Refinancing Problems Hinder Foreclosed Property Program

Since the launching of the foreclosed property prevention program, only around 13,000 home loans have been refinanced under the loan refinancing scheme.

This scheme of the foreclosed property program is set to expire in June next year, so the public is asking how the program can achieve its original goal of helping up to 2 million troubled homeowners when it has only 13,000 loan refinancings to show after 4 months.

Housing analysts said that the foreclosed property program had noble goals, but it has been weak on the implementation stage. What administration officials say in their offices is not being implemented by lenders and services.

One example is the extension of the loan refinancing scheme to underwater borrowers. Previously, the loan refinancing scheme was only offered to those whose home loans are not more than 105 percent of their home values.

When President Obama increased the home loan-home value ratio to 125 percent, many underwater homeowners hoped they have real chance of saving their homes from repossession property inventories.

But they were wrong. Mortgage lenders have not been accepting these underwater loan applications because Fannie Mae and Freddie Mac have delayed buying these higher loan-to-value home loans. Fannie Mae will only begin buying them in September while Freddie Mac will begin buying them in October.

Another problem with loan refinancing is the mortgage insurance factor. Under the foreclosed property prevention program, home loans with insurance can be refinanced, but in reality, banks have not been accepting applications from borrowers with mortgage insurance.

Banks have not been giving definite answers to questions about their refusal to refinance home loans with insurance. All that spokespersons of Wells Fargo and Bank of America say is that they are not currently refinancing loans with insurance.

Analysts contend that the mortgage industry and the mortgage insurance providers are just maintaining the status quo.

Another loan refinancing problem is related to the initial requirement of Freddie Mac that borrowers must refinance with their current servicers. But later Freddie Mac changed its policy, allowing homeowners to choose their servicers. The problem is that not many came to know about the change.

Fannie Mae, however, has at the start of the foreclosed property program allowed its borrowers to refinance with another mortgage lender if they desired.

Recently, administration officials have been stepping up efforts to enhance the foreclosed property program. They should move more boldly because foreclosures continue to rise, as shown in a nationwide foreclosure report released this week.

Comments are closed.

Sponsored Links:

Related Posts:

• Freddie Uses YouTube for Government Repo Prevention Program
• Freddie Mac Decided to Suspend Government Foreclosures
• HUD and Freddie Enhance Government Foreclosure Program
• Donovan in Vegas to Boost Government Foreclosures Program
• Foreclosed Homes Continue to Be Part of Fannie and Freddie