Government Refinance Assistance

After increasing for much of April interest rates on government-backed mortgages have been decreasing again for a several weeks and are now approaching new lows for the calendar year. Interest rates tend to track the 10 year treasury note so recent decreases in 10 year treasury yields have translated into 30 year mortgage rates below 5% in the last couple of weeks. Mortgage interest rates are volatile though so there is no telling how long this current dip will last.

Here is a quote from a recent WSJ article on this topic:

The average rate on the 30-year mortgage matched its lowest level since mid-January this week, according to Freddie Mac’s weekly survey released Thursday. …

“Weaker economic data reports reduced Treasury bond yields and allowed mortgage rates to drift lower for the third consecutive week,” said Frank Nothaft, vice president and chief economist at Freddie Mac, in a news release. “For instance, real economic growth in the first quarter fell short of the market consensus forecast and represented the slowest pace since the second quarter of 2010. In addition, both the manufacturing and service sectors exhibited growth at a slower rate in April.”

If you have an interest rate that is higher than you want contact us in the sidebar to see which programs might apply to your family.

As the housing bubble was inflating in the mid 2000′s one of the often-abused mortgage types was the ARM or adjustable rate mortgage. As a result of that abuse ARM’s have gotten somewhat of a bad reputation among consumers. But when used correctly ARM’s can be excellent mortgages. That is why government agencies like the FHA and VA still offer ARM’s, as do quasi-government agencies Fannie Mae and Freddie Mac.

The appeal of ARM mortgages is that the rates can be significantly lower than 30 year fixed mortgages. For instance, in recent weeks rates on 5 year ARMs were in the mid threes. That is nearly 1.5% lower than the average 30 year fixed interest rate in the same time period.

When is an ARM appropriate? The most obvious answer is ARMs are great for people who plan to sell their homes in the next 10 years or less. It is not uncommon for someone to know they plan to sell their home in the next 3-5 years for various reasons like growing families, or wanting to downsize, or knowing a job related move is pending.

Here is an example:

Fictional Borrower Lisa has a $200k mortgage at a 6% interest rate and would like to take advantage of the historically low interest rates we are seeing lately by refinancing. Lisa plans to sell her home in the next 5 years or so. If she were to finance at 5% on a 30 year fixed mortgage her principal and interest payments (excluding escrow) should drop about $126 per month — from about $1200/month to about $1074/month. However if she were to refinance to a 5 year ARM at about 3.5% her principal and interest payments (excluding escrow) would drop about $211 per month — from about $1200/month to about $899/month. In her case the 5-year ARM rather than a 30-year fixed would add up to more than $1000 per year in additional savings and would be a better fit based on her plans to sell the home in about 5 years.

The main risk of getting an ARM is that if a borrower ends up owning the property after the ARM begins to reset the rates are likely to rise. So it is useful for borrowers to have some level of confidence that they are going to sell the home before choosing and ARM. In many cases ARMs can only increase 1% per year after the resetting begins, so there is some ramp up time, but in cases where borrowers don’t plan to sell the home it is usually wiser and less costly in the long run to just refinance into a 30 year fixed rate instead of an ARM. On the flip side, in cases where borrowers plan to sell in the next 5-10 years it doesn’t make a lot of sense to pay an extra premium for a 30 year fixed rate.

Contact us in the sidebar to learn more about the available programs.

The heads of Fannie Mae and Freddie Mac have recently indicated they are not high on the idea of principal write downs at all. This should come as no surprise to anyone. The problem with principal write-downs is that they are a Pandora’s Box for banks and investors. If lenders started forgiving principal for borrowers they would open a massive flood that could bury them. There are millions of underwater homeowners in the US. The majority of those homeowners are not willing to consider walking away from their homes. A foreclosure or short sale severely damages credit scores and that is something most borrowers would like to avoid. The banks benefit greatly from this fact. If banks and investors started offering principal write-downs they would certainly be overrun with requests and would have to deal with billions of losses that they currently are avoiding.

So while politicians like to make noise about principal reductions, banks and investors like Fannie and Freddie will continue to show zero interest in the concept in most cases.

However there are several refinance programs available that do help families. Contact us in the sidebar to learn more about those.

