About Government Refinance and Home Purchase Programs

Have mortgage interest rates already bottomed out? That is the question as we head into the summer of 2011. The bad economic news that has been appearing lately has not been all bad. As the stock market has staggered in recent weeks demand for bonds has increased. That in turn has compressed yields on bonds which has further compressed mortgage interest rates across the board. As a result mortgage interest rates are again approaching all time lows.

If you have considered refinancing to a lower interest rate or would just like to lower your mortgage payments now is a great time to do some research. Contact us in the sidebar to get more information on the various government-backed mortgage programs available.

New reports out are suggesting that housing prices in the US might not see a bounce back until 2014. Here is an excerpt from the recent HousingWire article on the subject:

A lack of demand may keep house prices from a consistent rise until 2014, according to analysts at Capital Economics.

Home prices double-dipped in the first quarter, according to the Standard & Poor’s/Case-Shiller index. While other indices measured some improvement since, analytics firm Altos Research forecasted an up-and-down market for some time. In the near term, Capital Economics said foreclosure sales should keep house prices down 3% in 2011, resulting in another 5% for the year as a whole.

Easing the flow of foreclosures on the market may stabilize prices to 35% below the peak in 2006.

“But while prices tend to rise rapidly in the years after downturns, this time a chronic lack of demand means that they will probably be unchanged in both 2012 and 2013,” Capital Economics said.

The upshot of that is that if you were thinking about selling your home as soon as housing prices bounced back you are probably going to have to wait a few years before that happens. With that in mind, it might make sense to consider refinancing into a lower rate mortgage now while rates are flirting with all time lows.

Contact us in the sidebar to learn more about the programs that are available.

After increasing for much of April interest rates on government-backed mortgages have been decreasing again for a several weeks and are now approaching new lows for the calendar year. Interest rates tend to track the 10 year treasury note so recent decreases in 10 year treasury yields have translated into 30 year mortgage rates below 5% in the last couple of weeks. Mortgage interest rates are volatile though so there is no telling how long this current dip will last.

Here is a quote from a recent WSJ article on this topic:

The average rate on the 30-year mortgage matched its lowest level since mid-January this week, according to Freddie Mac’s weekly survey released Thursday. …

“Weaker economic data reports reduced Treasury bond yields and allowed mortgage rates to drift lower for the third consecutive week,” said Frank Nothaft, vice president and chief economist at Freddie Mac, in a news release. “For instance, real economic growth in the first quarter fell short of the market consensus forecast and represented the slowest pace since the second quarter of 2010. In addition, both the manufacturing and service sectors exhibited growth at a slower rate in April.”

If you have an interest rate that is higher than you want contact us in the sidebar to see which programs might apply to your family.

The heads of Fannie Mae and Freddie Mac have recently indicated they are not high on the idea of principal write downs at all. This should come as no surprise to anyone. The problem with principal write-downs is that they are a Pandora’s Box for banks and investors. If lenders started forgiving principal for borrowers they would open a massive flood that could bury them. There are millions of underwater homeowners in the US. The majority of those homeowners are not willing to consider walking away from their homes. A foreclosure or short sale severely damages credit scores and that is something most borrowers would like to avoid. The banks benefit greatly from this fact. If banks and investors started offering principal write-downs they would certainly be overrun with requests and would have to deal with billions of losses that they currently are avoiding.

So while politicians like to make noise about principal reductions, banks and investors like Fannie and Freddie will continue to show zero interest in the concept in most cases.

However there are several refinance programs available that do help families. Contact us in the sidebar to learn more about those.

After slowly rising for more than four straight weeks interest rates on government-backed and conventional mortgages finally dipped again over the last week or so. The dip in rates is a welcome development to folks looking into refinancing. Rates on mortgages largely track the the yields on the 10 year treasury bond and with the recent dip in the stock market, yields on the 10-yr note have dropped as well. If you have been thinking about refinancing to a lower interest rate contact us in the sidebar right away to learn more about the programs available. Drops in interest rates sometimes don’t last long so now might be a good time to lock in a better rate than you currently have.

Thanks to the efforts of the federal government mortgage interest rates are still near historic lows. But over the last week or two rates have begun inching upward again. This may, ironically, be partially due to the positive employment news that has been surfacing recently.

The good news is that rate are only inching higher lately rather than rocketing higher. It is inevitable that we will eventually see 30-year mortgage rates at more than 6% like we saw just a few years ago — it is only a question of how long before that happens. When rates increase like that many people with adjustable rate mortgages will see their payments go up by hundreds of dollars per month. But in the meantime rates are still very low.

If you have an adjustable rate mortgage or if you have a fixed rate mortgage that is higher than you want, contact us in the sidebar right away before interest rates get much higher. One of our counselors can point you in the right direction to take advantage of the government-backed refinance programs that are available.

The recent budget compromise reached in Washington DC that prevented a government shutdown had a direct effect of government-backed mortgages. The FHA program is an entirely government program so a government shutdown could have put a real crimp in the FHA mortgage originating and closing process. Thankfully, cooler heads prevailed and FHA loan proceed without interruption.

