Marc's Mortgage Matter's

Three friends from the local congregation were asked, "When you're in your casket, and friends and congregation members are mourning over you, what would you like them to say?"
Artie said: "I would like them to say I was a wonderful husband, a fine spiritual leader, and a great family man."
Tad commented: "I would like them to say I was a wonderful teacher and servant of God who made a huge difference in people's lives."
Robbie said: "I'd like them to say, ‘Look, he's moving!’”

As property values in the New York area slide, more borrowers are finding themselves “underwater,” which means they owe more than their homes are worth.

This month, the Federal Housing Finance Agency unveiled a new version of its Home Affordable Refinance Program, whereby lenders can offer new mortgages to borrowers even if their home’s value exceeds the mortgage amount by as much as 25 percent — as long as the borrower hasn’t missed loan payments in the past year.

Under the initial plan announced in February, lenders could refinance a loan only if the borrower’s mortgage was no more than 5 percent greater than the home’s value. With property values in many areas down sharply from their peak levels, 5 percent wasn’t enough to help many borrowers.

So why help borrowers who have not missed a payment?

Without a way to refinance into better loans, some of these borrowers could become part of the next wave of foreclosures.

Many are stuck with high interest rates or with rates that could adjust upward in the coming years. To make matters worse, lenders and mortgage insurers have tightened underwriting rules, typically requiring borrowers to have at least 15 percent equity in a home.

There is some fine print in this refinancing program. Borrowers must hold a loan that was purchased by Freddie Mac or Fannie Mae, the government-controlled companies that buy most mortgages. To determine whether you have a Fannie or Freddie loan, go to the “loan lookup” tab on the Web site MakingHomeAffordable.gov.

Most fixed-rate mortgages under $417,000 were financed through Fannie or Freddie, as were some more recent loans of up to $729,750 in higher-cost areas like Manhattan.

Also, borrowers who are 25 percent underwater cannot apply for new loans for at least a few weeks, depending on how quickly lenders prepare their systems to accept these new applications. October is probably the earliest these loans will close.

If you qualify, your interest rate will very likely be slightly higher than the market’s best loan rates, especially if you refinance with someone other than your current servicer. And if you are 5 to 25 percent underwater with a Fannie Mae loan, you must refinance with your current servicer to qualify.

(A servicer is different from a mortgage originator. You might, say, have taken out a mortgage from Countrywide. That loan was probably acquired by Fannie Mae, which then resold it, in a package of mortgages, to an investor. That lender may have hired a bank like Chase to collect payments, or “service” the loan.)

When borrowers seek to refinance through a new lender on loans where the borrower is merely 5 percent underwater, Fannie Mae and Freddie Mac will issue surcharges that can add four-tenths of a percentage point on the interest rate, or can be paid in the form of points.

Tom Kelly, a spokesman with JPMorgan Chase, said that his bank had not yet determined its charges for applicants whose loans it services, specifically those whose loans are 25 percent greater than a home’s value.

Although these rates may be higher than those paid by so-called prime borrowers, they are a boon for those who are underwater and who would otherwise have no choice but to keep their loan and hope property values rebound, or walk away from their investment.

A woman walked into her ex-husband's house with a chicken under her arm.
She says, "This is the pig I was in love with."
Her ex-husband retorts, "That’s a chicken, not a pig."
The woman responds, "I was talking to the chicken."