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The Latest News in Home Mortgage Refinancing

Wednesday, August 4th

The Latest News in Home Mortgage Refinancing

With a sluggish economy, static home sales and record foreclosures, the federal government has begun forcing banks to help homeowners refinance their home mortgages and keep their homes to get the economy moving again.

Recently, the U.S. Justice Department, the Department of Housing and Urban Development (HUD) and 49 state attorneys general announced a $25 billion agreement with the nation's largest mortgage lenders. As the result of this multi-billion dollar settlement in the government's investigation of questionable foreclosures and abuses, the federal government is now requiring five of the nation's largest banks to refinance certain underwater borrowers. These five banks include: Bank of American, Ally Financial, Citigroup, J.P. Morgan Chase and Wells Fargo.

Under the agreement, $20 billion will be dedicated to providing financial relief to homeowners and help them avoid foreclosure. Most of that money will go toward reducing the principal on loans for about 1 million of the 11 million people who are delinquent on their mortgage or those who are under water, as well as providing transitional assistance and providing benefits for service members.

According to the agreement, the banks must complete 75 percent of these relief obligations to consumers with two years. Within three years, they must have completed 100 percent of their obligations.

The banks will also have to pay $5 billion to the federal and state governments. About $1.5 billion of these monies will be used to establish a Borrower Payment Fund. This fund will provide cash payments to borrowers whose homes were foreclosed or taken between January 1, 2008, and December 31, 2011.

In addition, as a result of the investigation and the court agreement, lenders or mortgage services will be required to implement new servicing standards that will prevent the foreclosure abuses that had previously taken place. The new standards provide for strict oversight of foreclosure processing; will prevent some practices that allowed the past foreclosure abuse such as robo signing, lost paperwork and improper documentation; will provide consumer protections and will make foreclosure a last resort. In addition, loan servicers will also be required to create a single point of contact for borrowers who want information about their loans. Banks will not be able to foreclose on a borrower who is being considered for a loan modification.

This agreement only applies to borrowers who obtained loans from private lenders. It does not apply to Freddie Mac and Fannie Mae loans.

Home sales help drive the nation's economy and home ownership provides communities with stability. Be sure to continually research information online to look for new and existing government programs which can benefit you and help you get help refinancing your mortgage and keep your home.

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Mortgage Refinance Company FAQ

When you refinance your mortgage, you essentially take out a new loan on your current home. Your new lender pays off your balance with your previous lender, and you start a new mortgage. It sounds complicated, but the average homeowner refinances their mortgage every four years!
A refinance could be a great opportunity under several conditions. These include a significant reduction in your interest rate, minimizing risk by changing from an adjustable rate mortgage (ARM) to a fixed rate loan, or reducing the length of your mortgage (e.g from a 30-year fixed to a 15-year fixed).
There are three situations where it probably doesn't make sense to refinance. If you've had your current mortgage for a long time, most of your payments are now going towards the principal instead of interest; a refinance will put you back to paying more towards interest and cost you more money. Or, if your current mortgage has a prepayment penalty and the lender isn't willing to waive it, you could spend more in fees than you'll save by refinancing. Finally, if you're planning to move in the near future, you might not recoup the closing costs you'll pay to refinance before it comes time to sell your home.
A cash-out refinance lets you borrow against the equity you have built up in your home. Some people do a cash-out refinance to consolidate debts at a lower interest rate, to pay for college, or to remodel their home.
Absolutely. There are some highly-rated lenders whose primary focus is online home loans, both first mortgages and refinancing. Because these lenders often have less overhead than a local mortgage broker or bank, you may get lower interest rates and be able to negotiate on some of the fees to get the best possible terms.
You'll want to run the numbers to see if it makes sense for you. Will you be in the home long enough to recoup what you've paid in points to spend less on interest? Will it make a big enough difference in your monthly payments? Do you have the cash on hand or will you have to roll the cost of the points into the mortgage itself? The decision is ultimately yours, but do the math to see if it's a good option first.
Remember all of the paperwork it took when you got your current mortgage? Expect a refinance to be very similar. You'll have to provide proof of income and homeowner's insurance coverage, bank statements, and so forth. Your home will probably need a new appraisal, and you might have to dig up your documents from the first closing, like the property survey. The process will involve a hard pull on your credit, so don't be alarmed if you see your score dip temporarily.
That depends on how quickly you provide the required documentation, how fast your lender processes it, and several other factors. You can expect an estimated time to close ranging from 30-60 days.
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