About Government Refinance and Home Purchase Programs

See the official mortgagee letter here for the details. Right now the upfront FHA fee is 1.75%. Starting on April 5th 2010 that will increase to 2.25%. When you combine that with the fact that interest rates will likely be rising soon now is definitely the time to refinance with the FHA if you are a candidate. Contact us in the sidebar if you are a candidate for an FHA refinance.

Several news sources are reporting that the FHA is about to raise the upfront mortgage insurance premium for an FHA loan from 1.75% to 2.25%. This will make refinancing more expensive. We’ll report more details on the timing of the forthcoming changes as they are announced.

The Obama Home Affordable Refinance Program (HARP) and Home Affordable Modification Program (HAMP) are still getting mixed reviews as we approach their one year anniversary. Several new outlets are reporting that the programs are still moving along pretty slowly. Here are some bits from a WSJ article on the topic:

Thousands of homeowners participating in the Obama administration’s foreclosure-prevention plan could miss a government deadline for completing necessary paperwork, putting them at risk of disqualification.

The program, a cornerstone of President Barack Obama’s housing-rescue effort, was launched in February and has been bedeviled by paperwork problems from the start. Many companies have given borrowers modified mortgage terms on a trial basis, based on verbal information, and have struggled to get the documents required to finalize mortgage modifications.

According to data released by the Treasury Department Friday, more than 900,000 borrowers have begun trial modifications under the program, but just 7% of them have received permanent changes so far. …

he administration has said the mortgage program could help as many as four million borrowers. It provides financial incentives for mortgage companies and investors to reduce loan payments to affordable levels.

Through December, 66,465 borrowers had received permanent fixes; an additional 46,056 modifications have been finalized, but await the borrower’s signature. The number of borrowers who have received completed modifications, while low, has more than doubled since November. The Treasury Department announced in December a “conversion drive” designed to increase permanent fixes.

The pending mortgage rate increase is becoming a foregone conclusion. If you have an ARM mortgage or would like to lock your mortgage rate in below 6% for any other reason contact us now in the sidebar. Rates will likely be above 6% again soon so the window of opportunity to refinance is closing.

Here is an excerpt from a recent Reuters article:

U.S. home loan rates could rise by as much as three-quarters of a percentage point in the spring as the Federal Reserve ends its mortgage bonds purchase program, a top Fed policymaker said in an interview published on Saturday.

The Fed has been buying billions of dollars of mortgage backed securities in the last years or so, fueling the huge drop in mortgage interest rated we saw in 2009. Well the plan is to cut that program off in March and that is fueling fears that rates will be skyrocketing soon. We get this from a recent WSJ article:

The Federal Reserve’s pledge to stop buying mortgages by the end of March is sparking fears among home builders, mortgage investors and even some Fed officials that mortgage rates could rise and knock the fragile housing recovery off course.

…

The recent rise in mortgage rates could be a prelude to even bigger increases in coming months as the Fed steps away from support for the market. That prospect has some in the markets counting on the Fed to change course and keep buying past March, which many officials are reluctant to do.

When such a big investor stops buying, “that could lead to material increases in [interest] rates across the board,” said Ronald Temple, portfolio manager at Lazard Asset Management. He sees mortgage rates rising by a percentage point when the Fed stops buying. A withdrawal of government support, combined with high unemployment and rising mortgage foreclosures, could push home prices down 20%, he said.

There was an article in the LA Times recently talking more about the likelihood of mortgage interest rates increasing dramatically in 2010. Here are some bits from that piece:

Mortgage rates are continuing their creep upward in a trend that well may choke off a recent refinancing boom and provide a test of the strength of the housing market in 2010. …

The climb comes even though a government effort to keep rates low is in place for a while longer. A Federal Reserve program to spend $1.25 trillion to support the market for mortgage-backed securities is scheduled to end in the spring.

Every tick up in loan rates makes it less likely that someone with an existing mortgage will refinance to save money.

But rates in the 5% range remain extraordinarily low by historical standards, offering a huge incentive for buyers.

For example, principal and interest payments on a new 30-year fixed-rate mortgage were about one-third less than they were in May 2000, when rates peaked at 8.6%, said Frank Nothaft, Freddie Mac’s vice president and chief economist.

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.