A proposal by the Obama administration to help more struggling borrowers refinance into cheaper loans is prompting questions: Could it prompt an increase in interest rates, after a long period of low rates? And is this a program that can relieve the housing crunch, or just another Band-Aid?

The plan—announced in President Obama’s third State of the Union address—so far lacks much detail, although it would be paid for with a fee on large banks, and some expect it could even target loans not backed by Fannie Mae and Freddie Mac. But while some see benefits in such a broad scope for the program, others say it could be an administrative nightmare.

“Once you set off that rush to refinance, today’s low rates just went away. There’s no way there’s processing capacity to handle that rush, so the only way a lender can manage that pipeline is to temporarily close the doors or raise their rates to reduce demand,” said Pete Mills, a principal at Mortgage Banking Initiatives.

“There are some major operational challenges that will need to be dealt with for this program to work, like processing capacity, long-term rate locks, and a secondary market to buy them.”

But despite the need to iron out details, some observers are more optimistic about the stimulative effect for the housing sector of such an ambitious plan to avert foreclosures, as well as a boon for large originators who could handle the heightened demand.

“Such a massive refinancing would be positive for the major originators as they not only would profit from the fees associated with a refinancing, but they would be relieving themselves of representation and warranty claims that could be associated with the original loans that are being refinanced,” Jaret Seiberg, a senior policy analyst for Guggenheim Partners’ Washington Research Group, said in a research note.

Obama offered very few details about the plan, which would require congressional approval. He said it would be designed to help “every responsible homeowner” who wanted to benefit from today’s low rates, saving them on average $3,000 a year. More details are expected to be included in a legislative proposal released in a few weeks.

“While government can’t fix the problem on its own, responsible homeowners shouldn’t have to sit and wait for the housing market to hit bottom to get some relief,” he said in the speech.

But the idea is just the latest in a long string of plans aimed at aiding distressing homeowners and reviving the real estate market. Administration officials announced another effort on Jan. 27 to expand participation in the separate Home Affordable Modification Program, designed to provide servicers with federal resources to do loan workouts. And late last year, the government—as conservator to Fannie and Freddie—announced steps to boost refinancings for loans backed by the two mortgage giants.

Among the changes announced for the mortgage-modification program—known more commonly as HAMP—officials said they were extending the deadline to apply to the program by a year to the end of 2013 and borrowers who were initially not eligible for HAMP could go through a secondary evaluation process.

Officials briefing reporters about the changes said the various administration program should be viewed for their cumulative effect. “We believe very strongly the sum of the parts will be greater than the parts alone,” Gene Sperling, director of the White House’s National Economic Council, said on a conference call.

But while each plan has had limited effect, the overall impact on the housing sector has been lackluster.

“Anything that reduces the payments for borrowers, and certainly for distressed underwater borrowers, is positive,” said Brian Harris, a senior vice president at Moody’s Investors Service. “To date, though, while the various programs have been a help, it’s hard to say they’ve been a resounding success.”

Heavy foreclosures and negative equity continue to be a serious drain on the economy, to the point that even the Federal Reserve Board recently released a white paper stressing the need to policymakers of taking action sooner rather than later.

There was some speculation that the administration wanted to announce in the State of the Union progress in pending settlement negotiations over servicing flaws. But absent news like that, some saw President Obama’s refinancing proposal as rushing out yet another plan with few details or signs that it can be an improvement on earlier programs.

“The administration knew it needed to talk mortgages and knew it needed to bash big banks, this was plan B,” said Karen Shaw Petrou, a managing partner at Federal Financial Analytics Inc.

Meanwhile, industry observers are concerned such a comprehensive refinancing push overlooks the costs taken by investors of mortgage-backed securities, who would be hit when so many borrowers were placed into new loans.

“Somebody’s got to pay for it,” said Mills. “It’s not free. It’s people who own those (mortgage-backed) securities that are being refinanced in their pension funds and 401(k)s. They’re going to pay for it. The value of their securities will be diminished as they prepay.”

Others have criticized the administration’s plan to collect fees from the large banks to help fund greater loan financings for trouble borrowers.

