About Government Refinance and Home Purchase Programs

While mortgage interest rates are not breaking new records this week they continue to stay down near record lows.

For FHA streamlines (FHA to FHA refinances) the interest rates have been in the mid to low threes in recent weeks. This can vary based on the age of the current FHA loan though. FHA loans that were started in the spring of 2009 or sooner have a special program that allow for lower costs. Consequently, lower interest rates are common with those loans because less lender credits are needed. For newer FHA loans (FHA loans started summer of ’09 or later) the streamline rates have been in the mid threes as well. In both cases it is common for borrowers’ break even on costs to be immediate so contact us in the sidebar today if you have an FHA loan.

On HARP loans, rates tend to be a bit higher. For significantly underwater homeowners with Fannie-Mae-backed conventional loans, most HARP refinances have been coming in between 3.875% and 4.25% in the last month or so. Part of the reason for this is that Fannie and Freddie recently raised their fees in order to remain solvent as companies. For borrowers with Fannie Mae loans who are not upside down on their first mortgage rates are better though. If you have a conventional loan see here to find out if Fannie or Freddie have backed your loan. If you do have a loan backed by Fannie or Freddie, contact us to get more info on the HARP program.

For folks with VA mortgages or with conventional loans that are not backed by Fannie Mae or Freddie Mac, rates are very low as well. VA rates tend to be very close to FHA rates and the VA-to-VA streamline program is even easier than the FHA streamline program. Rates on conventional loans where there is enough equity in the home tend to be better than HARP loan rates. Contact us in the form on the right to learn more about those programs as well.

As we discussed in our last post, the FHA is making some changes to its mortgage insurance guidelines to bolster its reserves. The details and dates of those changes are available in a new FHA mortgagee letter found here.

The first change is a small increase in the monthly mortgage insurance fees. That increase will take affect for any FHA case number that is requested on or after April 1, 2013. Any FHA application that is started prior to that date will be able to avoid that small fee increase. Further, people who have FHA loans that were started and endorsed by the FHA prior to May of 2009 will be exempt from the increase when they are streamlining to a new FHA loan.

The second change is for all FHA case numbers requested on or after June 3, 2013. After that date the monthly FHA mortgage insurance will last for the life of the loan in most cases. Currently the monthly FHA MIP can be dropped after 5 years if there is 22% equity in the home.

If you have an FHA loan (or know someone who does) contact us in the sidebar to get more info on an FHA streamline right away. While these changes won’t make FHA streamlines useless, it will be better for most borrowers to streamline before the new changes kick in.

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.

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.

In his weekly radio address this week President Obama pointed a finger at the US Congress for ignoring a $5-10 billion plan he proposed last February designed to help more American homeowners who are underwater or upside down on their mortgages. Here is what the president said:

Back in February, I sent Congress a plan to give every responsible homeowner the chance to save about $3,000 a year on their mortgages by refinancing at lower rates. It’s a plan that has the support of independent, nonpartisan economists and leaders across the housing industry. But Republicans in Congress worked to keep it from even getting to a vote. And here we are — seven months later — still waiting on Congress to act. This makes no sense. Last week, mortgage rates were at historic lows. But instead of helping more and more hardworking families take advantage of those rates, Congress was away on break. Instead of worrying about you, they’d already gone home to worry about their campaigns.

The move by the president was largely symbolic and political in nature because there is no chance the congress will look at any such ideas prior to the November elections. Last February the congress rejected the idea because of the large price tag it came with. There is no indication right now that the stance of the GOP led congress would change even if President Obama were re-elected. But of course circumstances in Washington can change quickly as well.

When the FHA announced that they would be increasing their upfront and monthly mortgage insurance fees it was widely assumed that FHA streamlines for FHA loans that were originated after May of 2009 would no longer make sense. But with rates testing all time lows that assumption is proving to be false in many cases.

FHA streamlines for older FHA loans remain a no-brainer
As we have discussed here in the past, for people with FHA loans that were originated and endorsed by the FHA before June of 2009 there are some extremely beneficial new rules which eliminate the upfront mortgage insurance premium along eliminating any increases to the monthly mortgage insurance fees. Streamlining these older FHA loans is normally a cost-free refinance and with rates testing all time lows this summer, getting an FHA streamline for the folks who qualify for this pre-June-09 program is usually an easy decision.

