fannie mae Archives - Page 2 of 3 - Real Estate News and Commentary

July 15, 2010November 28, 2020

Mortgage oversight agency (FHFA) could stall county greening efforts

Last week, a federal oversight agency raised concerns about a green retrofitting loan program in an effort to protect consumers and the integrity of lending practices. Normally, this would not seem unusual; however on June 6th the Federal Housing Finance Agency (FHFA) issued a statement that affects many Property Assessed Clean Energy (PACE) programs across the country, and may affect Montgomery County’s Home Energy Loan Program (HELP) even before it officially kicks off later this year.

As part of a national initiative to reduce energy consumptions and curb greenhouse gases, PACE (pacenow.org) programs are intended to make green retrofitting affordable for home owners. The program generates funds for the retrofitting through “tax lien oriented financing” by selling “PACE bonds,” and is repaid by the home owner through annual tax assessments.

Enacted through Council Bill 6-09 (April 2009), HELP is Montgomery County’s local green retrofitting loan program, which is part of a first wave of PACE programs implemented throughout the country. Although HELP is awaiting a green light from the County Council to get underway, the county’s Department of Environmental Protection is preparing to manage the program. HELP’s financing arrangement is anticipated to allow a home owner to repay the “loan” over fifteen years through their property tax bill.

As the oversight agency for Fannie Mae, Freddie Mac and the Federal Home Loan Banks, FHFA’s (fhfa.gov) statement cited concerns about “certain energy retrofit lending programs,” specifically referring to local tax assessment loan programs by PACE. “Safety and soundness” concerns were cited because the PACE tax liens could interfere and disrupt a “fragile housing finance market” due to the “absence of robust underwriting standards to protect homeowners and the lack of energy retrofit standards to assist homeowners, appraisers, inspectors and lenders [to] determine the value of retrofit products…”

Although FHFA has collaborated with government agencies, state and local officials to work through their concerns, the issue appears to be unresolved. FHFA’s statement asserts that the tax assessment created through a PACE loan is unlike the typical tax assessment; such that the term and amount of a PACE related tax assessment exceeds a typical local assessment and do not have the usual community benefit that is associated with local tax initiatives. Additionally, the concern over such modifications would “present significant risk to lenders and secondary market entities, may alter valuations for mortgage-backed securities and are not essential for successful programs to spur energy conservation.”

Notwithstanding some critics concerns over the obsolescence of a green retrofit before such a loan is repaid, additional concerns raised by FHFA include: the shift of traditional lending priorities (PACE investors have minimal risk due to the first lien position); PACE program’s collateral based underwriting does not take into account the home owner’s ability to pay; the lack of lending disclosures (such as required by the Truth-in-Lending Act and other consumer protections); “and uncertainty as to whether the home improvements actually produce meaningful reductions in energy consumption.”

It remains to be seen whether HELP will be affected by FHFA’s new guidelines to Fannie Mae and Freddie Mac to deal with PACE loans. However, FHFA stated that the concerns were not raised to undermine programs meant to reduce consumer energy consumption, but rather to encourage the implementation of retrofitting loan programs with “appropriate underwriting guidelines and consumer protection standards.”

March 26, 2010June 28, 2019

The next round of homebuyer tax credits may be a local incentive

As the home buyer tax credit is set to expire very soon, many are wondering if the credit will be extended again. Earlier in the year, proponents have pointed to increased home sales as a direct result of the home buyer tax credit. However, a a Wall Street Journal article (blogs.wsj.com/developments/2010/03/18/has-the-home-buyer-tax-credit-extension-flopped) points to a recently revised Fannie Mae 2010 housing forecast that indicates the current home buyer tax credit has not been as effective as the credit in 2009.

Fannie Mae’s “March Economic Developments” states:

“There are many reasons why we believe the second tax credit will be much less effective than the first. The 2009 first-time homebuyer tax credit may have dried up the pool of qualified first-time homebuyers. In addition, while the tax credit was extended to cover repeat buyers, the amount of the credit was smaller than that for first-time homebuyers. The tax incentives may not be enough to induce many homeowners to move, given that current homeowners generally must incur commission costs to sell their current homes, a cost not incurred by first-time homebuyers.”

Although there is doubt over the federal home buyer tax credit, states like California that have been hit hard by foreclosures are offering home buyer incentives. Yesterday, Governor Schwarzenegger signed into law yesterday the extension and expansion of the California home buyer tax credit, commenting that the credit is expected to stimulate the economy and put many of the vacant homes back “on the tax role.” Now California home buyers can take advantage of a California tax credit of $10,000 for the purchase of a new home or their first home until December 31, 2010.

This article is not intended to provide nor should it be relied upon for legal and financial advice. Using this article without permission is a violation of copyright laws.

November 10, 2009October 5, 2019

A two pronged stopgap for real estate

Last week was indeed historic for events in Washington, DC. However, two important developments that directly affect real estate should be highlighted. You may have already heard that the home buyer tax credit was extended and expanded. However, you may not have heard that Fannie Mae announced another program to assist home owners facing foreclosure.

On Friday November 6th, the President signed HR 3548 into law which extends the home buyer tax credit through next year; home buyers must have a ratified contract for a principle residence (up to a purchase price of $800,000) by April 30th 2010 and close by June 30th 2010. A tax credit up to $8,000 will continue for first time home buyers who purchase their home before the sunset date; other home buyers who purchase their home before the deadline may be eligible to receive a tax credit up to $6,500. Home buyer income limits have also been increased to $125,000 for individuals and $225,000 for those filing joint returns (prorated amounts may be available for those who earn more than the stated limits). For additional qualifying information, please refer to the guidelines posted by the IRS (www.irs.gov/newsroom/article/0,,id=206293,00.html).