“Why would taking money from the industry and applying it to yet another government program be desirable and hopefully effective? I think that’s a question mark,” said Chip MacDonald, a partner with the law firm Jones Day in Atlanta.

MacDonald questioned the whole notion of the public sector trying to solve the problem.

“It would be better if it were coming from the private sector than from the government, because the government hasn’t been effectual in the process,” he said. “Wouldn’t each individual bank in a competitive environment be better off making those decisions based upon credit metrics and on a case-by-case basis, rather than trying to do some universal program?”

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Just sent a new post to The Home Ownership Center USA. Here’s the link-

http://thehomeownershipcenterusa.org/fha-streamline-refinance-get-a-lower-mortgage-rate-no-appraisal-no-closing-cost/

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Just posted an article – Top 7 Reasons to Buy a Home in 2012 – on my blog at www.thehomeownershipcenterusa.org. Please take a look.

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By Doug Huggins

When one has been in and around the home selling/mortgage business as long as I have, one comes to expect that home sales are “always” slower in the months of December and January.  With the holidays and New Year getting started, it’s just the way it has always been.

However where home sales usually decline during the winter months, December marked the sixth straight month with year-over-year gains in home sales.

According to numbers just released by RE/MAX, home sales this December (2011) were 5.7% higher from the previous month and were up 1.1% from the same time period a year ago.

RE/MAX officials stated that this was due to a lower volume of foreclosures hitting the market; the number of homes available for sale fell for the 18th consecutive month and is now 25.7% lower than last year.

“We’re pleasantly surprised to see the year end with such strong sales and hope this trend will continue into the traditional spring selling season,” said Margaret Kelly, CEO of Denver-based RE/MAX. “This December jump may be due to increased investor involvement and transactions that were scheduled to occur before the end of the year, but with prices at or very near the bottom and historically low interest rates, consumers are finding real value in this market.”

Of the 53 metropolitan statistical areas examined by RE/MAX in this report, 20 experienced better sales last month than in December 2010, led by Providence, R.I. which had a 32% jump. Other cities that had a notable increase in home sales were Wilmington, Del. (24%), Nashville, Tenn. (21%), Miami (19%), Albuquerque, N.M. (17%) and Chicago (17%).

Meanwhile, home prices remained nearly even from the prior month, but were down 3.5% from last year. The median sales price for sold homes through December was $179,587.

Home prices have declined year-over-year for 15 straight months, RE/MAX said. In last months report, 20 metropolitan areas showed price increases from November, while 11 had a price jump from December 2010. Cities that had year-over-year price raises were Miami, Orlando, Fla., Little Rock, Ark., and Phoenix, Ariz.

RE/MAX said home stayed on the market throughout the country in December for about 98 days. Only July and September had days on the market below 90, at 88 respectively

Ask about the “21-DAY CLOSING GUARANTEE”  on Refinances and the “29 DAY CLOSING GUARANTEE” on Purchases  we’ve been able to negotiate with our Preferred-Certified Lenders.

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Listen in now at http://tobtr.com/s/2681127. #BlogTalkRadio #doug huggins #best business radio

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Listen to my new episode Jeffrey Hayzlett Author of new book – Running the Gauntlet at http://tobtr.com/s/2681127. #BlogTalkRadio

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Doug Huggins here…host of BEST Business Radio.

First and foremost  -HAPPY NEW YEAR to You!!

We’re kicking off the New Year right here at BEST Business Radio with a very special guest – former Fortune 100 Excecutive, best selling author, speaker Jeffrey Hayzlett – author of the great new book – Running the Gauntlet.

Listen in TODAY at 1:00 PM Eastern -  at http://bestbusinessradio.com

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By Doug Huggins

As I’ve reported just this week, Congress has forced Freddie Mac, Fannie Mae and HUD to increase their fees on mortgage loans to pay for the temporary (2-month) payroll tax increase.  As you read here… The payroll tax cut extension bill passed by Congress on Dec. 23 requires that GSEs charge an average g-fee in 2012 of at least 10 bps higher than in 2011. The bill also directs the GSE regulator to adjust the g-fees so all lenders pay the same fee. 

