Today's Mortgage Rates

If you are a homeowner who has been struggling with making your mortgage payment and have felt like your mortgage servicing company isn’t really doing enough to help you…

You are not alone.

Many people are reporting that mortgage servicing companies aren’t helping them, are difficult to work with or are just plain not telling them everything that is available to help. And apparently there are enough people that are reporting these issues that the government is starting to look into the problem of mortgage servicers not being responsive to people who need help.

Today Treasury Secretary Geithner told a Senate appropriations subcommittee:

“We do not believe servicers are doing enough to help homeowners — not doing enough to help them navigate the difficult and frightening process of avoiding foreclosure…” and indicated that he was troubled by reports that servicers had done things like foreclose on homeowners who were potentially eligible for relief under the government’s Home Affordable Mortgage Program, lost documents or claimed to have done so and even steered troubled homeowners away from available assistance.

This is not the smoking gun exactly that it first appears to be because no exact data has been released — yet — on how bad the problem is. But that is about to change.

Geithner said during his testimony that Treasury will publish “much more detailed data on the performance of servicers” so that people can see just exactly how responsive lenders are being with homeowners who are having trouble.

And I suspect that very few people are going to be surprised by the results — except for maybe a few senior executives at the banks who end up with a black eye when the report is released.

Just a hunch.

FHA loans are one of the most popular loans with borrowers today – and not just because they are insured by the federal government from default.  Wait – you don’t think that that helps you if you are a borrower, do you? It doesn’t.  A few of the people that I speak with about FHA loans think that the FHA insured loan will benefit them somehow – but the fact that a loan is insured by FHA actually does the borrower no good. FHA insures the loan in the event of a default by the borrower, the lender gets paid from the FHA insurance fund.  Sorry for the bad news on this one, but at least we were able to clear up that confusion.

So FHA loans are popular because they have a low down payment, relatively flexible underwriting guidelines and low fixed rates — among a few other reasons. When people ask me what the advantages are to an FHA loan, here are just a few of the things that I talk about as to why an FHA loan may be right for them:

• FHA requires a 3.5% down payment as opposed to at least a 5% conventional loan down payment
• The closing costs and down payment can be a gift from a relative (or employer)
• There are higher debt to income ratios allowed when qualifying
• A higher loan to value ratio is allowed with FHA loans
• FHA still allows a cash-out refinance of up to 85% loan to value
• The UFMIP can be financed into the loan
• There is never a prepay penalty on an FHA loan
• The seller may contribute up to 6% on a FHA loan

There may be a few other advantages when getting an FHA loan – but these are some of the simple ones that seem to come up in conversation all the time when speaking with borrowers about them.

Oh, and now we are all clear on the FHA insurance thing — and who exactly it benefits: the lender.

Many people know that it is possible to get a loan modification under the Home Affordable Modification Program (HAMP) but what many people don’t know is that it is also possible to get a 2nd mortgage modified and not just a 1st mortgage.

Some of the biggest lenders in the country who hold many of the 2nd mortgages have started sending letters to 2nd mortgage holders who are struggling with their payments as to what options they have. Just a few of the lenders who have started notifying their customers include Citigroup, JPMorgan, Chase and Wells Fargo.

The government’s second-mortgage program, called 2MP, offers incentives to borrowers, mortgage servicers and investors to modify second mortgages. According to USA Today, here are some of the highlights of how it works:

• When a borrower’s first loan is modified under the federal program, known as the Home Affordable Modification Program (HAMP), and the servicer of the second loan is also a participant in HAMP, that servicer must offer to modify the borrower’s second lien.
• Servicers can stretch the term of the second loan to 40 years.
• Second-lien lenders must defer the payment of the same proportion of principal that was deferred or forgiven on the first loan.

In order to be eligible for a modification, the 2nd mortgage must have taken out on or before Jan. 1, 2009, to be eligible for the program and don’t expect it to be an easy process. Because there are multiple parties involved (including the 1st lien holder) it is often more difficult than modifying a first mortgage. That said, the government estimates that the program will help up to 1.5 million homeowners who cannot afford their mortgage payments and if it helps this many people, I think the program will be considered a success.