One of every three applicants for a mortgage are turned down by lenders, according to msn.realestate.com.  There is plenty of money available to loan and homes that are perfectly priced for affordability, but lenders are still saying “No thank you” to would-be buyers.

Banks and the federal government have tightened lending requirements. Each blames the other for the difficulties consumers have getting financing. It’s all a reaction to the big mortgage circus a few years back, when government regulators were lax, banks were handing out easy money and borrowers racked up debts they couldn’t pay.

The riskiest loans, made from 2004 to 2007, still haunt banks: The federal government now owns many of them and is forcing banks to buy some back.

Evidently when the government buys so many loans, their restrictions are greater so in order to sell lenders must meet those requirements.

Although everyone acknowledges that a huge number of houses are not worth as much money that is owed on them, reducing the principal amount of loans for homes that are under water is proving to be a slow process.  One of the most significant delays is the resistance of Ed DeMarco of the Federal Housing Finance Agency.

According to CNN Money, DeMarco is not keen on this because reducing the amounts owed on homes would be too costly for Fannie Mae and Freddie Mac.

His primary worry is that providing principal forgiveness could prompt many of the 2 million borrowers who are current with their payments to fall behind. Having them default will hurt the housing market more than offering principal reduction will help it, he said.

“The far larger group of underwater borrowers who today have remained faithful to paying their mortgage obligations are the much greater contingent risk to housing markets and to taxpayers,” he said, adding these homeowners can lower their monthly payments through the government’s refinance program.

That’s fine and dandy for him to say, but for people who have legitimately suffered because of job loss or other economically triggered financial problems, he offers no solace.  Hopefully there will be some relief soon.

Many people face major financial trauma after losing jobs.  However, help is available from a number of sources if people opt to take advantage of the help available.  When someone experiences job loss through no fault of their own, a possible period of forbearance.

A friend of mine recently rode the modification roller coaster and was turned down. He turned to a HUD-approved financial planner and suddenly – with the authority given them by the power of the president – the ball is rolling again.   “Why wasn’t my client offered forbearance when you learned of the job loss? Are you familiar with what you are required to do by law?  Can you tell me where the citation is?”

For anyone not familiar with their mortgage right, especially if they have an FHA loan, read this from the NY Times,

Under the new rules, lenders are required to consider a forbearance plan among a number of options to prevent foreclosure. Most of the government programs intended to forestall or prevent foreclosure have not lived up to expectations, and many homeowners have lost their homes. Last year, foreclosures were filed against about two million properties, down from 2.9 million in 2010, according to RealtyTrac, a real estate data provider.

Seek a qualified financial counselor if you find yourself in trouble!

Credit requirements to qualify for home mortgages may be loosening, a signal that the housing market may also be on the mend after crashing in 2007.  Five years it’s been since the U.S. was riding high on the housing boom hog.  Don’t expect the housing market to improve to those levels anytime soon, but at least it is staggering back according to DS News.com,

Market indicators point not just to a stabilization of mortgage lending standards, but also a loosening of credit availability. Banks are now lending amounts up to 3.5 times borrower earnings. This is up from a low during the crisis of 3.2 times borrower earnings. Banks are also loosening loan-to-value ratios (LTV), which Capital Economics denotes “the clearest sign yet of an improvement in mortgage credit conditions.”

This is definitely welcome news for market watchers!

Reducing the principal of money owed to mortgage lenders may be coming soon, however home owners should not expect lenders will be in a hurry to do this.

According to CNN Money, the settlement mandates lenders to reduce the principal on underwater loans,

Mortgage servicers will have a lot of work to do to prepare for the coming wave of principal reductions unleashed by the $26 billion mortgage settlement.

That’s because they haven’t been doing many of them up until this point.

Only 8.5% of loan modifications in the fourth quarter of 2011 involved principal reduction, according to the latest government data. That’s a mere 9,867 troubled homeowners for the quarter.

The down side is Fannie Mae and Freddie Mac loans are not included in the settlement.

I don’t know how we did it, but my husband and I somehow squeaked through our closing when we purchased the home we now live in.  Why wouldn’t we? After we wrote our contract and got it to the lender, my husband – knowing we were moving to the “country” – went out and bought a new truck.

OUCH!

