About Government Refinance and Home Purchase Programs

In his State of the Union address this evening President Obama announced plans for a new refinance program that is reportedly going to be targeted to borrowers who are having trouble taking advantage of the government-backed refinance programs already in place. We get the following from a WSJ article on the subject:

President Barack Obama called on Congress during Tuesday’s State of the Union address to approve new legislation that would give all homeowners who are current on their mortgages the opportunity to refinance at record low mortgage rates, officials said Tuesday.

Administration officials declined on Tuesday to outline the mechanics or costs of the program, and they said those details would be spelled out in the legislation in the coming days. “Responsible homeowners shouldn’t have to sit and wait for the housing market to hit bottom to get some relief,” Mr. Obama said. ” No more red tape. No more runaround from the banks.” …

Unlike the existing program, which was unveiled in 2009, the latest proposal wouldn’t limit such opportunities to borrowers whose loans are already backed by mortgage giants Fannie Mae and Freddie Mac, which guarantee about half of all outstanding loans.

While details on the new program are forthcoming, there are several very useful refinance programs already in place. Contact us in the sidebar to learn more about the available programs.

As we begin 2012 interest rates on mortgages are testing new lows. Borrowers with excellent credit and plenty of equity are seeing 30 year fixed rates below 4%. Rates are not quite that low in cases where credit is less than excellent or when there is little or no equity in the home but even in those cases the rates are astonishingly low right now.

Contact us in the sidebar to learn more about the government-backed refinance programs that are available and to get an estimate.

[Update: See this page for the most updated info on the HARP 2.0 guidelines or contact us in the sidebar for guidance on your specific situation]

Here are the links to the recently released HARP 2.0 guidelines.

https://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2011/sel1112.pdf
http://www.freddiemac.com/sell/guide/bulletins/pdf/bll1122.pdf

In short, here are the changes these guidelines describe:

– Starting December 1, 2011 authorized lenders were able to begin the loan application process for borrowers who have Fannie/Freddie mortgages with a current loan to value greater than 125%. HOWEVER those HARP 2.0 loans cannot be approved until March 2012 at the soonest because the Fannie/Freddie approval software will not be updated until then. So the soonest a HARP 2.0 loan with an LTV of more than 125% could actually close is probably April of 2012.

– For Freddie Mac loans, if the first mortgage is less than 80% of the value the home the first and second mortgage combined cannot be more than 105% of the current value of the home. (There will probably be price breaks for these loans though).

– There is apparently no change to the eligibility dates so people who got their current Fannie/Freddie loan after May of 2009 appear to not be eligible for HARP 2.0 still.

– There is no mention of changes to the mortgage insurance rules. The official guidelines of HARP 1.0 allowed for MI to transfer already but we do not know of any authorized lenders or MI companies that allowed that. We will have to wait and see if there is more incentive for lenders and MI companies to allow it with the new program.

The other questions yet to be answered over the coming months are:

1. How many authorized lenders will participate in the HARP 2.0 program? There are no requirements for lenders to participate.
2. What will the pricing be for these high LTV HARP 2.0 loan? (Probably significantly worse than loans with lower LTV’s)

So while these guidelines shed some light on the new program there are a lot of questions still to be answered. Stay tuned.

While interest rates on mortgages have been relatively low ever since the federal government began compressing rates in 2009, mortgage interest rates have been especially low since about August of 2011. The recent dip in rates was due to both global economic factors and actions from the Fed. As we enter 2012 mortgage interest rates remain near all time lows. When you combine the especially low rates with the government-backed refinance programs like the FHA and VA streamline programs and the new HARP 2.0 program that will become operational in the next few months, now is a terrific time to look into a government backed refinance.

Contact us in the sidebar to learn more about the government-backed refinance programs that might help your family as we launch into a new year.