Lenders Cushion Loan Pricing After Spike in Refinance Demand

Los Angeles, Calif. (VOCUS)

The Mortgage Bankers Association (MBA) released its results to its Weekly Survey. This survey covers over 50% of all U.S. residential mortgage loan applications taken by retail mortgage bankers, commercial banks, and thrifts. This extremely accurate data gives economists a great look into the consumer demand for mortgage loans. This trend of increasing refinance applications implies consumers are seeking out a lower monthly payment, a fairly predictable assessment. But, the long term effects of this action paint a better picture.

If these consumers are actually able to reduce their monthly mortgage payments they will increase their disposable income, or their “spending money”, giving them the opportunity to spend that spending money which would in turn revitalize the economy. This would create more consumer spending or even allow debtors to pay down personal liabilities like credit cards. This effect could spiral to astronomical proportions because as the more people spend their surplus disposable income, the better the economy gets and the lower the mortgage payments are, creating the effect all over again.

EXPAND HOME AFFORDABLE REFINANCE PROGRAM TO 125 PERCENT LOAN-TO-VALUE

  The Federal Housing Finance Agency has authorized Fannie Mae and Freddie Mac to expand the Home Affordable Refinance Program (HARP) to homeowners who are current on their mortgage payments from the present loan-to-value ratio ceiling of 105 to 125 percent. With these expanded refinance opportunities, qualified borrowers whose mortgages are currently owned or guaranteed by Fannie Mae and Freddie Mac will be allowed to refinance those loans according to the terms of the Home Affordable Refinance Program established earlier this year.

“I am pleased to join Secretaries Donovan and Geithner in announcing this expansion of the Obama Administration’s Making Home Affordable program,” said FHFA Director James Lockhart. “The higher LTV refinancings will allow more homeowners to strengthen their finances by taking advantage of lower mortgage rates. The Enterprises are also incenting these borrowers to combine a lower mortgage rate with a faster amortization schedule, which will enable them to get ‘above water’ on their mortgages more quickly. This program could assist many homeowners who otherwise would have difficulty refinancing due to declining house prices,” Lockhart said.

NO MORE COMMISSION REDUCTIONS FOR FANNIE MAE SHORT SALES

https://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2009/0903.pdf

Effective March 1, 2009, closing of preforeclosure sales may not be conditioned upon a
reduction of the total commission to be paid to real estate agents to a level below what was
negotiated by the listing agent with the borrower, unless the fee exceeds 6 percent of the sales
price of the property in aggregate. Servicers are reminded that they must continue to obtain
any approvals that may be required by interested third parties in connection with preforeclosure
sales.

Fannie Mae loan servicers can no longer require real estate brokers to reduce their commissions as a condition to a short sale approval. This new Fannie Mae policy takes effect on March 1, 2009. According to Fannie Mae, the closing of a pre-foreclosure sale cannot be conditioned upon a reduction of the real estate commission to a level below what the listing agent and borrower negotiated. An exception applies if the total commission is more than six percent of the sales price.

This good news may be tempered by the difficulty for REALTORS® to ascertain whether the underlying loan in a short sale transaction is a Fannie Mae loan. REALTORS® may wish to ask the lender or loan servicer whether the loan is a Fannie Mae loan, and to consider submitting the Fannie Mae Announcement to the lender with the short sale package
Thanks to Barbara Simmons of Simi Valley Real Estate for this great news.