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The Obama adminstration announced broad outlines of the revised Home Affordable Refinance Program, on Oct. 24th.   Fannie Mae and Freddie Mac issued guidance last week that filled in most of the details.

Making sense of the story.

HARP 2 greatly reduces or eliminates the risk-based fees Fannie and Freddie charge on many loans and virtually eliminates the chance that lenders will have to pay for losses on loans that go into default if they made underwriting mistakes.  It also vastly streamlines the underwriting process.

Although lenders can begin taking applications Dec. 1, it could take several months before the new loans are made.  Frannie Mae said it won’t begin buying certain types of refinanced loans until March.

To qualify, the existing loan must have been sold to Fannie Mae or Freddie Mac on or before May 31, 2009.  the loan balance must be more than 80% of the homes market value.  The loan must be current for the last six months, with no more than one late payment in the last 12 months.  Those who previously refinanced through HARP are ineligible.

The new program improves on the existing HARP refi program by letting borrowers refinance into a new fixed-rate loan regardless of how much is owed.  The existing program caps the new loam at 125% of the homes market value.

Read More: http://www2.realtoractioncenter.com/site/R?i=P_3LpPM4O7vB0bC4VAA0JQ

Related articles

• Will changes to HARP really help? (avidlawblog.wordpress.com)
• Realty Q&A: How to find out who owns your mortgage (marketwatch.com)

The average rate for 30-year-fixed-rate mortgages fell to 3.94% for the week
ended Oct. 6, according to mortgage-finance giant Freddie Mac—the lowest on
record. Rates on 15-year loans, meanwhile, have fallen to a record low of 3.28%.

While mortgage rates vary by region even among the nation’s biggest lenders,
they are down throughout the country for borrowers with excellent credit.
Citigroup, the third-largest U.S. bank by assets, is pitching a 4.193% rate on
30-year-fixed loans and a 3.806% rate for 15-year-fixed mortgages. EverBank
Financial of Jacksonville, Fla., is offering Cincinnati-area residents a 3.89%
rate on 30-year fixed-rate loans.

Steve Walsh, who heads mortgage lender Scout Mortgage in Scottsdale, Ariz.,
says he has seen a surge in interest among borrowers looking to take advantage
of low rates. “There’s a feeling that rates are basically at the lowest they can
get,” he says. But are they?

No one can predict the future, of course, but policy makers seem intent on
pushing rates down even further.

The Federal Reserve, for example, is trying to move rates lower by buying
more mortgage-backed securities. And Obama administration officials are talking
to lenders about ways to reinvigorate the Home Affordable Refinance Program, a
government initiative to help borrowers refinance even if they have little or no
equity left in their homes.

The goal for both: to get rates low enough so that more people will find it
beneficial to refinance. If people start doing it en masse, it could help the
economy.

“In the short term, rates could fall,” says Brad Hunter, chief economist for
Houston-based Metrostudy, a housing-market research firm. “In the longer term,
rates will rise as the economy starts to strengthen.”

If that were to play out, then refinancing now, with rates still around 4%,
could be a mistake. That’s because the chances are good that if you own a home,
and have significant equity in that home and good credit, you already have
refinanced in the past few years. Because refinancing involves costs—typically
2% of the mortgage value—it often doesn’t pay to refinance every time rates tick
down, tempting though it is.

“Don’t become a refinance junkie,” says Greg McBride, a senior financial
analyst at Bankrate.com, a consumer-information site. “You pay for it later in
the form of closing costs.”

So how far do rates need to fall before it makes sense for you to refinance?
Economists at the University of Chicago have tried to answer the question.

The ideal refinance rate must factor in closing costs, marginal tax rates,
the number of years left on the mortgage and other factors, the economists say.
Homeowners often make decisions based on faulty assumptions about rates, says
David Laibson, an economics professor at Harvard University and one of the
Chicago study’s authors. “Mortgage rates follow what we call a random walk, and don’t bounce back from
lows like most people assume,” he says.

