About Government Refinance and Home Purchase Programs

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.

Today the FHA announced planned changes that will increase the costs of FHA loans going forward. First, the monthly mortgage insurance premium on new FHA loans will increase once again. The plan is to raise the annual MIP by 0.10%. Second, as we previously reported, the FHA will begin requiring their monthly mortgage insurance premium to continue for the life of the loan. Currently FHA monthly MIP payments can be dropped after five years when more than 22% equity is reached in the home. When these changes are implemented that will no longer be the case for all new FHA loans.

The FHA will give official guidance on the timing of these changes in the next few days. But we know already that anyone with an FHA loan should contact us immediately to look into an FHA streamline to a lower interest rate while rates are still near all time lows and before these new costs are implemented.

In his first term, President Obama went to great lengths to try to help the ailing housing market recover by sponsoring or supporting several government refinance assistance programs. The primary refinance program of the Obama administration, the Home Affordable Refinance Program or HARP program, has proven to be a great success after a rocky start. Other programs, such as the FHA streamline program and the VA IRRRL program, have also been very successful over the last four years. In addition, the efforts of the Federal Reserve to keep interest rates low have allowed millions of Americans to refinance to record low rates over the last four years.

While there are not a lot of new government refinance programs on the immediate horizon, it is not too late to take advantage of the record low interest rates and current programs. With President Obama still at the helm the current refinance programs are unlikely being shut down any time soon.

However the clock is ticking on these record low interest rates. Most pundits are predicting that interest rates will be rising over the next 12 months and it is not unlikely that rates will continue rising over the next several years. So if you would like to take advantage of the government sponsored refinance programs and historically low rates available contact us now in the sidebar. There may never be a better time than now.

We have spent a lot of time writing about FHA to FHA streamlines here in the past but there is also a streamline program for borrowers who currently have VA loans. The program is officially called the IRRRL program and it is very much like the FHA to FHA streamline program. Borrowers who have VA loans now can trade their current VA loan in for a new VA loan at a lower rate. With interest rates on VA loans hovering near all time lows lately now is a great time to get a VA IRRRL/streamline.

The advantage of this VA streamline program is that borrowers who have even average credit or better do not need to prove their income levels or assets to qualify. Further, the IRRRL program works no matter how underwater the VA mortgage is right now. There is normally a 0.5% VA funding fee rolled into the new loan for VA IRRRL loans, but that funding fee is waived entirely for disabled veterans. If you have a VA mortgage, contact us in the sidebar right away to learn more about this VA-to-VA streamline, or IRRRL, program.

The FHA streamline program is not new. FHA streamlines are refinances from one FHA loan to a better FHA loan. They are called streamlines because the process is streamlined; no appraisal required, no income verification required, no asset verification required. The primary requirements are that the borrower has decent credit and no 30 day mortgage payments in the last 12 months. The FHA knows that they are already co-signed on current FHA loans so their attitude is that if Jane Public can afford her FHA loan at, say a 4.5% rate, Jane can afford it even more easily at a 3.5% rate or lower.

For FHA loans that were started after April of 2009 the monthly mortgage insurance payment normally increases with a streamline. (Not so with FHA loans older than that.) But in most cases, the monthly savings from the lowered interest rate is so high that the overall payment still drops pretty significantly even with the higher PMI. The other benefit of streamlines is that in most cases borrowers skip at least one payment and get a refund for everything in their current escrow account which means borrowers normally break even on any FHA fees added to the loan on day one.

The other good news (for now) is that the FHA monthly mortgage insurance can drop off entirely after 5 years. The current FHA rule is that FHA/HUD mortgage insurance is due on the loan for at least 5 years. However, when the 5 years is up if the loan balance drops to 78% of the appraised value of the home on record with the FHA the monthly MI will drop off entirely. For instance, if the home were appraised at $200,000 in 2008 when the home was purchased with an FHA loan, that is the value on record with the FHA even for families who streamline now. This is important because there are rumors that the FHA might soon change the 5 year, 78% rule and make the monthly MI last for the life of the loan.

So if you have an FHA loan, contact us in the form on the sidebar now. Rates are still hovering near all time lows and the rules for streamlines are extremely borrower-friendly still.

The fiscal-cliff-aversion bill that passed congress late last night had some good news for folks with government-backed mortgages. One of the stipulations of the bill was a two year extension of a 2011 provision that allowed mortgage insurance (mip or pmi) to be tax deductible. The provision mostly applies to borrowers who claim less than $100,000 in income. Borrowers at that income level or lower can deduct 100% of the mortgage insurance they pay upfront in a refinance or that they are paying on a monthly basis. This tax deduction will last through the end of 2013 at least. Borrowers who claim more than $100,000 in taxable income may also deduct some, but not all of the mortgage insurance paid.

