussed here over the past months. I am curious to see how far this goes and what will be stripped/added in order for it to pass. For now, Senator Boxer’s legislation would:
- Eliminate risk-based fees on loans for which Fannie and Freddie already bear the risk.
This would save borrowers money on adjustments to the rate based on scores, equity, etc. For the average borrower, that could equate to significant savings up front and long term as well as help with debt ratios and affordability.
- Remove refinancing limits on underwater properties.
Given the current state of housing, many homeowners have seen their equity erode with the economy. Despite rules allowing for up to 125% of value to refinance, most lenders cap at 105% and some at 95% of the current value. If all a person is doing is lowering their rate, and they are paying on time, why shouldn’t we help?
- Make it easier for borrowers with second mortgages to participate in refinancing programs.
Bulls Eye! This is one of my pet peeves with lenders today- charging a borrower money to consider subordinating with no guarantee that they will. With subordination, the second mortgage lender “steps aside” and lets the new first mortgage holder replace the existing one. Few lenders agree even though they are in no worse shape. I am happy to see this addressed finally.
- Require that borrowers are able to receive a fair interest rate, comparable to that received by any other borrower in good standing who has not suffered a drop in home value and has stayed current with their mortgage payments.
This one seems to make sense too. Under this program, the borrower can not cash out- they are simply lowering their rate. Why charge them a higher than market rate to do so? I submit that if this bill, in its current state, was enacted a few years ago, housing, jobs and other economic data would all be better than it is today. One bill will not accomplish it alone, but it is a step in the right direction.
Monthly savings equals spending. That segues into confidence. Confident people buy homes. Confident employers hire workers. Workers use paychecks to buy and the cycle continues. If this bill is not hijacked with add-ons/deletions, Senator Boxer just scored a TKO!
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