In other words, what goes down could keep going down—even if it goes up for a
little while first. If you catch the first big dip, you can miss later ones that
offer even better opportunities.

The economists produced an online calculator, at zwicke.nber.org/refinance/, that distills their theory into a
tool that calculates how far interest rates need to fall for homeowners to
derive value from refinancing—the “optimal” refinance rate.

For example, their formula suggests that a homeowner with a $400,000 mortgage
with 25 years left on a 30-year-fixed rate mortgage at 4.75% shouldn’t refinance
until rates fall to below 3.51%, assuming 2% closing costs.

The risk of waiting for a lower rate, of course, is that it will never come.
If you are unwilling to take the gamble, your best bet is to negotiate hard on
fees.

The conventional wisdom is that it doesn’t make sense to refinance unless you
can shave at least a point off your interest rate. That’s because you don’t want
your “break-even” point—when your savings exceed your refinancing costs—to be
longer than two years or so.

But if you can persuade your lender to waive the fees, or most of them, you
might need only a half-point of savings to make a deal worthwhile, says
Bankrate.com’s Mr. McBride.

Last week, Michael Allison refinanced his $417,000 mortgage on a
three-bedroom California Ranch-style house in Santa Barbara, Calif. The
41-year-old fitness-center owner says he will save $200 a month by switching
from a 30-year fixed-rate mortgage at 4.87% to one at 4.25%.

“It’s an absolutely great deal and didn’t cost me anything,” Mr. Allison
says. His lender, Provident Savings Bank in Pleasanton, Calif., covered the
closing costs after his real-estate agent made some calls to the firm.

With a little negotiation, homeowners can persuade lenders to cover their
fees. “It’s not a free lunch,” Mr. McBride says, because borrowers get slightly
higher rates in exchange—but it is a good way to minimize your upfront
costs.

Another option that’s growing in popularity: refinancing a home at a shorter
term—say, 20 or 15 years. If you can find a rate that keeps your monthly payment
about the same as you were paying on your old 30-year loan, the decision is a
no-brainer, says Mr. Walsh of Scout Mortgage.

Lloyd Qualls, a 57-year-old accountant in Mesa, Ariz., decided to do just
that. Last month he ditched his 30-year fixed-rate loan at 4.875% for a 15-year
fixed-rate loan at 3.375%. While that boosted his payments by $89 a month, it
will shorten his payment period by 13 years and save him $104,233 on interest
over the life of the loan.

Read the entire article here: http://www.mortgagematch.com/news/mortgage-types/ehlp-helps-distressed-homeowners-1443/

Go to the government website here:  http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/hcc/ehlp

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Trying to decide how to get to your next vacation?  Should you fly, drive, take a train etc.?  Which one will be more cost effective.  which mode of transportation will leave a bigger carbon footprint?  Now you can go to www.cost2drive.com to find out!  First, you enter where you are leaving from and where you will be going.  Then you put in the year make and model of your car it will calculate  the cost.  You can even compare it to the cost of flying if your vacation trip is far away.

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• Fly or Drive? I can’t decide. Now I don’t have to (gadling.com)
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The Water quality Association estimates that 4 out of 10Americans use a home water treatment unit.  Even though ACWD delivers high quality drinking water that meets or exceeds all state and federal drinking water standards,many individuals in the service area use their own water treatment units at home.  One of the most commonly used home water treatment units is the point-of-use filter.  These filters are commonly utilized inside a water pitcher, installed under the sink, attached to a facet or on the water/ice line for the refrigerator.

In general, home water filters can be effective at improving the taste of water, and some will also reduce lead and other contaminants.  Home water filters are made by numerous manufacturers and use a variety of filter materials.  The most common material is activated carbon.  Activated carbon is extremely porous; the pores enable the carbon to bond with contaminants and trap them.  It is important to remember that activated carbon filters must be replaced periodically because the can become plugged; once the filters adsorptive capacity is used up, no further contaminant removal occurs.  Think of it as a parking lot: once all the spots are taken no one else can park there.

