About Government Refinance and Home Purchase Programs

A lot of people have been wondering how much of an effect the results of the pending US general election will have on government-backed mortgage interest rates. The short answer is: Probably not much.

Mortgage interest rates tend to be driven by several different market forces and the election is not projected to impact those forces directly in the short run. The near-record-low mortgage interest rates we have been seeing lately are the result of, among other things, aggressive purchasing of mortgage-backed securities by the Fed and by the ongoing popularity of US treasury bonds as a safe haven for money. Those things are not likely to change quickly regardless of who is elected in November so don’t expect any jolts one way another.

Of course over time it will matter who wins the presidential election and other congressional races but there is no way of telling now what will happen with rates regardless of if Romney or Obama is the next President of the United States. One thing that is certain is that mortgage interest rates will not stay at or near record lows forever. Sooner or later rates will rise again to more traditional levels. So we recommend you contact us today to learn more about the available government refinance help programs while rates are still at historic lows. Getting the process started in early November ought to allow most borrowers to close their new loans before the end of the year. To learn more fill in the form on the right.

Recent figures from the Federal Housing Finance Agency indicated that nearly 100,000 HARP loans were closed in August. That is a huge number for a program that got off the ground slowly. The launch of the HARP 2.0 program last spring was largely the reason for the spike in HARP loans closing. Prior to the HARP 2.0 program the maximum loan to value ratio for HARP loans was 125%. HARP 2.0 removed that limitation and allowed qualified borrowers to refinance to a better rate no matter how underwater they were on their Fannie Mae or Freddie Mac conventional mortgage.

Another reason the numbers spiked in August is that HARP 2.0 loans have been taking much longer to close in many cases than other loan types. Many of the loans that closed in August were probably started in June, May, or even April.

Lastly, the great interest rates we have seen in the last few months made HARP loans even more enticing to many borrowers late in the summer. Those great rates have improved further this fall so if you have an FHA mortgage or a conventional mortgage contact us in the form on the right to learn more about the HARP program or other government-backed mortgage programs.

The effects of the Fed’s “QE3” are in full swing now in the mortgage markets. Mortgage interest rates broke all time lows last week and are remaining low this week. That means that in most cases 30 year fixed rates are in the 3’s and 15 year rates are in the 2’s right now.

Some homeowners who have already refinanced are wondering if doing so again will make sense. That question must be answered on a case by case basis, but there are some general factors to look at:

1. How long do you plan to own the home? If you plan to live in the home for decades more, 30 or 15 year fixed mortgages are the way to go. But if you are confident you will sell the home in the next 5-10 years it makes sense to look at a 5-10 year adjustable rate mortgage (ARM). Rates on government-backed ARM’s are in the 2’s right now and rates that low can significantly reduce payments for the next 5-10 years before you sell the home.

2. How much lower can your rate get with a refinance? If your rate is already in the 3’s on a 30 year fixed mortgage it might be hard to justify a refinance again. But if you are in the 4’s or higher it will be worth getting an estimate. On larger loans even lowering the rate by a quarter or half percentage point can make a big difference.

3. How long will it take to break even on the refinance? Sometimes you can get a truly no-cost refinance where the authorized lender pays for all of the costs and rolls nothing into the loan. This is most common with FHA to FHA or VA to VA streamline refinances. In such cases the break even is immediate so refinancing in such cases is often a no-brainer. If you have and FHA or VA loan now contact us in the sidebar right away. There are normally closing costs rolled into the loan on conventional and HARP refinances but if you can get a significantly lower rate in break even on all closing costs in 1-2 years such a refinance can make a lot of sense too — especially if you plan to own the home for several years to come.

To get more info fill in the contact form on the right. There has never been a better time to refinance to a government-backed mortgage. This is true for borrowers who have equity or those who are upside down / underwater alike.

While the idea was admirable, the execution was a failure.

The idea of the FHA short refinance program was to give lenders some incentive to avoid foreclosing on distressed, underwater homeowners by refinancing them in to an FHA loan at the current market value of the home. The primary incentive was supposed to be that doing so would cost lenders less money than foreclosing.

Unfortunately, in practice banks were appalled at the idea of forgiving debt on a massive scale. Lenders were especially afraid that if they started granting short refinances to some borrowers it would open the flood gates and upside down borrowers all over the country would start intentionally defaulting on their loans in or to get a principal reduction. Because the FHA short refinance program was voluntary and only offered very minor incentives for lender participation, the program was dead on arrival. Some large lenders have granted some token principal reductions as part of the large settlement they agreed to with the federal government, but overall the FHA short refinance program never got off the ground.

However the good news is there are several very useful government-backed refinance programs for upside down borrowers that did gain traction. While they aren’t principal reductions, the programs that are up and running can massively reduce interest rates and monthly payments for borrowers. Contact us in the sidebar today to learn more.

There has been some buzz on the internet in recent months about a new program being call called “HARP 3” or “HARP 3.0”. So what is HARP 3.0? The short answer is, it is simply an idea at this point. The Obama administration started floating an idea a few months ago about an expansion of the current HARP program. The current Home Affordable Refinance Program (HARP) only applies to conventional mortgages that are insured by Fannie Mae or Freddie Mac behind the scenes. About 70% of conventional mortgages are backed by Fannie or Freddie, but that means 30% of borrowers with conventional mortgages are currently simply out of luck. The primary feature of the new HARP proposal is it would allow those other 30% to take part in the program too.

Don’t hold your breath

The reality of the situation though is that this is an Obama administration proposal that has to be approved by the GOP-controlled congress. That explains why it had no chance of passing leading up to the 2012 election. If Obama wins in 2012 the program has an outside chance of gaining some steam, but even then it would be a long shot because it would require Fannie and Freddie to take on a lot more risky debt and that would be a risk to tax payers. If Romney were to win in November it is not clear what his plans would be to boost the housing markets.

While HARP 3.0 is currently just an idea, HARP 1.0 and HARP 2.0 are up and running. Contact us in the sidebar today to see if you are a candidate for the HARP program or for any other government-backed refinance program now available.

Mitt Romney made news today by proposing eliminating some tax deductions that could include the mortgage interest deduction. His opponents will jump all over his comments and claim that Romney is trying to take away the mortgage deduction. But that is not really what he said. Here is what he said in a local TV interview in Colorado:

As an option you could say everybody’s going to get up to a $17,000 deduction. And you could use your charitable deduction, your home mortgage deduction, or others — your health care deduction, and you can fill that bucket, if you will, that $17,000 bucket that way. And higher income people might have a lower number.

So basically Romney wants to give a 20% tax cut across the board but is considering offsetting that cut with a limit to the amount that can be deducted in total from things like charity, mortgage interest, etc. Of course at this point Romney is just floating a tentative idea. But if he manages to win the election in November ideas like this would have a deep impact on the mortgage market if actually implemented.

It is not yet clear what government-backed refinance programs a Romney administration would continue to support. With any luck more details will arise though so we’ll continue to report on mortgage-related news from the campaign trail through the election.

In the meantime, contact us in the form on the right to learn about the existing government-backed mortgage refinance programs and how they can help your mortgage situation.