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Who Gets to Refi?
We co-signed a mortgage with our daughter, but the value of the property has fallen more than 50 percent. Her credit is excellent and she has never missed a payment. But because the mortgage is not with Fannie Mae or Freddie Mac, she can’t reduce her interest rate from 6.125 percent.
Soon after she obtained the mortgage, it was re-sold to another company. Was it just “luck of the draw” that the company that bought it was not Freddie Mac or Fannie Mae?
Once originated, a loan is simply an asset that a lender can either keep in portfolio or sell in the secondary market, depending on its financial strategies and preferences. The secondary market is an electronic platform where various buyers and sellers deal in loans.
While Fannie Mae and Freddie Mac are important players in the secondary market, they are not the only ones. It is estimated that the government now backs as much as 90 percent of all mortgage loans.
Your daughter's property lacks equity. Since she cannot qualify for assistance under the government's Home Affordable Refinance Program (HARP), your next option is to contact the state attorney general to see if there is a state program that might help.
Unfortunately, the federal programs currently in place are only available for government-backed loans, such as Fannie Mae, Freddie Mac, FHA and VA loans.
Can the government do better? You bet. Of $45.6 billion of stimulus funds set aside for “housing support programs,” only $5.5 billion has been spent.
I believe that those who have paid in good faith for at least three years should be able to refinance at today's rates. With lower rates, borrowers would have more disposable income and less incentive to walk away from the property. Universal refinancing would mean fewer foreclosures, more local spending and a stronger economy.
Peter G. Miller is the author of The Common-Sense Mortgage and a veteran real estate columnist. Have a question? Please write to firstname.lastname@example.org.View Foreclosure Article Archives
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