As with any water treatment unit, activated carbon cannot remove all possible drivking water contaminants.  Because activated carbon systems are limited in the types of compounds they can effectively remove, it is essential that you determine what you are trying to remove before purchasing such a system.  To help determine what contaminants a given water treatment unit will remove. look for a certification from the California  Department of Public health (CDPH).  CDPD certification means that the deivce has been tested to:

1. verify the manufacturer’s health-realted performance

2. ensure the materials used within the device do no add contaminants.

This information came from the Alameda County Water District news letter.

The number of borrowers who are underwater on their mortgages has declined by more than 500,000 to date in 2010, but an additional 2.4 million borrowers were near negative equity (within 5 percent) in the third quarter. Negative equity and near-negative equity mortgages accounted for 27.5 percent of all mortgaged residential properties at the end of the third quarter.

Negative equity was most prevalent in five states: Nevada, Arizona, Florida, Michigan and California.

2. GET RID OF THE LEAD FOOT.  According to the U.S. Department of Energy (DOE), quick acceleration and heavy braking reduce fuel economy by as much as 33% on the highway and 5%around town.  Give the lead foot a rest to improve your fuel efficiency and your passengers ride.  Difficulty: l

3. STOP IDLING.  Although most of us grew up needing to let the car “warm up” any car built after 1990 doesn’t need the warm-up, so go ahead and get a move on.   Difficulty: l

4.GIVE YOUR CAR A BREAK.   You may n0t be able to retire your car completely, but try to opt for public transportation, carpooling, walking or biking when you can, and you’ll save both money and carbon emissions.  For each gallon of gas you save, you keep 20 pounds of carbon dioxide out of the environment and nearly $5.00 in your wallet!  Difficulty: l

5. BE REASONABLE WITH THE THERMOSTAT.  You don’t have to be uncomfortable in your home to save energy or reduce emissions, but try to keep it as warm as you can stand it in the summer, and turn it down to 68 or below in the winter.  Difficulty: l

6, CAULKING AND STORM PANELS.  Double-paned wondows are are good fix but, a least expensive way to improve insulation, is to seal and leaks or gaps around doors and windows with caulking and weather stripping.  You can then add a storm panel to your single-pane window to increase energy efficiency for less money than double paned windows.  Difficulty: ll

7.SWAP YOUR A/C FOR A CEILING FAN.  Ceiling fans are remarkably effective in cooling and use far less energy (or chemicals!) than air conditioning.  If you still need a A/C, consider running it on low and using ceiling fans to circulate the cool air.   Difficulty ll

8. PLANT TREES.  On top of soaking up carbon dioxide, trees that surround your home can provide shading in the summertime, keeping your house cool and requiring less energy-intensive air conditioning.  Difficulty: ll

9.  GET YOUR DUCTS IN A ROW.  In addition to increasing your electricity bills and and your carbon foot print, faulty duct work can cause serious, life-threatening carbon monoxide problems in the home.  Check your ducts for air leaks.  First, look for sections that should be joined but have separated, and then look for obvious holes.  If you use tape,  to seal your ducts, use mastic, butyl tape, foil tape,or other heat-approved tapes (look for tape with the Underwriters Laboratories logo.)  Be sure a well-sealed vapor barrier exists on the outside of the insulation on cooling ducts to prevent moisture buildup.  Difficulty: lll

10. GO FOR DOUBLE-PANED WINDOWS.  According to the DOE, the typical family spends $1,300 a year on home energy bills.  If your windows are letting air in or out, some of that money is being wasted, as is the energy its paying for.  Double-paned windows are up to 40% more energy-efficient than standard windows, and could shave 10% to 25% off youe heating or cooling bill, on top of saving five tons of carbon dioxide emissions per household per year.  Difficulty: lll

DIFFICULTY SCALE:                                                  

l= No Pain, but Lots of Gain.

ll= Commitment and Consciousness Required Daily.

lll= You Will Soon Reap the Financial Rewards of your Herculean Efforts.

TO BE CONTINUED NEXT WEEK!

Lesson learned!