FHA streamlines for newer FHA loans can make sense too
Here is the problem with streamlines of FHA mortgages that were originated after May of 2009. First, there is an up front FHA fee of 1.75% of the loan amount. Second, the monthly mortgage insurance fees more than double. Here is and example of a $200,000 FHA loan:

– Loan amount: $200,000
– 1.75% Upfront FHA mortgage insurance fee rolled into the new loan: $3500
– Monthly mortgage insurance fee: Going from about $90/month to probably closer to $200/month

It is not hard to see why people assumed FHA streamlines of newer FHA loans were dead. The increase in monthly mortgage insurance fees tends to eat into monthly savings on a such a streamline pretty significantly. Using our example loan above, if the existing FHA loan were at 5.25% and the new FHA mortgage were at 3.75% the principal and interest payment would decrease about $200 per month. But the monthly mortgage insurance would increase by $110 per month (as noted above) so the net monthly savings would be about $90 per month. And while $90 per month in savings isn’t bad, if the balance of the loan also were to increase by $3500 it would take a long time — more than three years — to break even on a refinance like that.

So what has changed to make streamlines for newer FHA loans make sense now? The answer is this: In recent months interest rates have improved so much that some authorized lenders are now able to give enough of a lender credit to pay for that entire 1.75% up front fee along with most of the other costs of the FHA streamline on behalf of the borrower. So in the example I gave above the net monthly savings would still be about $90 per month at 3.75% but there would be no costs rolled into the loan at all so the break even on the refinance would be immediate. The long term advantages of reducing such a loan from a rate in the 5’s to a rate in the high 3’s are even more significant. That is in part because after 5 years the monthly FHA mortgage insurance fee could drop off entirely. So after 5 years the payments could decrease by another $200 per month in the example we are using.

Conclusion
If you have and FHA loan that is less that three years old there is still hope for you with the FHA streamline program. This is particularly true if your current rate is in the 5’s or higher.

Contact us in the sidebar to the right to learn more about the FHA streamline program or to get an estimate from an authorized lender. Or if you don’t have an FHA loan now contact us to learn more about the HARP program or other government-backed refinance programs as well.

Like many of the government-backed refinance programs that proceeded it, the HARP 2.0 program is not running quite as smoothly as planned. The problem for borrowers is that very few lenders have chosen to participate in the program. Worse than that, some lenders that initially were participating in HARP 2.0 have recently chosen to back out of the program. The very limited number lenders participating in this program has led to long turn times. In some cases it is taking more than three months from start to finish on HARP 2.0 loans. Borrowers who have Freddie Mac loans or who have mortgage insurance are having the hardest time finding a lender who will help them with the HARP 2.0 program, and when they do find a participating lender they are in for very long waits. Borrowers with Fannie Mae loans that do not have mortgage insurance tend to get somewhat better rates and relatively faster turnaround times but with the HARP 2.0 program the process is rarely quick or easy.

But on the bright side, HARP 2.0 is up and running and while it can take months to get a HARP 2.0 loan, many underwater borrowers have waited years for a chance to improve their interest rates so perhaps a few months waiting is not all that bad after all.

Contact us in the sidebar if you have a conventional mortgage that is backed by Fannie Mae or Freddie Mac and would like to be connected with a lender who is participating in the HARP 2.0 program.

We sometimes get asked if there are really no cost refinances out there or if that is simply marketing spin by banks. The short answer is yes, no cost refinances do exist, but they are more rare than many lenders imply with their advertising.

As the old saying goes, there is no such thing as a free lunch. In this case there is technically no such thing as a truly “no cost” refinance because either the lender has to pay for the costs of a refinance or you do. However there are cases when lenders are willing to pay for all of your closing costs on refinances so it can be no cost to you. Lenders are able to do this because on most loans they are being paid a commission or finders fee for the mortgage by their investors. So for example, if an investor is willing to pay a lender $3000 for servicing rights to your new government-backed mortgage the lender can pay $2000 of your closing costs and still not lose money on the transaction.

Most likely no-cost mortgages

– FHA streamlines for FHA loans that were closed more than three years ago. If you have an FHA loan that you got in the spring of 2009 or earlier you could qualify a real no-cost FHA streamline refinance. For people in this situation the FHA has waived virtually all of the upfront mortgage insurance fees and does not allow any other closing costs to be rolled into the new loan. This results in a refinance that really does significantly reduce interest payments and payments without costing borrowers anything. Contact us to learn more about this program if you currently have an FHA loan.

– Most other types of refinances with slightly higher interest rates. For other types of refinances the most likely way to get a no cost refinance is to get a rate that is a quarter point or more higher than than average. For instance if the average mortgage rate is 3.75% you can normally get most or all of your closing costs paid for by the lender by going with a 4.0% rate. The higher interest rate gives lenders more money to pay for costs, including both the up front out of pocket expense and the costs rolled into the loan. It doesn’t always make sense to go for higher interest rates and lower closing costs though because the longer you own the property the more valuable the lower interest rate becomes.

Out of pocket costs vs. costs rolled into the loan.

