See, I knew there was a hitch! The lenders have outlined the parameters of the REFI Plus program based on FNMA and Government regulation over the past few weeks. As stated, it is a FNMA Program and if the loan is approved (for refinancing) by FNMA, then the banks said they will do the modification/refinance. How do we know if the loan is approved by FNMA?

 

The lenders have been using a program called Desktop Underwriting (DU) for years to approve the mortgages they sell to FNMA. This is known as the “underwriting engine”. As stated by the lender guidebooks, if the loan is approved by the DU “engine” then the bank will do the loan. Basically, the lenders are all cooperating with the program as requested and outlined by the Administration.

 

HOWEVER, we know from the crush of media attention, there is a maximum loan to value up to 105% allowed and no credit score minimum in most cases. The hitch is that the lenders will PRICE the loan accordingly. Below, I have taken a piece of a pricing matrix I receive today from a lender. The deal looks really good for people with FICO scores over 720 and loan to values under 90%.

 

I must admit, I added this language hours after the original post was publish. I realized that the chart was not well explained. The grid shows the loan to value v. the FICO score and the points the banks will check for each mix a borrower will fall into. Please note, that these are FNMA charges and thus will be the same for all banks selling loans to FNMA.

 

Two definitions:

 

1.    Points: one point equals 1% of the loan amount. For a loan amount of 100,000, one point equal 1% or $1,000.

2.    Loan to value: the loan amount v. the value of the home. If a home is worth $100,000 and the loan amount is $85,000, then the loan to value is 85%.

 

 

So, an example according to the pricing grid:

 

If you want to refinance your existing loan of to lower the monthly payment, first the bank will enter the data to obtain a loan approval. Once the loan is approved, the bank will then look at the current day’s interest rate and then add on a fee according to your FICO score and loan to value. Let’s assume:

 

·          Your loan is approved

·          Your new loan amount is $100,000

·          Your current FICO score is 647

·          Your new loan to value is 85%

·          Today’s current rate is 5% for a 30 year fixed mortgage

 

Your rate would be 5% and the bank would charge you 2.25 points or $2,250. Still sound like a good idea?  Do your research first.

 

 

 

 

Â	Â	Â	Â	Â
Credit			Â
Score			75.01-80	80.01-85	85.01-90	90.01-95	95.01-97	97.01-105
 >=740			0.000	0.000	0.000	0.000	0.500	1.000
 720-739			0.250	0.000	0.000	0.000	0.500	1.000
 700-719			0.750	0.500	0.500	0.500	1.000	1.500
 680-699			1.500	1.000	0.750	0.750	1.000	1.500
 660-679			2.500	2.250	1.750	1.750	1.750	2.250
 640-659			3.000	2.750	2.250	2.250	2.250	2.750
 620-639			3.000	3.000	2.750	2.750	3.000	3.500
 < 620			3.000	3.000	3.000	3.000	3.500	4.000

 

The rest of the people get hit with loan fees and interest rates too high to make it worth doing. Wasn’t that the banks’ plans anyway? This is not the target group the program was designed to reach. Again, only the upper echelon will be able to qualify for the good loans at those levels and take advantage of the lower interest rates. But those people probably had a decent rate anyway, so they do not need to refi! To conclude, although they are trying, it is just another program that will be meaningless, because the lenders find the ways around it and the government really does not understand the needs of the people….at the level that most needs it.

  PLEASE DO NOT USE A MORTGAGE MODIFICATION SERVICE COMPANY THAT SOLICITED YOU OR ASKS FOR FEES UP FRONT.

  THESE COMPANIES ARE SCAMS AND WILL BE ELIMINATED- ONLY AFTER THEY HAD THE TIME TO RIP YOU OFF!

 

Dale Siegel

 

 

 

 

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