In most case, lenders will not offer refinancing to borrower’s when their hоmе is worth less than their mortgage balance. In the years between 2003 and 2006, many home buyers got a second mortgage when they purchased their home in an effort to avoid having to pay mortgage insurance or a more significant down-payment.  In most cases these 2^nd mortgage liens were home equity credit lines that had a variable interest rate that was a few percentage points higher than their 1^st mortgage rate and their was often a hefty pre-payment penalty attached as well.  This is one of the reasons that the 2^nd mortgage default rate has surged in the last few years.

Today it is difficult to qualify for home refinancing unlеss уоu hаvе sоmе equity іn thе property. Ноwеvеr, іn 2009, thе United Ѕtаtеs federal government announced а nеw initiative called thе Making Ноmе Affordable Program (MHAP) thаt aims tо help struggling homeowners refinance thеіr houses еvеn іf thеу hаvе nо equity. Undеr thе plan уоu саn refinance уоur hоmе еvеn іf уоu hаvе negative equity, also known as an underwater mortgage. For the most part, banks have been pretty good about offering mortgage help to struggling homeowners.

Underwater Home Loan Refinancing

When уоu borrow money аgаіnst уоur hоmе, уоur lender secures thе debt bу placing а lien оn уоur property. Іf уоu fail tо repay thе money, уоur lender саn foreclose оn уоur hоmе аnd sell іt tо raise funds tо pay оff thе mortgage. Legal fees саn quісklу mount uр durіng thе foreclosure process, аnd bесаusе thе costs involved аnd thе risk thаt уоur property vаluе mау fall, lenders typically dо nоt allow уоu tо borrow 100% оf thе house vаluе whеn considering a refinance. Ноwеvеr, bесаusе оf thе housing crisis thаt continues to plague our economic recovery, thе government decided tо intervene аnd encourage lenders tо offer unconventional refinance loans аnd loan modification agreements.  Back in 2009 and 2010, loan modifications were more accessible. Today, many of the lenders have tightened their mortgage modification requirements.  Lenders like Chase continue to provide loan modifications in high volumes but banks like Wells Fargo wants to avoid re-defaulting situations that have been occurring at a high rate.

The government-sponsored Fannie Mae аnd Freddie Mac buy thе majority оf thе home mortgage liens written іn thе United Ѕtаtеs. Аs раrt оf thе Ноmе Affordable Refinance Program (HARP), bоth entities offer refinancing solutions tо people whоsе liens thеу hold. Wіth а HARP mortgage, а homeowner саn refinance аn existing mortgage еvеn іf thе nеw loan amounts exceeds125% оf thе property vаluе. Initially, the Home Affordable Refinance would cap the loan to value restictions at 125%, but last month the Obama administration announced sweeping reforms with new HARP guidelines in an effort to extend more payment relief to homeowners that were struggling nationally because of their underwater mortgage. Unfortunately, yоu are not allowed to refinance уоur loan undеr HARP іf уоu hаvе а government insured mortgage, suсh аs а loan backed bу thе Federal Housing Administration (FHA) оr Veterans Affairs (VA).

The Obama foreclosure prevention plan is coming under fire this week from members of Congress. This heralded loan modification program slated to aid 3 million to 4 million homeowners in an effort to extend loan relief while helping homeowners divert foreclosure. Unfortunately this government loan modification program have fallen far short of that goal, and now a handful of Republican Congressman are reportedly ready to introduce legislation to eliminate it.  It should be noted the Bush and Obama administration have made serious attempts to stem the foreclosure crisis with numerous mortgage relief initiatives.

TARP Watchdog Says Loan Modification Plan Is Failing

Scores of homeowners aren’t getting help they qualify for, says Neil Barofsky, who is stepping down. The HAMP loan modification program was designed to lower interest rates and mortgage payments for struggling homeowners, and it has worked for around 600,000 people across the country. But critics say it should be reaching a lot more people. As lenders continue to tighten refinance loan guidelines, more and more homeowners will be in need of mortgage relief.