After slowly rising for more than four straight weeks interest rates on government-backed and conventional mortgages finally dipped again over the last week or so. The dip in rates is a welcome development to folks looking into refinancing. Rates on mortgages largely track the the yields on the 10 year treasury bond and with the recent dip in the stock market, yields on the 10-yr note have dropped as well. If you have been thinking about refinancing to a lower interest rate contact us in the sidebar right away to learn more about the programs available. Drops in interest rates sometimes don’t last long so now might be a good time to lock in a better rate than you currently have.

Thanks to the efforts of the federal government mortgage interest rates are still near historic lows. But over the last week or two rates have begun inching upward again. This may, ironically, be partially due to the positive employment news that has been surfacing recently.

The good news is that rate are only inching higher lately rather than rocketing higher. It is inevitable that we will eventually see 30-year mortgage rates at more than 6% like we saw just a few years ago — it is only a question of how long before that happens. When rates increase like that many people with adjustable rate mortgages will see their payments go up by hundreds of dollars per month. But in the meantime rates are still very low.

If you have an adjustable rate mortgage or if you have a fixed rate mortgage that is higher than you want, contact us in the sidebar right away before interest rates get much higher. One of our counselors can point you in the right direction to take advantage of the government-backed refinance programs that are available.

The recent budget compromise reached in Washington DC that prevented a government shutdown had a direct effect of government-backed mortgages. The FHA program is an entirely government program so a government shutdown could have put a real crimp in the FHA mortgage originating and closing process. Thankfully, cooler heads prevailed and FHA loan proceed without interruption.

After rising fairly steeply since the end on 2010, interest rates on government-backed mortgages finally dipped a bit over the last several weeks. In the latest few weeks the turmoil in Libya has caused a domino effect started with a falling stock market which in turn increased demand for US treasury bonds which helped lower mortgage interest rates slightly.

Even after the rise in rates over the winter, rates are still surprising low by historical standards. For that reason the recent dip in rates is not likely to hold for long. The Fed and Obama administration have gone to great lengths to compress interest rates for around two years now. But those efforts won’t last for ever and there are signs that they are slowly losing effectiveness. The result will likely eventually be 30-year mortgage rates at more than 6% like we saw just a few years ago. When rates increase like that many people with adjustable rate mortgages will see their payments go up by hundreds of dollars per month. But in the meantime rates are still very low.

If you have an adjustable rate mortgage or if you have a fixed rate mortgage that is higher than you want, contact us in the sidebar right away before interest rates start their upward climb again. One of our counselors can point you in the right direction to take advantage of the government-backed refinance programs that are available.

Republicans in the US House of Representatives would like to end several government sponsored foreclosure prevention programs saying the programs are ineffective. We get this from a recent report published at the Miami Herald:

The House is scheduled to vote this week on getting rid of a refinance program for Federal Housing Administration loans and another program, scheduled to begin next month, that would help homeowners with delinquent payments.

The House Financial Services Committee is expected to vote Wednesday morning on ending two other measures: One of them is a massive effort that was designed to adjust up to 4 million mortgages but so far has tackled just half a million successfully. The other is the Neighborhood Stabilization Program, which steers money to communities hit hard by foreclosures

However it appears that such a vote would end up being symbolic only because there is virtually no chance such a law would get past the Democratics in the Senate or President Obama.

Principal reductions have thus far been more of a myth than a reality in the marketplace. The problem is that banks aren’t anxious to forgive debts. As a result the programs that require banks to write down principal like the FHA short refi program have been major flops so far. But Bank of America has recently announced that it will increase the number of loan write-downs it does in certain hard hit states. We get this from a recent HousingWire article:

Bank of America sent letters to Arizona homeowners who may qualify for mortgage assistance, including a principal writedown, under the Treasury Department’s Hardest Hit Fund.

In June 2010, the Obama administration released $1.5 billion in foreclosure prevention funding for states hardest hit by home price declines. BofA said Wednesday the write downs will go to homeowners experiencing financial hardship and owe considerably more on the mortgage than the property is worth.

It is still unclear what would persuade the folks at BofA to write down the principal on a loan. In all likelihood it would require a situation where a borrower is significantly late on payments and on the verge of foreclosing anyway. In such a case the bank may decide that it would be less expensive to write down the principal and keep the occupants in the house than it would be to proceed with a foreclosure, an eviction, and then the process of listing and selling the foreclosed property.