This news is especially good for folks who have FHA loans now. If you have an FHA loan, contact us in the sidebar to learn more about the FHA streamline program right away. Or if you have any loan with mortgage insurance, 2013 is a great year to refinance. Not only are rates still near all time lows, but any money that goes toward mortgage insurance is tax deductible for now.

Reports out this week have interest rates on government-backed mortgages still hovering near their all time lows. But with the Democrats and Republicans in Washington unable to agree on anything there is a lot of skittishness on Wall Street and in the mortgage investment markets about the pending “fiscal cliff” that remains unresolved. If Washington fails to come to an agreement that amends or at least delays the fiscal cliff it could be bad news for the fledgling economic recovery in the US. Rates won’t stay this low forever and one takeaway from this uncertainty in Washington is this: The sooner American borrowers get started on the refinance process, the lower their risk will be of missing this all time trough in mortgage interest rates.

Contact us in the sidebar to learn more about the available programs and how to get a quote before the end of the year.

One of the historical weaknesses of the HARP and HARP 2.0 program has been that there has been very little leeway for borrowers when it comes to their debt to income ratios. In the past, borrowers normally had to show that the minimum payments on all of their debts, including mortgages, car payments, credit card payments, student loans, etc., added up to less than half of the gross income they made every month. So for instance, a borrower who had a monthly debt payment load of $2500 had to prove they made more than $5000 per month to get approved for a loan by the Fannie Mae or Freddie Mac software.

The maximum 50% debt to income ratio has been the rule of thumb for some time. It has made refinancing difficult for a lot of families who are paying all their bills now but for whatever reason (being self employed is one common problem) can’t prove enough monthly income to qualify for the HARP program.

It appears that Fannie Mae at least has begun loosening up on that DTI rule of thumb. We are getting reports that the Fannie Mae underwriting software, called Desktop Underwriter or “DU”, has been approving HARP loans with debt to income ratios into the 60s since the last software update. Of course Fannie can tweak the parameters of the DU software any time so there is no guarantee this change is permanent, but if you have a conventional loan that is backed by Fannie Mae now might be the best time ever to look into refinancing. Interest rates are still hovering near all time lows and it appears that barriers to getting approved are slowly dropping. Contact us in the form on the right to learn more or to seek an estimate from an authorized lender.

The morning after the general election yielded a pleasant surprise for folks looking into refinancing their mortgage. Purchases of mortgage-backed securities skyrocketed. That means interest rates on government mortgage programs have dipped in response. Mortgage interest rates broke new record lows earlier this fall when The Fed announced a long term program to buy mortgage backed securities to help keep mortgage interest rates low. With President Obama winning the election two things happened to help investor confidence: 1) The uncertainty about who the president would be was removed and 2) The threat of Ben Bernanke being fired by Mr. Romney went away. No doubt those uncertainties being settled has bolstered investor confidence in the short run.

What that means for now is mortgage interest rates could be testing new lows over the next several weeks. If you have been considering investigating a refinance (even if you have already refinanced your mortgage in the past) now is a very good time to contact us in the form on the right to get more info and an estimate on the government-backed refinance programs that are available.

Buried in a recent report from HUD was a minor bombshell of an announcement. Because of an ongoing shortfall in the FHA/HUD funds, in 2013 the FHA is likely to once again increase both the upfront mortgage insurance premium and the monthly PMI fees on new FHA loans. That announcement is big news by itself, but the bigger news is the possibility that the monthly PMI may be for the life of the the loan on new loans, rather than being for a minimum of five years like they are now.

Here is what the HUD report said:

While FHA’s 100% insurance guarantee remained in effect for the 30-year life of a loan, borrowers were only required to pay premiums for less than ten years, FHA has been left without premiums to cover losses on loans held beyond the period for which it collects premiums. This change will apply to new loans.

This change will make a massive long term difference to borrowers with FHA loans.

In the last few months rates on FHA loans have been at shockingly low rates. It has not been uncommon to see low-cost or no-cost FHA streamlines to new 30 year fixed FHA loans at rates in the mid to low 3’s recently. If you or someone you know has an FHA loan currently, contact us in the sidebar right away to look into getting an FHA streamline started while rates are still scraping all time lows and before this major change in the FHA mortgage insurance rules is implemented.

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.