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Anyone but Fannie and Freddie

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Posted On: 10/17/2012

ANSWER:

According to a study by MortgageDaily.com, Fannie Mae and Freddie Mac funded roughly 81 percent of all loans in the second quarter. That means other mortgages are out there – but how different can they be?

Under Wall Street reform, lenders obtain important liability and financial protections when they make qualified residential mortgages. The law spells out many of the standards lenders must meet to obtain QRM protections.

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For instance, the loan must be a Federal Housing Authority, Veterans’ Affairs or conventional mortgage in most cases. The cost for points and fees cannot exceed 3 percent of the loan amount.

Also, the lender must show that the borrower has the ability to repay the loan. To do that, the lender must verify the borrower’s income and employment. The days of no-doc and low-doc loan applications are gone. The result is a much stronger – and less risky – mortgage system, something that is good for both borrowers and lenders.

You explain that your bills are paid and your credit score is at 720. These are important measures that can help with a loan refinance. However, there must be something else that you feel will hinder a loan application, such as insufficient equity or a loss of income.

Contact your lender and see if it’s possible to modify your current mortgage. For instance, under the government’s Home Affordable Unemployment Program, there are cases where “your mortgage payments may be reduced to 31 percent of your income or suspended altogether for 12 months or more.”

Also, see if you can be helped under the Treasury Department’s $7.6 billion Hardest Hit program for homeowners in major foreclosure centers.

Peter G. Miller is the author of The Common-Sense Mortgage and a veteran real estate columnist. Have a question? Please write to peter@ctwfeatures.com.

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