Saturday, September 1, 2007

Bush details

The LA Times' "For some, a chance to refinance despite default" by Kathy M. Kristof today gives useful detail and supports the idea that Bush's proposal wouldn't have much effect after all the qualifications, especially here in California.

Who qualifies for these loans? ...

* Even if you're in default today, you must have had a history of on-time payments until your so-called teaser rate expired and the interest on your adjustable-rate mortgage reset.

* The interest rate must have been scheduled to reset between June 2005 and December 2009.

* You must have 3% cash or equity in your home.

* You have to show a history of sustained employment.

* You have to prove you will have sufficient income to make the FHA Secure loan payment.

What's the maximum loan amount under the program?

FHA limits vary by county. In most major California cities, the maximum FHA loan for a single-family home is $362,790.

What if my mortgage is more than that?

An FHA proposal would hike the loan limit to $417,000. The proposal had been stalled in Congress but appears to be gaining steam and may be at the top of the priority list when lawmakers return from recess.

What about the interest rate?

An FHA loan is only modestly more costly than an ordinary loan, said Jeff Lazerson, a Laguna Niguel mortgage broker. Current rates for a traditional, so-called conforming loan averaged 6.09% on Friday, according to

If you have a small down payment, lenders charge more -- closer to 6.5%.

The FHA also charges a 1.5% upfront insurance premium, plus 0.5% a year, which could bring the total annual loan rate to 7% or higher. On a $350,000 loan, that would mean a $2,329 monthly payment.

That's not cheap, to be sure, but many sub-prime borrowers are paying 10% or more, Lazerson said. At 10%, the monthly payment on a $350,000 mortgage would be $3,071.

"Big bailout might be inevitable" by Tom Petruno is more disturbing.

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