About Government Refinance and Home Purchase 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.

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.

In the wake of the Federal Reserve’s newly announced quantitative easing program, mortgage interest rates have dropped to all time lows again this month. There has never been a better time to refinance.

Please note that the rates borrowers see in the news apply to mortgages where the borrower has plenty of equity and excellent credit. When there is little or no equity or if there are credit problems interest rates tend to be slightly higher. For instance this week rates on 30 year fixed government-backed mortgages for folks with plenty of equity and good credit were coming in at around 3.5% (or even lower in some cases). But in cases where the home is underwater (where the borrower owes more than the home is worth) and the borrower is using the HARP program the risk is higher for the lenders so the rates tend to be higher. Still even in those cases rates are astonishingly low right now. Most HARP 2.0 loans are still coming in at rates in the very low 4’s or even high 3’s this week.

Rates on FHA streamlines have been low too. For people who have FHA loans that were started in the spring of 2009 or sooner, refinance rates have been down in the mid to low 3’s this week with no closing costs added to the new FHA loan. For newer FHA loans streamline rates have been in the mid to upper 3’s.

Beware of false advertising from lenders. Many lenders will advertise rates in the 2’s but won’t mention in the advertisements that rates that low only apply to 15 year mortgages (which have higher payments) or adjustable rate mortgages (ARM’s). If you are looking for a 30 year fixed refinance, rates are in the mid 3’s and higher.

Contact us in the sidebar to learn which government-backed refinance programs are best for your family and to get an estimate.

The highly anticipated Fed announcement today ended up being good news for borrowers considering refinancing their mortgage or buying a home. The gist of the announcement was that the Fed was going to put a lot more money into compressing interest rates heading into this fall. Here is a quote from the statement:

To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee agreed today to increase policy accommodation by purchasing additional agency mortgage-backed securities at a pace of $40 billion per month. The Committee also will continue through the end of the year its program to extend the average maturity of its holdings of securities as announced in June, and it is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities. These actions, which together will increase the Committee’s holdings of longer-term securities by about $85 billion each month through the end of the year, should put downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative.

This is the “QE3” that many pundits suspected was coming and it is more aggressive than many assumed. For consumers, mostly this means that mortgage rates could continue to test new all time lows for the next couple of months.

Contact us in the sidebar to learn more about the various government-backed mortgage refinance programs available and to get an estimate.

A disappointing jobs report was released this morning. Expectations were than the US economy would add about 140,000 jobs in August but the number came in at 96.000. The immediate market reaction to that unpleasant news was a increase in buying of mortgage backed securities and treasury bonds as investors sought safe havens for their money. Upticks in purchases of treasury bonds and mortgage backed securities inevitably lead to mortgage interest rates dropping.

So while indications that the US economy is still faltering is not good news at all, it has at least had the positive effect of keeping downward pressure on mortgage interest rates for now. Of course there is no telling how long this current trend will last so if you are interested in seeing if a government-backed refinance programs can help your family contact us in the form in the sidebar today. With any luck we can help direct you to a program that will make a positive difference for your household.

After hitting all time lows in July, interest rates on government-backed mortgages began moving up again for most of August. But we have seen a reversal in that upward trend in the last week or so. Mortgage interest rates have improved again for several straight days. Whether mortgage interest rates continue to test all time lows heading in to the fall is in large part dependent on the Fed announcements coming out later this week. Most pundits believe that if the Fed announces it will launch another round of quantitative easing, or “QE3”, that will be worse for mortgage interest rates than it will be if the Fed remains non-committal on the subject. We will be closely monitoring the situation and reporting new developments here.

Contact us in the sidebar to learn more about the government-backed refinance programs that are available.

After breaking records for all time lows in July, mortgage interest rates have slowly begun inching higher again in August. This is in response to some macro-economic news that led to the yields on the 10-year treasury note to increase over the last few weeks. Of course mortgage interest rates increasing again after breaking new record lows was inevitable, but the good news is that so far the rates are still near those all time lows.

There is no telling where rates will be in a few months, but odds are that in a couple of years 30 year fixed mortgage rates will be back in the more normal 5-7% range rather than in the high 3s and low 4s like they are now in many cases.

Not everyone can qualify for a government-backed refinance but the folks who can and do refinance to these low rates will be in an enviable situation for years to come. Contact us in the form on the right to get more information about the government-backed refinance programs available.

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.