In any case, principal write-downs are still the exception rather than the rule. And they remain entirely at the discretion of the lenders.

However, borrowers who currently have an FHA loan or who have conventional loan backed by Fannie Mae or Freddie Mac still have refinance options even when they owe more than the home is worth. While refinancing doesn’t reduce the principal it can reduce payments. In addition, borrowers control their own destinies with refinances whereas loan modification requests (including requests for principal reductions) leave borrowers at the mercy of the lender.

Contact us in the sidebar for more information.

There was recent news that Warren Buffett is bullish on the US housing market and is investing in it on the belief that falling housing priced in the US will change course within a year and start heading back upward again. Here is a bit from the HousingWire piece on the subject:

Warren Buffett anticipates a recovery in the housing market to begin within one year and the investment guru said in his biennial letter to investors that mortgages written by his subsidiaries performed better than most of the competition through the financial crisis.

Buffett said the recovery hinges on durable, common sense underwriting based on affordability for mortgage borrowers. …

He added that as the housing market pushes toward a recovery, home ownership can still make sense for many Americans with lower prices and interest rates. Future housing policy, he said, should be sculpted from lessons learned during the downturn.

“But a house can be a nightmare if the buyer’s eyes are bigger than his wallet and if a lender – often protected by a government guarantee – facilitates his fantasy,” Buffett said. “Our country’s social goal should not be to put families into the house of their dreams, but rather to put them into a house they can afford.”

A recovery in housing prices is good news for US homeowners. Of course odds are that mortgage interest rates will be significantly higher next year at this time than they are now. Contact us in the sidebar if you would like to learn about the government-backed refinance programs that are available now.

The FHA announced yesterday that it will be increasing its monthly mortgage insurance fees by 0.25% on all products in April of 2011. This comes on the heels of other recent changes the FHA has made in order to strengthen its financial position in the face of the foreclosure crisis of the last several years.

What does a 0.25% increase in monthly mortgage insurance mean? Well on a $100,000 mortgage that equals an additional $250 per year or about $21 per month. On a $200,000 loan that is $500 per year or $42 per month. And so on. The rate increase also means that if you have an FHA loan now and were hoping to streamline it to a lower rate you should try to get that done immediately because the new, higher FHA mortgage insurance rates will apply to the new loan starting in April and those higher PMI payments could mitigate a lot of the savings that come from lowering the interest rate.

Contact us in the sidebar right away to learn more or get an estimate.

The Treasury and Obama Administration released the the first iteration of their plan to wind down government-sponsored mortgage behemoths Fannie Mae and Freddie Mac. The plan was not earth shattering by any means. The basic ideas in it are to slowly wind down the involvement of Fannie and Freddie in the mortgage market by about 10% per year over the next few years. It also recommends reducing the loan limits on government-backed loans this Fall. Here are some excerpts from the recent HousingWire article on the subject:

The administration’s plan, sent to Congress by the Treasury Department, calls for continuing to wind down of the GSEs investment portfolio at an annual rate of no less than 10% per year.

The Treasury also wants to see 10% down payments from potential borrowers. …

“This is a plan for fundamental reform – to wind down the GSEs, strengthen consumer protection, and preserve access to affordable housing for people who need it,” said Treasury Secretary Tim Geithner. “We are going to start the process of reform now, but we are going to do it responsibly and carefully so that we support the recovery and the process of repair of the housing market.” In a conference call Geithner predicted a 5 to 7 year timeline for implementation.

Despite the recent wave on news on rising mortgage interest rates, the interest rates on most government-backed mortgages are still startlingly low by historical standards. But all good things must come to an end and it is not unlikely that rates will bounce significantly higher soon. For folks who have an adjustable rate mortgage (ARM) now, rising rates overall will mean monthly mortgage payments could start shooting up soon.

If you have an adjustable rate mortgage — whether that is on a first or a second mortgage — and have been thinking about looking into a fixed rate mortgage it is definitely time to stop procrastinating. Contact us in the sidebar right away to learn which programs best suit your situation.

Recent reports show housing prices in the US continuing to drop. We get this from a recent HousingWire report:

December home prices fell 5.4% from a year ago, the fifth straight month of declines, according to data provider CoreLogic.

