About Government Refinance and Home Purchase Programs

Yesterday we reported that a Morgan Stanley analyst was forecasting much higher interest rates coming in 2010. The folks over at Subprime Blogger are reporting that a Goldman Sacs analyst came out with an opposing opinion.

These two predictions are on completely different ends of the spectrum when it comes to mortgage rates. Morgan Stanley feels mortgage rates are going to move all the way up to 8% while Goldman Sachs feels mortgage rates are going to stabilize

If nothing else, we can be sure that the current friendly mortgage interest rates are tenuous. If you are in need of a low fixed rate contact us in the sidebar while rates are still relatively low.

We get this from a recent Bloomberg article:

Yields on benchmark 10-year notes will climb about 40 percent to 5.5 percent, the biggest annual increase since 1999, according to David Greenlaw, chief fixed-income economist at Morgan Stanley in New York. The surge will push interest rates on 30-year fixed mortgages to 7.5 percent to 8 percent, almost the highest in a decade, Greenlaw said.

…

Mortgage rates last reached 7.5 percent in 2000 as productivity gains slowed after the demise of some Internet companies. The average rate on a typical 30-year fixed-rate mortgage climbed to 5.05 percent in the week ended Dec. 24, according to McLean, Virginia-based Freddie Mac.

Yields on mortgage securities issued by Fannie Mae rose to a four-month high of 4.54 percent last week. Fannie and Freddie securities are used to guide borrowing costs on almost all new U.S. home lending.

Higher borrowing costs as the U.S. shows signs of beginning to emerge from the longest economic contraction since the 1930s puts Treasury Secretary Timothy Geithner in a situation similar to one faced by his predecessor Robert Rubin.

“This is the re-emergence of the bond market vigilantes,” said Mitchell Stapley, the Grand Rapids, Michigan-based chief fixed-income officer for Fifth Third Asset Management, who oversees $22 billion. “The vigilantes are saying, OK guys you want to do this, you’re going to pay a higher price for it.”

Right now rates are still in the mid 5’s. If you are considering refinancing or purchasing a property contact us in the sidebar right away.

We have known for some time that artificially created low mortgage interest rates we have seen in 2009 wouldn’t last forever. The end to those low rates seems to be upon us now. There was a good article in the WSJ recently on some of the details. Here is a snippet from that piece:

The days of record-low mortgage rates are numbered.

The U.S. government is slowly extracting itself from the market for home loans, closing out several emergency measures put into place in the throes of distress last year to prevent a collapse of mortgage finance.

The Federal Reserve’s $1.25 trillion program to purchase mortgage-backed securities, considered the most critical support, will draw to a close in the first quarter of 2010. Fannie Mae, Freddie Mac and Ginnie Mae will then be without a government buyer of last resort for their home loans for the first time since the mid-1990s and will have to rely solely on private investors.

A couple of reports today show that despite “green shoots” in the economy more and more people are falling behind on their mortgages still. Here is some info from a piece on the subject over at the WSJ online:

The U.S. housing market continued to deteriorate in the third quarter as even the most credit-worthy borrowers increasingly fell behind on their mortgages, highlighting the problems policy makers have faced in trying to address the problem.

A new report from the Office of Thrift Supervision and Office of the Comptroller of the Currency found that the percentage of current and performing mortgages dropped for the sixth consecutive quarter, as foreclosures in process topped 1 million mortgages at the end of September. The report covers roughly 34 million loans totaling $6 trillion in principal balances, or approximately 65% of the U.S. mortgage market.

The regulators said that serious delinquencies, loans that are at least 60 days past due, increased across all loan categories and climbed to 6.2% of the loans in the portfolio during the third quarter. The report said that just 67.7% of option adjustable-rate mortgages were considered current at the end of the third quarter, while 27.9% were either seriously delinquent or in the process of foreclosure.

The most troubling finding was that even borrowers considered “prime,” or the least risky, increasingly can’t pay their loans. The report said that 3.6% of prime mortgages were more than two months behind on payments, more than double from a year ago.

We specialize in helping people prevent falling behind by refinancing out of ARM’s and other undesirable mortgages before they find themselves late. If you fall into that category contact us in the sidebar and we can look at your options.

Recent reports showed lenders canceling a lot of scheduled California foreclosures in November 2009. Here is an excerpt from a San Jose Mercury story on this topic:

Under intense pressure to help more people stay in their homes, mortgage lenders canceled far more scheduled foreclosures in November than in the previous month, according to a report Tuesday.

A total of 10,469 scheduled foreclosures were canceled in November throughout California, up 20 percent from 8,741 in October, according to ForeclosureRadar, a Discovery Bay company that tracks foreclosure activity daily. In Santa Clara County, 337 were canceled, up from 269 in October.

The raw numbers may actually understate the scale of the increase, said Sean O’Toole, ForeclosureRadar’s founder. There were 416 cancellations each business day in October, and 581 each business day in November. That was an increase of 40 percent on an average daily basis because there were three fewer business days in November than October.

