Marc's Mortgage Matter's

How would you like to process and underwrite loans in Israel ? Their Minister of Development recently said that, “…low mortgage rates will help residents of the Qassam-ridden region afford to fortify their own homes in lieu of government funding.” In lieu of sufficient government funding toward the expansion of the fortification works, the Minister of Development “suggested offering the residents of the Qassam–ridden region low mortgage rates so they will be able to afford to fortify their own homes in light of the renewed rocket attacks on Israel 's southern region.” The proposal came after some objected to a request for an additional $132 million toward the outright construction of secure rooms in some 8,000 Gaza-vicinity housing units. Nice to live in the US …

Freddie & Fannie’s regulator unveiled a plan that could cut payments for hundreds of thousands of struggling homeowners to help reverse defaults. Homeowners facing foreclosure who are spending more than 38 percent of their income on mortgage payments could have monthly payments reduced by Fannie Mae and Freddie Mac in an effort to keep their homes. Since it is generally believed that mortgage defaults are at the root of the global credit crisis and the recession here in the US , steps like this are important to “put a floor under the housing market” and are a prerequisite to recovery. Companies like Indymac, Chase and BofA are halted foreclosures, but since Fannie Mae and Freddie Mac own or insure 31 million mortgages (58% of SFH’s), this is big news. Eligible homeowners must first be contacted (I don’t know all the exact criteria, although one is that borrowers need to be delinquent 90 days or more to qualify) and could see their mortgage rates cut, the life of their loans extended or their principal reduced in an effort to ease payments.

It will instruct servicers to change the terms of the loan so that the monthly payment (including principal, interest, taxes and insurance) would be lowered to 38% of the borrower’s income (income must be documented). This would be done in up to three steps: 1) the term of the loan would be stretched to 40 years. If the monthly payment is still too high relative to income, then 2) the interest rate would be reduced to as low as 3%. Finally, if the implied monthly payment were still greater than 38% of the borrower’s income, 3) forbearance could be provided on loan principal down to the current appraised value of the property. (However, the reduced principal would not be written off entirely, but instead would be payable as a balloon payment at sale or maturity of the loan.) Not an easy fix and only for those truly in dire straits it seems!