About Government Refinance and Home Purchase Programs

The Mortgage Bankers Association released its forecast on mortgage interest rates recently and the verdict was that rates, including interest rates on government backed mortgages, are likely currently near their bottom and will be rising in the near future. If you have considered refinancing we recommend you contact us to look into your options now before rates head back up.

Here is an excerpt from a recent MarketWatch piece:

Mortgage rates may be as low as they’ll get — rates are on course to rise, slowly moving toward 5% by the end of next year, according to the Mortgage Bankers Association’s economic forecast, released Tuesday at the group’s annual convention here.

The group predicts rates on the 30-year fixed-rate mortgage will average 4.4% in the fourth quarter of 2010, increasing to a 4.7% average in the first quarter of 2011, and climbing to 5.1% by the end of next year. That’s barring any “blockbuster” announcement from the Federal Reserve next month, said Jay Brinkmann, chief economist of the MBA.

Another week, another new shocking low on mortgage interest rates, including the rates on government-backed mortgages. We get this from a recent WSJ piece:

Longer-term mortgage rates declined the past week, with the average rate on 30-year fixed-rate mortgages furthering its all-time low for the third consecutive week to 4.19%, according to Freddie Mac’s weekly survey of mortgage rates.

The 30- and 15-year fixed-rate mortgages and the five-year adjustable-rate all sit at their record lows, with Freddie tracking the 30-year since 1971, the 15-year since 1991 and the five-year since 2005. Freddie said that using data from the Federal Housing Administration, the last time the 30-year was this low was April 1951.

Fill in the contact form in the sidebar here to learn more about the government-backed mortgage programs that might apply to your family.

A new law in California now prevent banks for going after people who short sell their homes in the state for the difference between the loan amount and the sales amount. We get this from a recent HousingWire piece:

California Gov. Arnold Schwarzenegger signed a state bill into law Oct. 1 prohibiting mortgage holders from pursuing deficiencies after a short sale is accepted.

Before S.B. 931 was signed, distressed borrowers who sold their homes for less than the owed amount were still in danger of owing the debt left over, or the deficiency. Many lenders routinely granted deficiency waivers, but now it is required by law.

California pre-foreclosure sales, often short sales, increased 8% in the second quarter, according to RealtyTrac, which tracks the data.

With any luck more states will follow suit. Selling short is a useful compromise that allows banks to get the fair value of the home while helping consumers avoid a foreclosure on their credit report.

While the steep declines in mortgage interest rates seem to have halted in recent weeks the good news for borrowers is that rates have also not bounced significantly higher yet. That means mortgage interest rates are still hovering around the 50 year lows they hit this summer. If you have been considering a refinance contact us by filling in the short form in the sidebar. We can assist you in getting refinance estimates or point you in the right direction for other government-backed mortgage programs.

As we mentioned in an earlier post, the fee structures for FHA mortgage insurance are officially changing on Oct. 4, 2010. The upfront mortgage insurance fees for getting into an FHA loan are being cut by more than 50% but the monthly mortgage insurance fees (sometimes called PMI) are almost doubling. Here is a bit from a recent LA Times article on the topic:

On new low-down-payment FHA-insured loans originated on or after Oct. 4, the annual premium will rise to 0.9% of the loan amount from 0.55%. At the same time, though, the upfront premium will be lowered to 1% of the loan amount from 2.25%.

And because most borrowers choose to finance the initial fee as part of the loan amount, the overall effect will be easier on the checkbook — for a few years, anyway.

FHA loans will be less expensive in the short run but more expensive the longer one keeps the FHA loan. This is because the monthly mortgage insurance payments remain on FHA loans permanently. Of course because FHA loans allow one to refinance up to 97% of the current value of the home and allow for credit scores as low as 580, they are still the best refinance option for many people with little equity or less than stellar credit. Keep in mind that borrowers could potentially refinance out of their FHA loan and into a conventional loan with no PMI a few years down the road, assuming they get to at least 20% equity. So with rates at historic lows now, refinancing into an FHA loan could make a lot of financial sense.

Contact us in the sidebar to learn more about the programs that will best help your family.