Sometimes lenders will tell you that if you bring no cash to closing that it is a “no cost” refinance. But if closing costs are rolled into your new mortgage there are still costs to you. If $5000 in closing costs get rolled into your new mortgage that means you are $5000 deeper in debt and you still have to pay that money back eventually. It is important to calculate the actual costs and the number of months it takes to break even on those costs before proceeding with a refinance. (*Contact us to be connected with authorized lenders who always help borrowers calculate break even costs.*) Normally if you plan to own the house 5+ years you should be alright with a break even point of less than 2 years on a refinance but the faster you can break even the better.

Fill in the contact form on the right to get more information on this topic or to find out which government-backed refinance programs you can qualify for. With rates at all time lows this month there may never be a better time to refinance your mortgage.

As predicted, the new FHA streamline program that launched in June created a massive stampede of FHA streamline refinances over the last month or so. But as we approach August the flood of refinance applications is slowly subsiding while interest rates on government-backed mortgages continue to drop to new all-time lows.

If you have an FHA loan contact us today to see about streamlining your mortgage to a new FHA loan in the mid to high 3’s. Likewise, if you have a conventional or VA loan fill in the contact form on the right to get a quote for a new refinances at surprisingly low interest rates. With rates at all-time lows again it is starting to make sense for more and more people to take another look at refinancing. And with the backlogs in underwriting starting to ease finally the wait times on many government-backed loans won’t be as long in the latter half of the summer as they have been in the first half.

As the European debt crisis slogs along, mortgage interest rate in the US continue to test new lows. Unfortunately the number of borrowers who are able take advantage of the record low rates seems to be shrinking. While borrowers who have equity, solid credit, and enough income can still refinance to the record low rates through authorized lenders on our list, it is becoming more difficult for borrowers who are underwater on their mortgages to refinance. Fewer and fewer lenders are participating in the main refinance programs targeted toward underwater borrowers, the FHA streamline program and the HARP program. Part of the problem is lenders are leery about adding new upside-down mortgages to their books. The launches of the new FHA streamline program and the HARP program have sent many thousands of underwater borrowers in search of refinances from these programs and as a result of the popularity of these programs many banks simply have lost their appetite for funding such loans. If the problem persists the federal government might have to come up with greater incentives for lenders to participate in these programs because the programs will not do any good if none of the authorized lenders are willing to participate.

The good news is that some authorized lenders are still participating in both programs and it is still possible to get an FHA streamline or a HARP loan… for now. But with the retreating we are seeing among most authorized banks recently there is not telling how long both programs will be available. The HARP 2 program is already available among so few lenders that in many cases where the home is significantly underwater borrowers are looking at waits of three or more months to close their HARP 2.0 loan. With any luck the FHA and Fannie/Freddie will step up to make these programs more appealing and less risky for lenders soon.

In the meantime, contact us in the sidebar today to learn more about which programs are the best fit for your family. All of the government-backed refinance programs are still available for now so getting going now while rates are testing new lows is probably a very good idea.

As we have discussed in the past, the new FHA streamline program that went live June 11 is hugely beneficial to families who have FHA loans that are more than three years old. Well the expected stampede to participate in the new program is underway and several large FHA-approved lenders have decided they need to place limits on the number of FHA loans they are refinancing and servicing. The end result of this pullback by banks is likely to be that FHA streamlines will soon have higher interest rates and will be harder to come by. If you have an FHA loan that is more than three years old contact us in the sidebar right away. From the looks of things this new program with the record low interest rates might be much harder to get in the next few days.

The much-anticipated new FHA streamline program for people who have FHA loans that were started prior to May 2009 goes live Monday June 11th. With interest rates testing all time lows this new program is a good idea for virtually every home owner who qualifies. Not only can the interest rate be lowered to somewhere between 3.75% and 4.0% right now, this new program adds nothing to the loan amount and normally allows borrowers to skip at least one mortgage payment. The other benefit of the FHA streamline program is that it doesn’t matter how underwater borrowers are on their current FHA mortgage as long as there are no 30-day late payments in the last 12 months. Add to that the fact that borrowers will also receive a refund check for the amount in their current escrow account and there is no downside at all for most qualified borrowers. Again this program only applies to people who already have FHA loans that are more than three years old. But for that segment of the population taking advantage of this new program is the proverbial “no-brainer”.

Be ready for longer than usual closing waits with this new program though. Because the new program is so beneficial to qualified borrowers millions of homeowners will be seeking these FHA streamlines this summer. Folks who get started right away should expect to close their streamline loan in July. But plan for about six weeks for the refinance process in June and July until the initial rush dies down.

If you have an FHA loan you got prior to May 2009 contact us in the sidebar right away to get an estimate on this new FHA streamline program. If not, you can still contact us to learn more about other available government-backed refinance programs.