Additional good news came last week from the mortgage giant Fannie Mae, which issued a press release announcing the “Deed for lease” program. The “Deed for Lease” program is designed to assist struggling home owners to stay in their homes by allowing them to pay “market” rent. The program requires home owners facing foreclosure to give the home to their lender via a “deed in lieu of foreclosure” (also known as a friendly foreclosure).

The rental period for the “Deed for lease” program may be up to twelve months. The program may also be available for investment properties that are currently occupied by tenants. A rental application fee of $75 per unit is required. If the home is occupied by tenants who want to stay in the home, those tenants must cooperate with the property manager through the process. Any disruption of the process may result in disqualification from the program. Once initiated, the home owner may not be eligible for the ”Cash for Keys” program (a relocation assistance program for those who are forced to leave their homes). Eligibility requirements and further assistance can be obtained from your Fannie Mae servicer (www.efanniemae.com/sf/servicing/d4l/).

This two prong approach may stem further eroding residential real estate values, which may be due to foreclosures, by increasing demand while reducing inventory. Providing incentives to all home buyers will add additional home buying activity, while allowing home owners facing foreclosure stay in their homes may decrease the negative events associated with foreclosure, such as: lowering the number of displaced home owners who are forced to move, reducing the number of vacant homes; and decreasing the inventory of distressed properties that have the potential to lower neighborhood values.

Alone, programs such as these have drawn criticism pointing out statistics indicating that the money is wasted. However, increasing demand through incentives, while decreasing distressed property inventory may be the combination needed to hold off further eroding home values while strengthening the overall economy. Time will tell if the one-two punch is successful and if there is a need for further expansion of one or both of sides of the equation.

This column is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of November 9, 2009. Copyright © 2009 Dan Krell

November 6, 2009June 27, 2019

Fannie Mae in the Rental market?

Although the new “Deed for Lease” program may not be considered nationalized housing, it comes close to the scenario I envisioned back in March:

“Rather than the Government entering the mortgage servicing arena, the ideal nationalized housing program (through Government controlled lenders) would allow struggling home owners to pay what they can afford. In return the home owner would give up some (if not all) of the future equity stake in their home when they eventually sell.”

https://dankrell.com/blog/2009/03/03/nationalize-housing/

Yesterday (November 6), Fannie Mae announced the “Deed for Lease Program.” The program is designed for homeowners who are in foreclosure and do not qualify for a mortgage modification. The home owner is supposed to give their home to their lender via a “deed in lieu” (also known as a “friendly foreclosure”) and be allowed to rent back from the lender. Program guidelines and other information can be obtained from Fannie Mae’s news release: http://www.fanniemae.com/

September 14, 2009October 5, 2019

Options to lower mortgage payments

by Dan Krell © 2009
www.DanKrell.com

If selling your home is not in your near future, you may be indifferent to real estate market trends. But, would you be interested in lowering your mortgage payment?

Several months ago I told you about the government push to modify and refinance mortgages to assist home owners to keep their homes. The Obama Administration’s Making Home Affordable program (makinghomeaffordable.gov) is up and running and gaining momentum!

If you are facing financial challenges and need assistance to lower your mortgage payment, the Home Affordable Modification may be able to help you. To qualify, the mortgage must be on your principle residence, must not exceed $720,750, and must have been received prior to January 1, 2009. Additional requirements include having difficulty in paying the monthly payment due to: having increases in monthly payments, having a reduced income, experiencing hardships that increase your expenses; and/or your mortgage payment exceeds 31% of your gross income.

If you are current on your mortgage but find it difficult to refinance because the mortgage balance exceeds your home’s value, the Making Home Affordable Refinance may be for you. The Making Home Affordable Refinance program allows home owners to refinance mortgages up to 125% of the value of the home. To qualify you must be current on your mortgage, the mortgage must be on a residential building (up to four units) that was bought by Fannie Mae or Freddie Mac. To find out if your mortgage was sold to either Fannie Mae or Freddie Mac, you can either call your servicer or you can check on your own by going to their corresponding websites (loanlookup.fanniemae.com or freddiemac.com).

You can determine if you qualify for the Home Affordable programs through completing a brief questionnaire on the Making Home Affordable website (makinghomeaffordable.gov). If you qualify for these programs, you will need to contact your mortgage servicer and request one of the Home Affordable programs (refinance or modification). The servicer will need your income and asset information (hardship information is also required to process the Home Affordable Modification) to assist them in processing your request. The process will be slow, but making frequent calls to follow the progress is necessary to ensure you don’t miss a step.

What if your mortgage balance is less than your home’s value and your credit is excellent? If you haven’t yet taken advantage of recent mortgage interest rate lows, you might consider an automatic rate reduction loan (ARR mortgage). An ARR mortgage is a loan where the rate automatically lowers as mortgage rates fall. ARR mortgage programs have been around for some time, but haven’t received much press lately because mortgage rates have been relatively low.

Although not many lenders offer ARR mortgage programs, ARC Loan (arcloan.com) has been offering “mortgage management” since 1993. According to the ARC Loan website, the program seeks to take advantage of mortgage cycles to assist their clients in saving money and reducing debt. Because everyone’s needs and situations are different, ARC Loan consultants take the time to provide a personalized analysis to determine if you qualify and if an ARC Loan can improve your financial picture.

Many options now exist to lower mortgage payments for home owners in various financial situations. If you qualify, taking advantage of these programs may lower your monthly payments.