After rising fairly steeply since the end on 2010, interest rates on government-backed mortgages finally dipped a bit over the last several weeks. In the latest few weeks the turmoil in Libya has caused a domino effect started with a falling stock market which in turn increased demand for US treasury bonds which helped lower mortgage interest rates slightly.

Even after the rise in rates over the winter, rates are still surprising low by historical standards. For that reason the recent dip in rates is not likely to hold for long. The Fed and Obama administration have gone to great lengths to compress interest rates for around two years now. But those efforts won’t last for ever and there are signs that they are slowly losing effectiveness. The result will likely eventually be 30-year mortgage rates at more than 6% like we saw just a few years ago. When rates increase like that many people with adjustable rate mortgages will see their payments go up by hundreds of dollars per month. But in the meantime rates are still very low.

If you have an adjustable rate mortgage or if you have a fixed rate mortgage that is higher than you want, contact us in the sidebar right away before interest rates start their upward climb again. One of our counselors can point you in the right direction to take advantage of the government-backed refinance programs that are available.

Republicans in the US House of Representatives would like to end several government sponsored foreclosure prevention programs saying the programs are ineffective. We get this from a recent report published at the Miami Herald:

The House is scheduled to vote this week on getting rid of a refinance program for Federal Housing Administration loans and another program, scheduled to begin next month, that would help homeowners with delinquent payments.

The House Financial Services Committee is expected to vote Wednesday morning on ending two other measures: One of them is a massive effort that was designed to adjust up to 4 million mortgages but so far has tackled just half a million successfully. The other is the Neighborhood Stabilization Program, which steers money to communities hit hard by foreclosures

However it appears that such a vote would end up being symbolic only because there is virtually no chance such a law would get past the Democratics in the Senate or President Obama.

Principal reductions have thus far been more of a myth than a reality in the marketplace. The problem is that banks aren’t anxious to forgive debts. As a result the programs that require banks to write down principal like the FHA short refi program have been major flops so far. But Bank of America has recently announced that it will increase the number of loan write-downs it does in certain hard hit states. We get this from a recent HousingWire article:

Bank of America sent letters to Arizona homeowners who may qualify for mortgage assistance, including a principal writedown, under the Treasury Department’s Hardest Hit Fund.

In June 2010, the Obama administration released $1.5 billion in foreclosure prevention funding for states hardest hit by home price declines. BofA said Wednesday the write downs will go to homeowners experiencing financial hardship and owe considerably more on the mortgage than the property is worth.

It is still unclear what would persuade the folks at BofA to write down the principal on a loan. In all likelihood it would require a situation where a borrower is significantly late on payments and on the verge of foreclosing anyway. In such a case the bank may decide that it would be less expensive to write down the principal and keep the occupants in the house than it would be to proceed with a foreclosure, an eviction, and then the process of listing and selling the foreclosed property.

In any case, principal write-downs are still the exception rather than the rule. And they remain entirely at the discretion of the lenders.

However, borrowers who currently have an FHA loan or who have conventional loan backed by Fannie Mae or Freddie Mac still have refinance options even when they owe more than the home is worth. While refinancing doesn’t reduce the principal it can reduce payments. In addition, borrowers control their own destinies with refinances whereas loan modification requests (including requests for principal reductions) leave borrowers at the mercy of the lender.

Contact us in the sidebar for more information.

There was recent news that Warren Buffett is bullish on the US housing market and is investing in it on the belief that falling housing priced in the US will change course within a year and start heading back upward again. Here is a bit from the HousingWire piece on the subject:

Warren Buffett anticipates a recovery in the housing market to begin within one year and the investment guru said in his biennial letter to investors that mortgages written by his subsidiaries performed better than most of the competition through the financial crisis.

Buffett said the recovery hinges on durable, common sense underwriting based on affordability for mortgage borrowers. …

He added that as the housing market pushes toward a recovery, home ownership can still make sense for many Americans with lower prices and interest rates. Future housing policy, he said, should be sculpted from lessons learned during the downturn.

“But a house can be a nightmare if the buyer’s eyes are bigger than his wallet and if a lender – often protected by a government guarantee – facilitates his fantasy,” Buffett said. “Our country’s social goal should not be to put families into the house of their dreams, but rather to put them into a house they can afford.”

A recovery in housing prices is good news for US homeowners. Of course odds are that mortgage interest rates will be significantly higher next year at this time than they are now. Contact us in the sidebar if you would like to learn about the government-backed refinance programs that are available now.

The FHA announced yesterday that it will be increasing its monthly mortgage insurance fees by 0.25% on all products in April of 2011. This comes on the heels of other recent changes the FHA has made in order to strengthen its financial position in the face of the foreclosure crisis of the last several years.

What does a 0.25% increase in monthly mortgage insurance mean? Well on a $100,000 mortgage that equals an additional $250 per year or about $21 per month. On a $200,000 loan that is $500 per year or $42 per month. And so on. The rate increase also means that if you have an FHA loan now and were hoping to streamline it to a lower rate you should try to get that done immediately because the new, higher FHA mortgage insurance rates will apply to the new loan starting in April and those higher PMI payments could mitigate a lot of the savings that come from lowering the interest rate.

Contact us in the sidebar right away to learn more or get an estimate.