“In early 2012, FHFA will further analyze whether additional guarantee fee increases are appropriate to ensure the new requirements are being met,” DeMarco said Thursday morning.

The lawmakers relied on a 10-year increase in Fannie and Freddie g-fees to cover most of the costs of the legislation that extended the payroll tax reduction along with unemployment benefits for two months.

As a result, he Federal Housing Finance Agency has directed Fannie Mae and Freddie Mac to implement a congressionally mandated increase in their loan guarantee fees on April 1, 2012.

The legislation gives FHFA two years to implement a uniform fee structure. 

“FHFA will announce plans for further guarantee fee increases or other fee adjustments that will then be implemented gradually over the two-year implementation window, taking into consideration risk levels and conditions in financial markets,” Demarco said. 

BOTTOM LINE: If you are seriously interested in refinancing your current home loan or are looking to purchase a home, NOW would the be opportune time to do so. Essentially, you have three-months to get the loan done before your lender will be forced to charge you higher fees to close.

 Not only will you save the additional fees if you move forward now, you will also be able to take full advantage of the lowest interest rates I’ve seen in my lifetime (and I turn 60 in March 2012).  With home prices still low and interest rates in the low 4% range and with our preferred Certified Lenders willing to help you purchase or refinance with No-Closing Costs – NOW is definitely the time to get off your assets and take advantage of this incredible market.

Ask about the “21-DAY CLOSING GUARANTEE” we’ve been able to negotiate with our Preferred-Certified Lenders.

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Original Article by Brian Collins with Commenary by Doug Huggins

By Brian Collins

The Federal Housing Administration has suspended its anti-flipping rules for another year to facilitate

“This extension is intended to accelerate the resale of foreclosed properties in neighborhoods struggling to overcome the possible effects of abandonment and blight,” said acting FHA commissioner Carol Galante.

The Department of Housing and Urban Development issued the anti-flipping rule in 2003 to protect FHA borrowers from investors who were quickly flipping properties at inflated prices. The anti-flipping rule prohibits lenders from using FHA financing in transactions where a single-family property is being resold within 90 days.In early 2010, HUD first suspended the anti-flipping rule because it was holding up sales of foreclosed properties.  It was suspended again for all of 2011.  And now it is being suspended for all of 2012. Under the terms of the suspension, all sales must be “arms length” transactions and the lender must demonstrate that the property was not subject to prior flipping and that the property was fairly and openly marketed for sale.

In cases where the sales price is 20% or more above the seller’s acquisition cost, the lender must justify and document the reasons for the increase in value.

FHA research shows the investors can acquire, renovate and resell properties in less than 90 days.  Requiring them to hold the property for more than 90 days increases costs and risks vandalism.

Although the suspension of the anti-flipping rule is designed to stimulate renovation of foreclosed properties, it applies to all sales transactions. Since suspending the anti-flipping rule in February 2010, FHA said it has insured nearly 42,000 mortgages worth more than $7 billion on properties resold within 90 days of acquisition.

By Doug Huggins

What this means is that investors and rehabbers continue to be free to purchase distressed homes, bring them up to a marketable condition and sell them at a fair price to those who need and want a nice home at a good price.

As stated in Brian’s article, this ultimately helps HUD move part of its backlog of HUD-Owned Homes. However, it will also help the overall housing market. As these homes are fixed-up and brought back to market they will help stabilized a shaky housing market and aid in an increase in home values overtime.

This market stabilization and value increase will help home owners keep the value of their homes from declining further. It will stimulate more potential home buyers to explore the market; and will help all home sellers get a better price for their homes.

BOTTOM LINE HERE – NOW is the very best time to purchase a home, whether you are a first time home buyer or are someone getting back into the housing market. Interest rates are at historic lows, mortgage loan underwriting is easing a bit and borrowers can still buy a home with as little as 3 1/2 % down payment and pay no closing costs – all with interest rates in the low 4% range.

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