My Solution to the Housing Crisis

Let me start off by saying that this is not the only solution, but a simple one that will not cost the government billions of dollars. My approach is a 3 pronged attack:

1. Government Subsidized/Mandated Mortgage Interest Rates

Lower Thirty Year Fixed Rate to 4%

All of the people who want purchase a home but haven't yet -1st time home buyers, procrastinators, people still waiting for prices to come down - would seriously reconsider if they new they could get a rate of 4%. Even the people who were responsible and have good credit and equity would pick up the phone to refinance their loan. This will last for 18 months - anyone that wants to refinance into this and can qualify, can apply.

2. Government imposed 18 month moratorium on all primary residence foreclosures. This will help to put a stop to plummeting housing prices due to short sales and foreclosures. I think we can all agree that for the most part, the lenders don't want these houses back anyway; so they are not losing buy not taking back these houses. Also, this will keep people from abandoning their house after receiving a foreclosure notice.

3. All lenders must modify all primary residence loans (1st and 2nd mortgages) to an affordable payment for the borrower (for those who apply). We will use 31% debt to income ratio as definition of affordable. (monthly p.i.t.i payment divided by monthly gross income)

If modification results in principal reduction - so be it - no future shared appreciation. My reasoning: if they will short sell and take the loss, then they will modify and take the loss, end of story. Go out and make new loans to recoup the money. That's what I'm gonna do.

This is about as simple as it can get, and this will get the economy going again. If people see that they can get a rate of 3.5-4% on a 30 year fixed, they will start to buy and refinance again. This will create jobs through a ripple effect, as well as help to put a bottom in on the housing market by creating demand.

Posted by Joseph P. Mazzei at www.mymortgagebroker.blogspot.com

100% Financing - Yes, It Still Exists!

Much "to do" has been made over the recent housing legislation that has eliminated the use of seller funded DAPS (down payment assistance programs). I can say this - HUD has been against these programs for years, and the new bill was their way of finally getting rid of them - at least for now. But do not fret for too long, as this is not the end all-be all. 100% Financing is alive and well.

For years (at least 20) there has been a 100% financing loan available called the USDA Guaranteed Rural Housing Loan. That's right, the United States Department of Agriculture. It's called the guaranteed loan because like its FHA counterpart, the loan is made by the bank and guaranteed (insured) by the USDA (although the USDA does make direct loans). And you don't have to be a farmer, own a cow, or live on 20 acres to be eligible. Most Lenders and banks did not want to bother with this loan because there are income as well as geographic restrictions to this loan. Also, it was much easier to just use FHA and a seller funded DAP. Well, those days are over, at least for now.

Realtors and lenders alike have been scrambling to find an alternative to FHA financing with nothing down, and right now, this is it. It does come with several caveats though. Here's the breakdown, in a nutshell:

1. This is an income sensitive program. You can not make more than 115% of the HUD median income for the area (county) you are trying to purchase in. Many borrowers will not exceed this limit. For example, a married couple with one child can make upwards of $70,000.00 per year and still qualify. (referring to Pasco County Florida) Not bad for a low income program.
2. This program also has geographical restrictions. The program is intended for homes in rural areas, but you would be surprised to see what qualifies as rural. Many suburban areas qualify. You can check the property's eligibility by going to this link: http://eligibility.sc.egov.usda.gov/eligibility
3. The program is for primary residences only; sorry, no second homes.
4. Fixed Rate only - 30 Years.
5. 102% Maximum financing - 100% of purchase price plus 2% guarantee fee.
6. Maximum 6% seller contribution allowed towards buyers closing costs.
   
7. No Monthly PMI.
8. Maximum loan amount = $417,000.
9. No cash reserves required.
10. Full Documentation Only.

As you can see, this program is not a cure all for your 100% financing blues, but this may be just what the doctor ordered for some of your borrowers who do qualify.


Posted by Joseph P. Mazzei at www.mymortgagebroker.blogspot.com