In his State of the Union address, President Obama laid out a plan to help responsible borrowers and support a housing market recovery.

Key aspects of the president’s plan include:

• Broad-based refinancing: The president’s plan will provide borrowers who are current on their payments with an opportunity to refinance and take advantage of historically low interest rates
• Homeowner Bill of Rights: The president is putting forward a single set of standards to make sure borrowers and lenders play by the same rules, including: Access to a simple mortgage disclosure form, so borrowers understand the loans they are taking out; full disclosure of fees and penalties; guidelines to prevent conflicts of interest that end up hurting homeowners; support to keep responsible families in their homes and out of foreclosure; and protection for families against inappropriate foreclosure, including right of appeal.
• First pilot sale to transition foreclosed property into rental housing: The FHFA, in conjunction with Treasury and HUD, is announcing a pilot sale of foreclosed properties to be transitioned into rental housing.  C.A.R. is opposed to bulk sales of REO properties in California. 
• Providing a full year of forbearance for borrowers looking for work: Following the administration’s lead, major banks and the GSEs are now providing up to 12 months of forbearance to unemployed borrowers.
• Pursuing a joint investigation into mortgage origination and servicing abuses: This effort marshals new resources to investigate misconduct that contributed to the financial crisis under the leadership of federal and state co-chairs.
• Rehabilitating neighborhoods and reducing foreclosures: In addition to the steps outlined above, the administration is expanding eligibility for HAMP to reduce additional foreclosures, increasing incentives for modifications that help borrowers rebuild equity, and is proposing to put people back to work rehabilitating neighborhoods through Project Rebuild.

C.A.R. and NAR support the Obama Administration’s efforts to help homeowners and the struggling housing market, because restoring the health of the housing market is critical for the nation’s economic recovery.

More info

Los Angeles Times – The Center for Responsible Lending has called a proposed $25-billion settlement over faulty foreclosure practices between attorneys general, federal agencies, and the mortgage industry “an important step in addressing foreclosure abuses.”

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Mercury News – The Federal Reserve said it’s unlikely to raise its benchmark interest rate before late 2014, extending its time frame by at least a year and a half.

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Mercury News – Paying off a mortgage might sound like an ambitious plan, especially for those who have recently refinanced into a 30-year term.  But it’s still smart for homeowners to give some serious thought as to how they’ll pay off their loan; if not in 2012, then sometime.

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San Francisco Chronicle – In a major shift, the Federal Reserve will start announcing four times a year how long it plans to keep short-term interest rates at existing levels, according to minutes from its December policy meeting.

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Mercury News – Historically low interest rates coupled with a strengthening economy are getting the new year off to a fast start, stirring hopes that the housing and mortgage markets may finally come to life in 2012.

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New York Times – Interest rates are the lowest in decades, enticing many borrowers to shop for a loan.  Mortgage lenders adjust their rates based on perceptions of risk, so unless the borrower can show they’re a low-risk individual, the borrower is unlikely to qualify for a rate that matches those seen in recent advertisements and headlines.

Making sense of the story

• The rates quoted are averages drawn from a variety of financial institutions, and lenders use varied approaches to set them.  Consumers who want to try for the lowest rates available need to consider basic factors, such as credit score, points, property type, down payment, and length of the loan.
• Credit score: The ideal borrower has a FICO score of 740 or higher, which puts the individual in the best place for pricing.
• Points: The lowest rates usually are decreased by paying a fee called a point, or 1 percent of the loan amount.  Borrowers may buy points in order to get the best rates at many banks.  Points might make sense depending on the borrower’s financial situation and how long they expect to stay in the home.
• Property type: Borrowers planning to buy a duplex or a four-unit build likely will have a higher interest rate.  Condominiums also may have a rate premium rate, especially if they are newer or the down payment is less than 25 percent.  Lenders also may charge more if the borrower is not planning to live in the home.
• Down payment: Borrowers who put down at least 25 percent are more likely to obtain the best interest rates.  Lenders offer different breaks on rates if equity in the property is higher, so borrowers should ask what is available.
• Length of loan: Borrowers who are likely to move in a few years may want to look into an adjustable-rate loan with a low interest rate fixed for a few years, and adjusted afterword. 

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San Diego Union Tribune – The number of loan servicers taking part in a state mortgage-aid program continues to grow roughly one year after its launch.  The Keep Your Home California program now has 55 participating mortgage servicers, up from 21 in June.

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New York Times – The Federal Reserve has committed to keep long-term interest rates low through next year, so a 30-year mortgage will be pegged about where it is now at least through spring, said Freddie Mac.

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Los Angeles Times – The mortgage market told a sad story throughout 2011: Record low rates, but few people taking advantage of them to buy homes.  The likely scenario in the new year, according to many analysts, is more of the same.

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