Sunday, May 3, 2009

The special refinance programs rolled out three weeks ago are not participants in the scam plans in the headlines. Here's the easy way to tell a scam from the real deal.

Slime mongers will always give you the answer you want to hear: "Do you guarantee you can refinance my mortgage?"

"Yes!"

"If I refinance with you, will you bring me ice cream and cake to the closing table?"

"Yes!"

These groan-loans invariably have a significant slippery upfront fee -- perhaps $2,000 or more.

The Fannie Mae/Freddie Mac Home Affordable Refinance Program (HARP) has neither of those components.

After my last column, I spent a lot of time responding to your requests for information. I heard this coming out of my mouth more than I wanted: "Nope."

There's a Fannie Mae link, http://loanlookup.fanniemae.com/loanlookup/, and a Freddie Mac link, https://ww3.freddiemac.com/corporate/, that tells if Fannie or Freddie own your mortgage.

They are not bulletproof. If you don't get the response you want, don't give up. However, even I was confounded when, so often, neither Fannie nor Freddie claimed the mortgage.

"It's got to be a Fannie Mae loan," callers said. "Look, even the mortgage document is a Fannie Mae document."

That's when bells started going off in my head. Forms R Us uses Fannie Mae forms for all kinds of mortgages -- not just Fannie Mae loans.

That was it! Fannie and Freddie don't own some of these loans at all. They only buy approximately 75 percent of residential mortgages.

The Fannie Mae version of the HARP mortgage has features distinctly different from Freddie Mac's, which I covered last time.

If Fannie owns the mortgage, the borrower may apply for this refinance with any loan originator who closes Fannie Mae-type loans. It doesn't matter who the current servicer of the borrower's mortgage is.

If the borrowers currently send their mortgage payments to Countrytime, they don't have to apply through Countrytime for the HARP loan. They may choose who they want to do business with. The new loan originator must offer Fannie Mae loans, of course.

Both Fannie and Freddie allow a 105 percent loan to value for this special no-cash-out refinance loan.

Fannie won't refinance the following loan types under this program: FHA, VA, loans in excess of $417,000 or mortgages with private mortgage insurance. Unlike Freddie, Fannie does not exclude non-prime or Alt-A loans.

Although the new first mortgage can't exceed 105 percent loan to value, Fannie doesn't care about the borrowers' second mortgage. They can have a second as big as a caboose and it doesn't matter. Still, whether that second is a whopper or a shrimp, the second mortgage holder has to agree to remain in second position.

For both the Fannie and the Freddie blue plate special, typical refinance costs apply. Borrowers have to pay for the normal stuff: appraisal, title work, doc stamps, intangible tax and others. If there is sufficient equity, Fannie allows closing costs to be added to the new loan. While Freddie limits this feature, Fannie does not.

Like Freddie, Fannie will refinance primary residence, vacation home and investment property.

Mom is a little more lenient than Dad on credit. Fannie doesn't establish a minimum credit score. Also, while Freddie calls for no 30-day mortgage lates in the last 12 months, Fannie says no 60-day mortgage lates in the last 12 months.

However, while Freddie does not require documentation of income, Fannie does. Borrowers have to supply either pay stubs, or one year's federal tax returns to prove income.

Fannie hasn't stipulated what debt-to-income ratio will be accepted. So until we run the application through the automated underwriting engine, we can't tell how high the ratios may be.

Neither Fannie nor Freddie will accept a condotel or a manufactured home (mobile home or trailer for those of you with embarrassed necks).

What do you think?

Regina E. Corcoran, SRA, is a Florida real estate broker, state-certified residential appraiser and residential contractor. She is president of AmeriRealty Corp. and vice president of AmeriMortgage Corp. She can be reached at ReginaECorcoran@cs.com. Corcoran writes her column exclusively for The Citizen. It appears every other Sunday.