There are “3.3 million families who might have been reached by this program if only it had been better designed, better managed and better executed by the Treasury department,” said Neil Barofsky, the special inspector general installed to oversee the government’s bank bailout efforts. Speaking at a House hearing Wednesday, Barofsky responded to questions from North Carolina Republican Rep. Patrick McHenry, who recently introduced the legislation that would end the program. [There are] 3.3 million families who might have been reached by this program if only it had been better designed, better managed and better executed by the Treasury department.

A recent Nation Public Radio article revealed some interesting insight. TARP special inspector general, gave his thoughts regarding the Home Affordable Modification Program. Neil Barofsky has been critical of the Treasury department for not doing more to make the program work better and reach more people, and for not offering a current estimate of how many homeowners the program will actually reach. “It is somewhat shameful that at this point — here we are in March 2011 — and the Treasury department will in one breath say that, ‘Well, we know the number is not going to be anywhere close to what we originally said it would be,’ ” Barofsky said, “and then in the second breath refuse — I mean, this is such a basic failure in transparency, to refuse to tell you what their expectation is as to the total number that are going to receive permanent modifications. It evades accountability, and it’s trying to cover up a program that is clearly a failure.”

The Treasury department and Barofsky both agree that the banks and mortgage service companies have not been doing a good job.  Barofsky said. “But Treasury has done nothing to punish or penalize these loan servicers.” It would cause a huge amount of damage to a very fragile housing market and leave hundreds and hundreds of thousands, if not millions, of Americans without the chance to take advantage of a loan modification programs that enable homeowners to keep their homes.

Treasury Secretary Timothy Geithner said it would “cause a huge amount of damage to a very fragile housing market and leave hundreds and hundreds of thousands, if not millions, of Americans without the chance to take advantage of a mortgage modification that would allow them to stay in a home they can afford.”

According to NPR, Barofsky was critical, but did not of call for the Home Affordable Modification Program to be eliminated. Instead, he has long called for the Treasury to fix the program so it will help more people.

Borrowers across the nation continue to fall behind on their home loan payments. Many have contacted their mortgage lenders in an effort to renegotiate mortgage rates.  Many borrowers have been offered loan modification agreements and forbearances. Clearly the process of modifying their mortgage has made most homeowners become weary.

What else could you call it when almost 1 in 7 of South and Central Floridians who jumped into the Obama administration’s Making Home Affordable Program in January in hopes of getting a loan modification had dropped out by May?  The borrowers who have dropped out have joined an exodus of more than 215,000 borrowers nationwide in the past five months. They went through the trouble of applying, only to leave with nothing to show for it.

The answer, according to representatives of Chase and Wells Fargo/Wachovia among the largest banks operating in Florida is: Those borrowers did not meet the loan modification qualifications. Many of the mortgage relief prospects were not able to send in the documentation or their loan modification application was not completed correctly.

Using the May report from the Treasury Department, it’s clear that Miami-Fort Lauderdale and Orlando-Kissimmee are the largest metro markets in the nation for loan modifications. The two regions account for 6.8% of all Making Home Affordable loans nationwide, topping Los Angeles 6.4% and New York 6.1%.  Here, even those borrowers who do get a loan modification say the process is too vexing. Even if they comply with all the lender’s rules, borrowers say they get the runaround and often, contradictory answers from one day to the next.  Read the original article online Thousands giving up on home loan modification hopes.

The latest Home Affordable Modification Program statistics were announced Monday in a report used to measure the success of federal loan modification programs. The HAMP report indicated that slightly more than 10% of eligible borrowers received a loan modification that became permanent. Yet only one in three homeowners who started in the trial program has been kicked out.  The number of homeowners who have received a permanent federal loan modification rose to 340,459 in May from 295,348 reported in April.  That’s about 11% of 3.2 million HAMP eligible loans.  At the same time, the number of trial loan modification plans continued to fall as borrowers must now provide proof of income prior to any new payment plan. Active trial modifications fell to 467,672 from 637,353 in April. And borrowers who received a mortgage modification under the old rules are now required to prove their income before getting a permanent modification.  An additional 150,000 borrowers who could not prove their income or keep up with the new payments had their modifications canceled in May, bringing the total number of cancellations to 429,696. That’s about 35% of the 1.24 million trial modifications started.