That should have demolished our ability to buy a house.  Fortunately our credit score was extremely high and we made really good money (then!) that we were somehow able to get the loan approved.  We got lucky. Others are not often that fortunate.  Rhode Island real estate agent Ginny Gorman tells about the toils and troubles others people have faced,

Credit Bumps that Delay Closings. It was a topic of conversation at a 50th birthday party of one of my clients the other night that got me going on this credit bump subject again. It is those bumps that can alter your credit worthiness for awhile but especially if you are in the process of buying a Rhode Island home.

A couple of the dinner party guests were talking about someone they ‘Knew’ (not them they said) who had an unpleasant experience with a home closing due to a credit issue.

Don’t go out and buy a new truck, the new fridge, living room furniture, or any other major purchases until AFTER you close!

I have a confession to make here.  My husband’s job was outsourced to India two years ago and he has yet to find another job. Fortunately my own work life has improved so we have managed to stay in our home. We have, however, because of the displaced worker issue requested to modify our mortgage.  We have been trying to do this for a year and a half.  We fax our papers every two months (or more if they ask) showing paycheck receipts.  We  call Wells Fargo every week.  And still… nothing.

This is why as I read the article about the new task force investigating mortgage fraud, I feel a little sense of relief.

After a year of talks aimed at a settlement with five big banks — Bank of America, JPMorgan Chase, Wells Fargo, Citibank and Ally Financial (formerly GMAC) — attorneys general in all 50 states this week have been are poring over the 100-page draft of a the $25 billion deal requiring bankers to commit to modify problem loans that they have been slow to do until now. Under the proposed terms, the banks would also agree to follow strict foreclosure guidelines and procedures and contribute as much as $5 billion to foreclosure relief programs.

I don’t believe for a minute that it will help my husband and me – Mr. & Mrs. Joe Average – but it does give me a sense of satisfaction that perhaps SOMEONE will be helped.

The only thing I’ve ever managed to pay off is a car or three.  The idea of making the final payment on a home loan is just … heavenly!  To write that very final check on my mortgage payment – well – I admit that I DREAM about the day!  However, it appears that some companies will do whatever it takes to stretch the money owed to them as long as possible.  According to Wakdjunkaga’s Blog (and I hope I spelled that right!),

First, after more than half a decade of handling our payments nearly perfectly — no delays in check-cashing to force late fees, as I had suffered under other institutions — on our penultimate payment, they somehow ignored the amount for which I had made out the check and cashed it for the monthly payment only, without the additional thousand of additional principal. A mistake? The probability of driving up our final payment by a couple of bucks a day made the coincidence of this “error” seem overly convenient to me. So I called the company (with three motives in mind — to complain about their deliberate error and get it corrected; to verify the final payment procedure and, after the “error” correction to determine the appropriate timing of our payoff; and to investigate our acquisition of the funds in our [currently rather hefty] escrow account).

That he spent forever getting through the voicemail barricades is another good reason to get mad! Ouch! Congratulations nevertheless, Mr. Burrow!

The Home Affordable Refinance Program is expanding eligibility requirements, allowing homeowners who are underwater to qualify.  By refinancing, homeowners gain a lower interest rate, therefore save money on their monthly payments.  According to Bargaineering, more people may now be eligible,

Before, in order to be eligible for HARP, missing a mortgage payment was not allowed. Now, as long as you haven’t missed a payment in the past six months, it won’t disqualify you if you missed a mortgage payment in the last 12 months. The program has been extended through December 31, 2013, and gives time for homeowners to work to meet eligibility requirements for an eventual refinance.

The catch? Your mortgage has to be a Fannie Mae or Freddie Mac backed.  That makes it too good to be true for many.

Photo by nikcname.

If you want to refinance your mortgage loan and you can qualify, this is a great time to do it!  Mortgage rates are approaching the lowest rates in history – the 3.94 percent average that was recorded in the 1950′s.

First, lower payments. Second, you’ll get a month “off” making that mortgage payment – at least a month off at the beginning of the loan; you’ll still pay it at the end.   From MSNBC.com,

The average rate on the 30-year fixed mortgage fell back down to 3.94 percent, the record low set earlier in the fall.

Low rates offer a historic opportunity for those who can afford to buy or refinance. Still, few people are able to take advantage of the record-low rates or have already done so.

The rate on the 30-year home loan fell from 3.99 percent the previous week, Freddie Mac said Thursday. The 3.94 percent average is the lowest on records dating to the 1950s.

These really are incredible rates, but have not done much to help the housing market.  Time will heal that gaping wound.