As part of the federal stimulus bill, the federal government on Feb. 23 raised the limit at which an Orange County home loan is considered a "jumbo loan" rather than a "conforming loan." According to the Orange County Register's Mortgage Insider blog, Orange County is one of a handful of high-cost areas of the country that qualify for the higher threshold. The higher limit matters because the federal loan-purchasing agencies Fannie Mae and Freddie Mac may not purchase "jumbo" loans, which in turn means those loans carry higher interest rates and are more difficult to get.
Until 2008, the threshold was just $417,000, a policy that disproportionately affected homeowners in high-cost areas like Southern California. Now, the limit is $729,750, allowing homeowners to borrow up to that amount to buy a new home or refinance an existing one.
At first blush, this may sound like great news for Southern Californians. Unfortunately, as Cypress mortgage loan modification lawyers, we know it's too little, too late for many homeowners. Most importantly, the policy change can't do much to help people who are already homeowners and have gone "underwater" -- meaning their home is worth less than their debt -- thanks to a sharp drop in home values. Those people might like to refinance their homes to take advantage of the better rate, but generally can't because the drop in their homes' values means they don't have at least 20% equity in their homes. And 20% equity is the threshold for most lenders to consider refinancing, although the Obama foreclosure prevention plan expands that slightly to include homeowners who are underwater by 5%.
Furthermore, homeowners still must qualify for a large loan in order to take advantage of the new policy. That cuts out people with lower incomes -- the people who may need refinancing the most. Because a lower income makes it harder to qualify for a conventional mortgage loan, many people with moderate incomes were offered "subprime" or non-traditional loans, some of which have become unrealistic as their interest rates reset and their home equity drops. It may be appropriate that people with low incomes can't qualify for a large loan, but the policy change won't help them get the refinancing they need.
However, these and other homeowners who are trapped in bad mortgages may still be able to get help through mortgage loan modifications. Refinancing replaces one debt with another, generally more favorable debt; a mortgage loan modification changes the terms of your existing debt without any new loan. At Howard Law LLP, a large part of our practice is representing homeowners who need to modify their mortgages to better reflect their financial situation. Our Anaheim mortgage loan modification attorneys can help you negotiate with the bank for a lower interest rate, a longer repayment period or changes to the terms of "toxic" mortgages. We can also help clients who are victims of predatory lending.
If this sounds like your situation and you're ready to explore your options, Howard Law's Buena Park mortgage loan modification lawyers offer free, confidential consultations. To set one up, please contact us online as soon as possible or call 1-800-872-5925.