Government home loan modification programs are being offered under the HAMP, or Home Affordable Modification Program.  We are told that some borrowers are getting approved for a loan-workout with mortgage rates as low as 2 % for five and even 10 years for qualify homeowners.  Many mortgage lenders are offering 30-year fixed rates at 5% with no points.  No cost mortgage refinancing requires stellar credential though. Both bankers and mortgage counselors agree that if you’re considering a home refinance, do your homework. Check with your current mortgage holder.  We suggest shopping online for the best refinance loan. If you do not qualify then consider a loan modification from an attorney backed loan modification company.

Thousands of borrowers are losing trial loan modification agreements that were installed recently under the HAMP prrogram. The total of distressed homeowners who drop out of President Obama’s loan modification plan soared in April.  According to federal loan modification statistics released last week, over 122,000 homeowners had their trial mortgage loan modification agreement canceled in April, bringing the total to 277,640 since the HAMP program began about a year ago.

Meanwhile, only 68,000 homeowners were converted from the trial modification phase to a permanent loan modification last month.  Under the program, known as HAMP, eligible troubled borrowers are put into trial home loan modifications to determine whether they can keep up with the reduced mortgage payments and to give loan servicers time to verify income and hardship.  A total of 295,348 people have received permanent long-term help under the loan modification plan, but another 3,744 who were converted to permanent status were later cut from the program anyway.  Mortgage refinancing has not been an option for millions of homeowners who have inadequate credit scores or mortgages that are buried under-water with home values less than the mortgage balance.

The latest modification report does not include home equity loan modification details.  Many industry insiders believe the second mortgage foreclosures and defaults could be stemmed if home equity servicers came up with a good modification plan for home equity credit and second mortgage loans.  Many homeowners have used the loan modification to stop the foreclosure proceedings.

In most cases, loan modification agreements are usually canceled if the borrower fails to make the adjusted payments, or if during the trial period, does not meet the program’s criteria or hand in the required income verification paperwork.  Obama admin officials said they were not surprised to see the number of canceled trial mortgage modifications rise because borrowers had been allowed to enroll in the trial program by simply stating their income. Many homeowners are being dropped from HAMP if they cannot prove the income figures they originally provided.  “As those decisions get made, it’s certainly expected that there would be some that fall out of HAMP,” said Phyllis Caldwell, chief of Treasury’s Homeownership Preservation Office.  So far, some 24.6% of trial loan modification options have become permanent, up from 19.8% a month ago.  Some 637,353 troubled borrowers remain in trial mortgage loan modifications, officials said. The pace of people entering the program has slowed as servicers begin implementing new requirements to collect documents at the outset. Read the original article at CNNMoney.com.

President Obama made more mortgage news as he announced further expansion of the federal loan modification program, Home Affordable Modification Program also known as HAMP.  Many Washington insiders are questioning the rumored bailouts to mortgage lenders and banks contained in the fine print of the HAMP program.

According to the Wall Street Journal, several of the largest mortgage lenders, including some that have already received huge bailouts, carry hundreds of billions worth of home equity loans on their books. As home prices have nationally declined by almost 30%, these second mortgage liens are worthless in the case of a foreclosure. Second mortgage loans are usually wiped out completely during a foreclosure if the price has decreased more than 20%.

Yet the Obama solution is now to pay off 6 cents on the dollar for those junior liens, also known as second mortgages. While 6 cents doesn’t sound like a lot, it is a whole lot more than zero, which is what the banks would receive otherwise. Given that the largest mortgage lenders are carrying over $500 billion in second mortgages that may need to be written down, we are talking about tens of billions of taxpayer dollars again being funneled to the very banks behind the subprime mortgage crisis.  If that bailout isn’t enough, the new equity loan plan increases payments to home loan lenders to not take over homes, all at the expense of the taxpayer.  Many critics believe that Obama continues these mortgage bailouts rather than correcting the financing problems in the housing market.