About Government Refinance and Home Purchase Programs

With the reserve funds for the FHA dwindling there is growing speculation that the FHA may need to raise its fees to stay in the black during these tough times in the housing market. Many of the possible fee hikes will affect home buyers mostly — hikes in the minimum down payments for instance. But other possible changes could affect refinances as well. Among the ideas being considered are possibly raising the mortgage insurance fees (currently at 1.75% up front and .55% annually) or even raising the minimum credit score requirements (currently at 620 for most lenders). Whatever the case, with rates likely to increase soon anyway, now is the time to look into refinancing. Contact us in the sidebar if you think you are a candidate for a government-backed refinance.

According to recent figures, about 10% of all US mortgages are more than 30 days late on payments in Q3 2009 and more than 4% are in some stage of foreclosure. Here is an excerpt from an article from CNNmoney.com on the subject:

Mortgage borrowers are still falling behind on their payments in record numbers, despite the many foreclosure prevention efforts initiated by the government and nonprofts.

In the third quarter, 9.64% of all mortgage loans were delinquent, according to a report released Thursday by Mortgage Bankers Association. That represents 4.5 million borrowers and is an increase from 9.24% in the prior three months.

“Despite the recession ending in mid-summer, the decline in mortgage performance continues,” said Jay Brinkmann, MBA’s chief economist. “Job losses continue to increase and drive up delinquencies and foreclosures because mortgages are paid with paychecks, not percentage point increases in GDP.”

The new head of HUD speculated that FHA mortgage insurance premiums may need to increase in the future in order to keep the FHA from going in the red. Here are some bits from a recent Bloomberg article on the subject:

Insurance premiums for mortgages guaranteed by the Federal Housing Administration may rise as the Obama administration looks for ways to shore up the agency’s finances, Housing and Urban Development Secretary Shaun Donovan said.

“It’s likely that you’ll see further changes in the coming months,” Donovan said in an interview following an event today in Washington held by Bloomberg Ventures, a unit of Bloomberg LP, parent of Bloomberg News. “A number of the steps that we are looking at that are possible around the mortgage insurance premium would help to accelerate FHA stepping back as the private market returns.”

Donovan said FHA will likely make program recommendations when it submits its budget request for fiscal 2011 to the president and Congress early next year.

If you have an FHA loan with a rate at 6% or higher it is now or never to streamline your loan to a rate in the low between 5% and 5.5%. The FHA is pulling the plug on this program Monday November 16th.

Streamlines currently require no appraisal, no income or asset verification, and no money at closing. They allow you to significantly lower your interest rate, skip a month’s mortgage payment, and receive a refund on your current escrow account.

All you need is to qualify is no 30 day late payments on your current FHA loan and a credit score above 620. Contact us in the sidebar now if you fall into that category. If we get your application started by Monday we will be ok.

[2012 Update — The “now or never” talk was hyperbole. It turns out that three years later there has never been a better time to get an FHA streamline. Fill in the form on the right if you have an FHA loan to get more details.]

The folks over at Zillow.com reported that the number of Americans who owe more on their mortgages than their homes are worth actually decreased in the third quarter. Here is an excerpt from the CNNmoney.com story on the subject:

Fewer people are underwater on their mortgages — further evidence that the real estate free-fall may be slowing.

Just 21% of all single-family homeowners owe more on their mortgage balances than their homes are worth, according to a third quarter residential real estate report from Zillow.com. That is down from 23% at the end of the second quarter.

That is good news because it should help reduce the number of homeowners losing their homes to foreclosure. Being underwater is one of the two factors that lead to foreclosure, the other being, of course, not having enough income to make the monthly payments.

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But there’s a second, less-positive factor that contributed to the reduction in underwater borrowers: foreclosures. So many people have already lost their homes that the ranks of those underwater is slowly dwindling.

And that highlights one of the most serious concerns that housing markets currently face. “Foreclosure rates,” said Humphries, “are ramping up again.”

Here is an excerpt from the Housing Wire story in the subject:

President Barack Obama signed the “Worker, Homeownership and Business Assistance Act of 2009” into law on Friday, extending the first-time homebuyer tax credit as well as certain jobless benefits…

With the first-time homebuyer tax credit originally scheduled to expire on Dec. 1, 2009, HR 3548 now allows first-time buyers to claim 10% of the purchase price of their home, up to $8,000 for single or married taxpayers filing jointly, if they close on the purchase by midnight June 30, 2010. Taxpayers must purchase or be locked into a contract to close before midnight on April 30, 2010.

