As expected, The President announced that Fannie and Freddie would redesign their HARP program to become more accessible to underwater homeowners. Affectionately dubbed HARP 2, the announcement is getting a lot of fanfare.
Critics, however, argue that while some can be helped, many will still be left in the dark to fend for themselves. For now, no one really knows until FHFA announces the actual details on November 15, 2011.
What is known :
1. Eliminating the risk based fees for certain borrowers and reducing fees on others. (This is a good idea as some risk-based fees reduce savings form refinancing to a lower rate).
2. The current loan-to-value cap of 125% will be removed. Ostensibly, there will be no equity requirements. (This too can be beneficial, provided lenders are willing. Few lenders will go to 125% now).
3. Potentially waiving the appraisal if other valuation methods are justified.
4. Waiving and/or reducing the onerous contractual requirements under the current plan(commonly known as reps and warrants).
5. Extending the date until 12/31/13.
What is missing is language to force 2nd mortgage lien holders to comply. Sen. Boxer (D -CA)proposed a bill a few months ago(which I covered in this column) targeting the lenders that held 2nd mortgages and penalizing those uncooperative lenders by disallowing them to sell their 1st mortgages to Fannie, Freddie and FHA. Given that those are the only loans available, that may be an incentive!
Boxer’s office is quiet on this provision but given her passionate support for HARP 2, I am optimistic that this important provision will be added. Stay tuned…..
Another bill proposed last week was a “Housing Visa” bill that would allow foreign investors to buy a home in The US. Senator Schumer(D- NY) feels that this will help housing. He is dreaming. First, the bill is not a work visa, it is simply a visa to allow homeownership. It must be a primary residence lived in for a minimum of six months and worth $500,000 or more (or two homes totaling $500,000 with caveats).
Therefore, to qualify, you must be wealthy enough to not work for 6 months; buy a home for ½ million or more; and, the buyer must undergo criminal and background checks but the family does not.
In a perfect world, where would this person buy? Most likely, NYC, Miami, Palm Beach…. How will that help housing? The bill isn’t going to help housing and is not worth the wasted paper submitting it. Not to appear a nationalist, but wouldn’t it make more sense to help Americans that are struggling to keep their homes and jobs? Reward homeowners that are making their payments as agreed?
In other news, meetings took place to discuss eliminating the mortgage tax deduction and 30-year mortgage. Yes, those are the panacea for housing. While the media is covering “Occupy Wall Street”, maybe it should focus on the foolish legislation trying to pass before we have “Un-Occupied Main Street.”
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