Current homeowners and first time homebuyers of Philadelphia real estate have faced many issues surrounding buying, selling and refinancing their properties.
President Barack Obama has announced his new mortgage settlement deal, which will affect millions of Americans currently struggling with paying their mortgages due to the high interest rates that existed when they originally financed their property.
Interest rates are at historic lows! Real estate agencies and mortgage brokerages are encouraging people to buy properties to take advantage of the rates. For first time Philadelphia home buyers, it’s probably a good idea to take a serious look at buying and locking in on those rates. If you already have a mortgage, in order to take advantage of these lower rates, you would have to refinance your property. But that’s not so easy…
CURRENT PROBLEMS WITH REFINANCING:
- The Federal Housing Administration (FHA) has very strict guidelines for loan approval. They will not guarantee loans that are higher than the property’s current value. Why is that an issue? Real estate has been hit the hardest by the recession and properties are not worth what they were when originally purchased. If you already owe more than your property is worth (a reality for many), and you’re attempting to use FHA loans, refinancing is not an option.
- Poor credit history can make loan approval impossible. Sometimes, people want to refinance because it makes the most financial sense to them over the long run. Too often, however, people want to refinance because they have to. Jobs were lost, salaries were cut, people can’t afford what they could before. They can’t make their mortgage payments in full or on time; this brings down their credit scores. The refinancing with a smaller interest rate would make their monthly payments more affordable, but they can’t get approved because they’re already in trouble. Those that need it the most, can’t.
According to the New York Times in their February 4th article, An Easier Path to Refinancing, “there are millions of other borrowers with loans held by banks, which have largely not responded to pressure to relax their refinancing standards.” President Obama’s plan involves new legislation that would put more pressure on banks to make it easier for homeowner’s to refinance. Turns out, that “new pressure” = $25 Billion Dollars. This time, Obama isn’t bailing out the big companies and banks. This time, finally, the American homeowners get the bailout.
PRESIDENT OBAMA’S HOUSING PLAN
New focus – Making 5 Major Banks Pay
- Principal mortgage balances will be reduced. Fox News reports that “under the agreement, five major banks — Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial — will reduce loans for nearly 1 million households.” Unfortunately, homeowners who have already lost their homes to foreclosure will not get them back. Still, the legislation will provide relief for those who are having trouble paying their mortgage now and face the possibility of future foreclosure.
- Previous foreclosures will be investigated. There have been many foreclosures in the past that may have been wrongly enforced. Signatures were forged, documents weren’t verified, and the processes were rushed. In some instances, the foreclosures never should have happened, and these are people who lost their homes! Criminal charges can now be pursued by federal and state authorities.
Ongoing efforts – Making Home Affordable Program (Obama created this program years ago, but now it is receiving greater attention)
- Financial relief for the unemployed. Your payments may be reduced to 31% of your income or may even be suspended for a year.
- New refinancing option for those who are in good standing. Through the Making Home Affordable Refinancing Program (HARP), those who are unable to refinance due to issues surrounding the lower value of their home may now be eligible for refinancing. Note this does not affect those who are in foreclosure or who have not been making their mortgage payments.
