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Old 02-04-2012, 04:26 PM
 
Location: SF Bay Area
11 posts, read 30,784 times
Reputation: 13

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Our 5/1 ARM Interest Only (non-Fannie May loan) will expire June 30 2012. House value is underwater by at least 30% market value based on an unofficial reappraisal estimate.

Should we

1. Refi now, before current 5/1 loan expires before June 30 2012?

2. Refi after the 2012 Refi relief plan?http://www.nytimes.com/2012/02/02/bu...financing.html

3. Just let the term expire and go on the variable rate?
My loan terms:
ARM 5/1 Interest Only @ 5.875%
Index: 1 Year LIBOR
Margin: 2.25%

Assuming my math is correct, and using this:
1 Year LIBOR Interest Rate Forecast

Margin + new potential Libor rate => 2.25 + 1.05 = 3.3% interest rate. And, I assume I am back to a regular P+I payment.

Q: How do I figure out my new monthly payment annually? Assume loan balance is $570,000

Q: Are there any rate caps or equvalent "got chas" that I should be aware of?

Q: Do I have any leverage to re-negotiate a better rate with my bank?

Thanks for any help! I appreciate it.

Last edited by me4tux; 02-04-2012 at 04:27 PM.. Reason: minor edits
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Old 02-06-2012, 11:37 AM
 
Location: Laguna Niguel, CA
768 posts, read 4,135,246 times
Reputation: 456
It's not very clear what the 2012 government refinance plan details are at this point, still in proposal stages I'm sure there will be a few changes until it is implemented. Remember they are still doing the Making Home Affordable plans, and even after the details were made official it took awhile for it to be implemented. Could be fall or later of this year to see it rolled out by lenders. At best, it sounds like it'll be refinancing into an FHA loan without an appraisal, that means paying principal & interest and mortgage insurance (and taxes & insurance), which for people in an interest only payment situation may not see much payment relief, if any at all, and those who aren't paying monthly escrow accounts could see their monthly payment increase even though it'll save them from having to make lump payments on property taxes & homeowners insurance.

Using you assumptions of a 3.3% interest rate, on a $570k loan amount over 25 years the P&I payment will be $2,792.78/mo.

In your last post at //www.city-data.com/forum/mortg...finance-w.html you said "Int rate cannot increase more the 5.00%. Int rate cannot decrease more the 3.625%" and also said "It states on the first Change Date, the int rate cannot increase more than 5% above, or decrease more than 3.625% below the initial int rate." So that sounds like it couldn't decrease more than 3.625% lower than 5.875%... so 2.25% would be the floor rate. Also you said "There is also a note about second Change Date and every Change Date thereafter the int rate cannot increase/decrease more than 2.00%" and so if your rate is 3.3% after the first adjustment, the 2nd time it adjusts it couldn't increase more than 5.3%. I'd suggest you have a mortgage professional review the paperwork to determine if there are any other rules or "caps" that would affect your interest rate.

Some people are led to believe (by their own bank, etc.) they have leverage to force a modification by not making their payments, but all too often the modification doesn't work out and the homeowner is left in a worse position than when they begun.

For some reason the URL to the NY Times article in your post didn't work for me - but http://www.nytimes.com/2012/02/02/bu...cing.html?_r=1 worked for me.

Last edited by ShanetheMortgageMan; 02-06-2012 at 11:37 AM.. Reason: added the URL to the NY times article
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Old 02-06-2012, 08:32 PM
 
Location: Laguna Niguel, CA
768 posts, read 4,135,246 times
Reputation: 456
Some initial details regarding the plan were released - FACT SHEET: President Obama

Providing Non-GSE Borrowers Access to Simple, Low-Cost Refinancing: President Obama is calling on Congress to pass legislation to establish a streamlined refinancing program. The refinancing program will be open to all non-GSE borrowers with standard (non-jumbo) loans who have been keeping up with their mortgage payments. The program will be operated through the FHA.


Simple and straightforward eligibility criteria: Any borrower with a loan that is not currently guaranteed by the GSEs can qualify if they meet the following criteria:


They are current on their mortgage: Borrowers will need to have been current on their loan for the past 6 months and have missed no more than one payment in the 6 months prior.
They meet a minimum credit score. Borrowers must have a current FICO score of 580 to be eligible. Approximately 9 in 10 borrowers have a credit score adequate to meet that requirement.
They have a loan that is no larger than the current FHA conforming loan limits in their area: Currently, FHA limits vary geographically with the median area home price – set at $271,050 in lowest cost areas and as high as $729,750 in the highest cost areas
The loan they are refinancing is for a single family, owner-occupied principal residence. This will ensure that the program is focused on responsible homeowners trying to stay in their homes.

Streamlined application process: Borrowers will apply through a streamlined process designed to make it simpler and less expensive for borrowers and lenders to refinance. Borrowers will not be required to submit a new appraisal or tax return. To determine a borrower’s eligibility, a lender need only confirm that the borrower is employed. (Those who are not employed may still be eligible if they meet the other requirements and present limited credit risk. However, a lender will need to perform a full underwriting of these borrowers to determine whether they are a good fit for the program.)


Program parameters to reduce program cost: The President’s plan includes additional steps to reduce program costs, including:


Establishing loan-to-value limits for these loans. The Administration will work with Congress to establish risk-mitigation measures which could include requiring lenders interested in refinancing deeply underwater loans (e.g. greater than 140 LTV) to write down the balance of these loans before they qualify. This would reduce the risk associated with the program and relieve the strain of negative equity on the borrower.
Creating a separate fund for new streamlined refinancing program. This will help the FHA better track and manage the risk involved and ensure that it has no effect on the operation of the existing Mutual Mortgage Insurance (MMI) fund.
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