Good news for anyone looking to buy or sell a home right now: The tax credit for purchasing homes has been extended. See excerpts from an AP story below and contact us in the sidebar if you would like to participate in this program:

Buy a home before May 1 and collect up to $6,500 from the government. If you’re a first-time homebuyer, get up to $8,000.

As part of the government’s efforts to encourage people to spend money to help revive the economy, the House voted 403-12 Thursday to expand a popular tax credit for homebuyers. The bill, which also extends unemployment benefits and expands a tax break for money-losing businesses, now goes to President Barack Obama, who plans to sign it Friday.

First-time homebuyers have been getting tax credits of up to $8,000 since January as part of the economic stimulus package. But with that housing program scheduled to expire at the end of November, the House voted to extend it into the spring — and to expand it to many people who already own homes.

Buyers who have owned their current homes at least five years would be eligible, subject to income limits, for tax credits of up to $6,500. First-time homebuyers — or people who haven’t owned homes in the previous three years — could get up to $8,000. To qualify, buyers have to sign purchase agreements before May 1 and close before July 1.

With the increased loan limits on FHA and Fannie Mae/Freddie Mac loans set to expire at the end of 2009, congress passed a resolution extending the loan limit increase for another year. The loan limit increase is seen as crucial to keep the economic recovery on track and to bolster home sales and refinances throughout the country. President Obama is expected to sign the resolution next week.

There was an interesting article over at Business Week recently speculating on how soon mortgage interest rates will go up. The short answer is this author thinks we might have relatively low rates through the winter. Here are some excerpts:

When the economy—and the real estate market—tumbled in 2008, the Fed stepped in to lower interest rates. As we have seen throughout history, lower interest rates makes housing more affordable, increase the likelihood of transactions, and ultimately produce stabilization in the residential real estate market. A major clue to where the residential real estate market is headed lies in the question of where interest rates might be headed.

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You and I aren’t the only ones doing the watching. If you see the 30-year mortgage rate start to climb relative to other interest rates, it’s a sure indication that your friendly neighborhood mortgage broker thinks a Fed rate hike is on its way—and that mortgages rates will climb.

So if you are thinking of buying or refinancing a home, this is a pretty good time to move, before rates begin to rise again.

There have been several changes to the FHA rules lately. One of those changes will make it harder for consumers to purchase condos with an FHA loan. Here is an excerpt from a recent Bankrate.com/Detroit News article on this subject:

The new rules were supposed to take effect Oct. 1. But the FHA has announced it would delay implementation of the new rules until Nov. 2, and says it might modify some of the policies.

Of the several new rules and requirements, there are four that most directly affect people who want to buy condos with FHA-insured mortgages:

– “Spot approvals” are eliminated, and now the entire condominium project has to meet FHA approval before a borrower can get an FHA-insured loan.

– A maximum of 30 percent of the units can have FHA-insured mortgages (there was no such limitation previously).

– Before the FHA will insure a mortgage on a condo, at least half the units must have already been sold (again, there was no such limitation previously).

– At least half of the project’s owners will have to occupy their units, down from 51 percent.

A recent article over at CNNmoney.com cited recently released data on the continuing drop of home prices in most markets in the US. If you are considering a refinance to a fixed rate or just a better rate now is the time to contact us in the sidebar to look into a refinance while you still have equity in your home. If you are considering a government-backed mortgage to purchase a home some time soon the price drops work in your favor so you can contact us about government-backed purchase loans as well.

Here are some excerpts from the article:

If you thought home prices were bottoming out, you may be wrong. They’re expected to head a lot lower.

Home values are predicted to drop in 342 out of 381 markets during the next year, according to a new forecast of real estate prices.

Overall, the national median home price is predicted to drop 11.3% by June 30, 2010, according to Fiserv, a financial information and analysis firm. For the following year, the firm anticipates some stabilization with prices rising 3.6%.

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Hunter also sees a new wave of foreclosure problems coming from higher priced loans and prime mortgages. He expects a high failure rate for option ARM loans that were issued to prime customers so they could buy homes in bubble markets, such as California and Florida. In those areas, prices for even modest homes had skyrocketed.

We get this from a recent AP story on a joint press release from earlier today:

The Obama administration is unveiling a new program to provide support to state and local housing agencies to provide help to thousands of home buyers and renters.

The administration said the new program would help to support low mortgage rates and expand resources for low and middle income borrowers who want to buy or rent a home.

The program will feature two parts — a new bond purchase program to support new lending by housing finance agencies and a temporary credit and liquidity program to improve access by housing agencies to credit sources for their existing bonds.