What is a Deed-in-Lieu of Foreclosure?

As of March 1st, Fannie Mae and Freddie Mac will allow homeowners to apply for a deed-in-lieu of foreclosure even if they have been making their mortgage payments on-time.  Until recently, the GSEs only allowed their borrowers to engage in a deed-in-lieu of foreclosure if they were more than 90 days delinquent.

What is a Deed-in-Lieu of Foreclosure?

It is a deed instrument in which the borrower conveys all interest in a real property to the lender in order to satisfy a loan that is in default. This is done in hopes of avoiding foreclosure proceedings. The deed-in-lieu of foreclosure has advantages for both the borrower and the lender.  The borrower is immediately released from most or all of their personal indebtedness that is associated with the defaulted loan.  Also, the borrower's credit is not hurt as much as it would be if they went through foreclosure.

Advantages for the lender include a reduction in the amount of time and money that is associated with a repossession. There is also a lower risk of the borrower exacting revenge by vandalizing the property before they are evicted.

It is considered a deed-in-lieu of foreclosure when the debt is secured by the real estate being transferred  Both the borrower and the lender are expected to enter the transaction voluntarily and in good faith.  However, if the borrower's outstanding debts are greater than the current fair value of the property, the lender may not proceed.

To summarize briefly, a deed-in-lieu of foreclosure basically means that the homeowner cannot afford their mortgage and are voluntarily giving their home back to the bank in exchange for wiping their debt clean. It does have a negative impact on credit scores, but sometimes it is the only option for some people.  It is quite possibly the fastest way that one can escape foreclosure.

To qualify, homeowners must be able to prove their hardships, such as the loss of a job, serious illness, or the death of a co-borrower. They must have a debt-to-income ratio of 55 percent or higher, and the property must be in good condition. This mortgage release option is best for those facing a hardship and will not be able to make their payments in the future. It is not expected than a large number of homeowners will suddenly apply for a deed-in-lieu of foreclosure though, especially since home prices are going up. It is up to each homeowner to decide if it is better for them to continue paying their mortgage for a few more years while home prices further improve, or take a hit to their credit now and move on.

If you find yourself unable to make your mortgage payments, be sure to carefully consider all of your options before making a decision. If you are unsure of what to do, we are willing to help assess your situation and answer your questions. Call us at 888-883-5252 for help.

What is Ginnie Mae?

The Government National Mortgage Association (GNMA), or Ginnie Mae as it is nicknamed, is responsible for allowing mortgage lenders to obtain a better price for their loans in the capital markets. Recently, Ginnie Mae announced that it has guaranteed more than $41 billion in mortgage-backed securities (MBS) as of December 2012. These are a dependable source of liquidity for loan originators who work with government-backed mortgages.

Ginnie Mae finances housing mortgage insurance programs that are run by the FHA, the VA, and other programs, by raising capital from investors in the global credit market. This ensures liquidity for affordable rental and homeownership for everyone across the nation.

Unlike Fannie Mae and Freddie mac, who are "government-sponsored enterprises" or GSEs, Ginnie Mae is a wholly owned government corporation. Ginnie Mae is the guarantor of MBS issued by government-approved securities issuers who participate in Ginnie Mae's program.

It has always been Ginnie Mae's mission to expand affordable housing throughout the US. Ginnie Mae is an essential part of the housing finance market and its economy recovery.

The Future of Refinancing

How would you like to be among the millions of responsible homeowners who can refinance their mortgages at a lower rate in order to save thousands of dollars each year? It's within your reach!

Especially now that U.S. Senators Robert Menendez (D-NJ) and Barbara Boxer (D-CA) have introduced this legislation in the 112th Congress. It is called "The Responsible Homeowner Refinancing Act of 2013" and it plans to remove the barriers that are currently preventing borrowers from obtaining the lowest rate possible.

This bill would streamline refinancing as we know it for all of Fannie Mae and Freddie Mac's borrowers whether they are underwater or not. Up-front fees would be reduced, appraisal costs for borrowers would be eliminated, and the HARP program would be extended by one year to allow eligible borrowers to take advantage of it.

This would be done at no cost to taxpayers. It is intended to stimulate the economy by lowering borrowers' monthly mortgage payments. This would hopefully reduce the number of foreclosures around the nation while boosting the housing market.

That’s why the Menendez-Boxer bill has such broad support from industry and consumer groups. With the recent record-low rates for a 30-year mortgage averaging around 3.53%, you could be one of the nearly 12 million homeowners guaranteed by Fannie Mae and Freddie Mac who could refinance! There are many who are not currently able to refinance because of policies and high fees, but if the Menendez-Boxer bill goes into effect, all that red tape would be gone!  In fact, through HARP, the average homeowner saves $2,500 per year as it currently is. The bill plans on increasing that amount by expanding refinancing opportunities for all those who are eligible.

If you are ready to take advantage of the current low rates, find out if you are qualified for a loan now! Call Quest Loans at 888-883-5252 to find out when it is the right time for you to refinance! We will answer all your questions!