After a really good run of about 5 weeks mortgage interest rates started getting worse again after Thanksgiving. Many loans are still coming in between 5% and 5.5% but those rates won’t last forever. If you have been procrastinating looking into a refinance our of a bad rate or an ARM or if you need a cash out refinance contact us in the sidebar before rate creep back toward 6% and higher again.

Congress is apparently becoming fed up with banks resistance to modifying loans for struggling homeowners. Here are some excerpts from a recent AP story on the subject:

Only one in three homeowners who have signed up for the Obama administration’s mortgage relief plan have sent back the necessary paperwork, highlighting continuing problems for the government’s effort to stem the foreclosure crisis.

The poor results from the mortgage industry drew sharp criticism from House Financial Services Committee members Tuesday. Since the program was launched in March, lenders have made loan modification offers to just 680,000 borrowers, far short of the administration’s goal of up to 4 million.

“Taxpayer-funded foreclosure mitigation programs have been an abject failure,” said Rep. Jeb Hensarling, R-Texas, at a hearing on the program. “Throwing more money at programs that do not work is absolutely insane.

…

Much of the criticism for the disappointing results is being leveled at the banks, many of which received billions in taxpayer bailout dollars. Calls are growing louder on Capitol Hill for the Obama administration to take a tougher approach.

“We haven’t spanked anybody,” said Rep. Emanuel Cleaver, D-Mo. “I think they’ve come to the conclusion that spankings are not on the agenda … Why can’t we do something to one of them?”

Herbert Allison, the Treasury Department’s assistant secretary for financial stability, said punishment could be in the works.

While recent FHA policy changes eliminated some of the benefits of FHA streamline loans, the FHA streamline program is still running and still has some real benefits. Here are some of those benefits:

– FHA streamlines still allow for homeowners who are underwater on their FHA mortgages to refinance to a better rate without requiring an appraisal
– FHA streamlines require more paperwork than they used to but still require significantly less paperwork than traditional refinances

The biggest difference for FHA streamlines going forward is that they will normally require some money at closing because FHA is no longer allowing escrow prepayments, title fees, or bank fees to be rolled into the new FHA loan. Usually the best way to deal with this is to close the FHA streamline loan near the end of the month and to bring the normal mortgage payment due the next month to the closing. So for instance, for an FHA streamline closed in January the borrower would make the normal January payment at the start of the month and then bring the February payment to closing on, say, the 26th of January. With the February payment made the first payment on the new FHA loan would be due in March.

Of course each situation is different and in some cases we as the federally-chartered lender would be able to foot the bill for some of the closing costs.

The primary point is that FHA streamline program is still one of the best programs available for people who already have an FHA loan and would like a lower interest rate. Contact us today in the sidebar if you have an FHA loan at 5.75% or higher and we’ll see if can help you lower your rate and payments.

The Fed announced it is going to launch a program in 2010 that encourages lenders to agree to more short sales on homes. See the pdf of the announcement here. Here are some excepts as well.

Foreclosure Alternatives
The HAFA program simplifies and streamlines the use of short sale and DIL options by incorporating the following unique features:

-Complements HAMP by providing viable alternatives for borrowers who are HAMP eligible.

-Utilizes borrower financial and hardship information collected in conjunction with HAMP, eliminating the need for additional eligibility analysis.

-Allows the borrower to receive pre-approved short sale terms prior to the property listing.

-Prohibits the servicer from requiring, as a condition of approving the short sale, a reduction in the real estate commission agreed upon in the listing agreement.

-Requires that borrowers be fully released from future liability for the debt.

-Provides financial incentives to borrowers, servicers, and investors.

Timing & Eligibility

Servicers — Supplemental Directive 09-09 is effective April 5, 2010, but participating servicers may elect to implement HAFA prior to April 5, 2010, in accordance with the Supplemental Directive. In order to participate in HAFA, a servicer must have executed a HAMP Servicer Participation Agreement (SPA) by December 31, 2009. (The HAMP SPA is available for review on HMPadmin.com.)

Borrowers — Servicers must consider a HAMP-eligible borrower for HAFA in accordance with their policies within 30 calendar days of the date the borrower:

-Does not qualify for a HAMP Trial Period Plan,

-Does not successfully complete a HAMP Trial Period Plan,

-Is delinquent on a HAMP modification by missing at least two consecutive payments, or

-Requests a short sale or DIL.

Note: A borrower must be considered for a HAMP modification and other retention programs offered by the servicer prior to being considered for HAFA.

There was a pretty good article over at the Washington Post on the tightening of FHA lending guidelines coming down the road. Here are some excerpts:

— Higher down payments. The FHA’s current minimum cash down payment is 3.5 percent. On a $200,000 house, a buyer can bring as little as $7,000 to the table, aside from closing costs. A purchase of a $500,000 house in a high-cost area requires only $17,500 in cash.

Critics say 3.5 percent does not force purchasers to have enough “skin in the game” to discourage them from missing payments or risking foreclosure. Rep. Scott Garrett (R-N.J.) introduced legislation last month requiring a minimum 5 percent down payment for all future FHA loans. …