The Federal Housing Finance Agency (FHFA) recently directed Fannie Mae and Freddie Mac to extend the Home Affordable Refinance Program (HARP) by two years to Dec. 31, 2015. The program was set to expire Dec. 31, 2013.

In addition, FHFA will soon launch a nationwide campaign to inform homeowners about HARP. This campaign will educate consumers about HARP and its eligibility requirements and motivate them to explore their options and utilize HARP before the program ends. HARP is uniquely designed to allow borrowers who are underwater to refinance their mortgage.

To be eligible for a HARP refinance, homeowners must meet the following criteria:

• The loan must be owned or guaranteed by Fannie Mae or Freddie Mac.
• The mortgage must have been sold to Fannie Mae or Freddie Mac on or before May 31, 2009.
• The mortgage cannot have been refinanced under HARP previously unless it is a Fannie Mae loan that was refinanced under HARP from March-May, 2009.
• The current loan-to-value (LTV) ratio must be greater than 80 percent.
• The borrower must be current on their mortgage payments with no late payments in the last six months and no more than one late payment in the last 12 months.

Borrowers should contact their existing lender or any other mortgage lender offering HARP refinances.

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The Federal Housing Finance Agency (FHFArecently reported that the national average contract mortgage rate for the purchase of previously occupied homes by combined lenders, used as an index in some adjustable-rate mortgage (ARM) contracts, was 3.43 percent based on loans closed in February. The rate increased 0.08 percent from the previous month.

The average interest rate on conventional, 30-year, fixed-rate mortgage loans of $417,000 or less increased 9 basis points to 3.62 in February. These rates are calculated from the FHFA’s Monthly Interest Rate Survey of purchase-money mortgages.

These results reflect loans closed during the February 22 – Feb. 28 period. Typically, the interest rate is determined 30 to 45 days before the loan is closed. Thus, the reported rates depict market conditions prevailing in mid- to late-January.

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The Federal Housing Finance Agency (FHFA) has announced that Fannie Mae and Freddie Mac will offer a new, simplified loan modification initiative to minimize losses and to help troubled borrowers avoid foreclosure and stay in their homes. Beginning July 1, servicers will be required to offer eligible borrowers who are at least 90 days delinquent on their mortgage an easy way to lower their monthly payments and modify their mortgage without requiring financial or hardship documentation.

The new Streamlined Modification Initiative eliminates the administrative barriers associated with document collection and evaluation. Eligible borrowers must demonstrate a willingness and ability to pay by making three on-time trial payments, after which the mortgage will be permanently modified. Homeowners are encouraged to continue working with their servicer to evaluate all of their foreclosure prevention options. Documenting income and financial hardship could result in a modification with additional savings for the borrower.

The program, which expires Aug. 1, 2015, is available to those homeowners with loans owned or guaranteed by Fannie Mae or Freddie Mac. Since being placed into conservatorships, Fannie Mae and Freddie Mac have completed 2.7 million foreclosure prevention transactions, including 1.3 million loan modifications.

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The Federal Housing Finance Agency (FHFA) has released its 2013 Conservatorship Scorecard for Fannie Mae and Freddie Mac. The Scorecard details specific priorities for Fannie Mae and Freddie Mac in 2013 that builds upon the three strategic goals announced in FHFA’s Strategic Plan for Enterprise Conservatorships released in 2012.

• Build a new securitization infrastructure, including a common securitization platform;
• Contract Fannie Mae and Freddie Mac’s dominant presence in the marketplace while simplifying and shrinking certain operations;
• Maintain foreclosure prevention activities and credit availability for new and refinanced mortgages.

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Orange County Register – Buyers who went through short sales or foreclosures are becoming homeowners again, thanks in part to loans from the Federal Housing Administration.

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Los Angeles Times – Some of the FHA’s traditional customers may find that conventional alternatives are cheaper.

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CNN Money – The Federal Housing Administration, which is the largest insurer of low-down payment mortgages, announced last week that it will raise premiums by 10 basis points, or 0.1 percent, on most of the new mortgages it insures.

Making sense of the story

• A borrower opting for a 30-year, fixed-rate mortgage who puts down 5 percent or more will now pay an annual insurance premium of 1.3 percent of their outstanding balance. Someone who puts down less than 5 percent will pay a premium of 1.35 percent.

• The FHA said it also will raise premiums for borrowers with jumbo loans – loans of $625,000 or more – by 5 basis points, and increase the minimum down payment requirement on these loans to 5 percent from 3.5 percent.

• Additionally, the FHA said it will require most buyers to pay insurance premiums for the life of their loan. A policy that was put in place in 2001 allowed borrowers to cancel premium payments once their debt fell below 78 percent of the principal balance. One exception will be for borrowers who put more than 10 percent down at the time of purchase.

• Other new policies include a requirement that any mortgage for an applicant with less than a 620 credit score and debt-to-income ratio above 43 percent must be underwritten manually. Lenders who want to issue loans to these applicants must be able to adequately document why they decided to approve the loans.

• The FHA also decided to put new restrictions on reverse mortgages, no longer permitting retirees to take such large, upfront payments.

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U.S. house prices rose 0.6 percent on a seasonally adjusted basis from October to November, according to the Federal Housing Finance Agency’s monthly House Price Index (HPI). The previously reported 0.5 percent increase in October was revised upward to a 0.6 percent increase. For the 12 months ending in November, U.S. prices rose 5.6 percent. The U.S. index is 15.2 percent below its April 2007 peak and is roughly the same as the August 2004 index level. National home prices have not declined on a monthly basis since January 2012.

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Los Angeles Times – The Federal Housing Administration has decided to extend its rule permitting loans on quick “flips” of renovated houses beyond the scheduled Dec. 31 expiration deadline.  The policy is widely considered one of the key federal government moves that has encouraged private investors in large numbers to buy foreclosed and deteriorating houses from lenders, then repair them and resell within short periods of time.

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FHA has been working with Congress since the release of the audit showing the agency may need a taxpayer bailout on what changes will be made to stabilize the FHA’s financial position.  This week, the FHA issued a letter to Senator Corker outlining some significant changes not previously mentioned.  These will have an immediate impact on consumers.

1. Raising DTI for borrowers with low credit scores.  FHA will require borrowers with credit scores below 620 to have a maximum DTI (debt to income ratio) of 43 percent
2. Moratorium on full cash out HECM (reverse mortgages)
3. Raising the down payment for loans above $625,500 to 5 percent
4. Greater oversight on borrowers who are trying to obtain a new FHA loan 3 years following a foreclosure.

Read the letter