The decrease was steeper in December than the revised 4.39% drop in November. For all of 2010, though, home prices showed no change from the year before and some signs of stabilization. From 2008 to 2009, home prices fell 12.7%. CoreLogic Chief Economist Mark Fleming said 2010 was a year of volatility with the expiration of the homebuyer tax credit.

“It was a bumpy ride which ended with a net gain/loss of zero. Despite the continued monthly decline in home prices and year-over-year depreciation, we’re encouraged that on an annual basis we’re unchanged relative to a year ago,” Fleming said. “Excess supply continues to drive prices downward, but the silver lining is that the rate of decline is decelerating.”

If you still have any equity in your home it is much easier to refinance to a better mortgage rate than if you are significantly underwater. If you would like to improve your mortgage situation contact us in the sidebar to see which programs apply to your family right away before housing prices slide further.

With the economy showing signs of life lately mortgage interest rates have slowly been creeping higher. While it is still possible to get a 30 year fixed government-backed mortgage at below 5% that window of opportunity may be closing quickly.

While rising interest rates will be met with rejoicing among savers and investors, they are not desirable to folks looking to refinance their mortgages or people who have adjustable rate mortgages now. If you have considered getting an estimate on a refinance to a lower interest rate contact us in the sidebar right away. We may be looking at the recent record low rates through the rear view mirror as soon as this Spring.

One of the foreclosure prevention ideas that has been kicking around Washington DC in recent years is the so-called “right to rent” plan. Basically, the idea is that the government could give the right to homeowners to rent their homes back from the bank after a foreclosure and thus not be evicted. We get the following from a recent Huffington Post article:

At the moment, though, it’s unclear whether or not a “right-to-rent” plan has enough support in Washington.

“While we continue to review this concept, we have found several challenges that we believe would limit this type of assistance from making any significant impact in the market,” David Stevens, Federal Housing Administration Commissioner, wrote in an email. “Although we are not currently pursuing this option, the Obama Administration continues to work toward reforming the housing finance system and the mortgage servicing system in a way that puts consumers first and helps keep more Americans in their homes.”

But while the right to rent idea doesn’t have much traction, several other programs are up in running. Contact us in the sidebar to learn about which programs best apply to your situation.

Homeowners over the age of 62 are eligible to look at a government-backed loan product called a reverse mortgage. There was a good article recently over at CNNmoney.com on the subject. Here are a few excerpts:

A reverse mortgage can be a good way for people 62 and older to turn their home equity into extra spending cash that can supplement Social Security and withdrawals from savings, making retirement more enjoyable than it otherwise might be.

Typically, you can take the loan proceeds in a lump sum, monthly payments for life, as a credit line or a combination of these.

One of the big appeals of this type of arrangement — as opposed to, say, tapping your home equity by refinancing or opening a home equity line of credit — is that you don’t have to repay the loan until you die or move out of your house.

Another plus is that the payments you receive from a reverse mortgage don’t affect your Social Security benefits (although they could affect your eligibility for programs like Medicaid and Supplemental Security Income, or SSI, the program that provides income to people with low incomes and disabilities)

Keep in mind that you need to have a decent amount of equity in your home to be a candidate for a reverse mortgage. If you would like to learn more about reverse mortgages just fill in the contact form on the right and one of our counselors with follow up with you.

There was an interesting story recently over at HousingWire reporting that two lenders — GMAC and Ocwen — have ramped up the number of principal write downs in this months. Here is a bit from that article:

Mortgage servicers began aggressively writing down the principal on delinquent nonagency mortgages and even second liens in January, analysts at JPMorgan Chase said in a report Wednesday, yet the amount of foreclosed properties continues to rise.

GMAC, the servicing arm of Ally Financial, stood out to analysts, who surveyed 433 deals in the nonagency space. In one security, GMAC liquidated 45 mortgages for a $3.2 million loss. At the same time, however, it modified nearly 1,200 of the loans that included $5.5 million in principal forgiveness.

“This is the first time we have seen large-scale principal forgiveness from GMAC,” JPMorgan analysts said. Outside of GMAC, however, principal forgiveness has been contained only in the subprime sector, but even those have occurred on a smaller scale to GMAC’s January numbers.

Ocwen Financial Corp. showed a push to charge-off second liens and low-balance first liens when it took over servicing for HomEq and Saxon Mortgage Services.

“I haven’t seen the report so I cannot comment specifically on it, but I can say that whenever we charge off second liens, it’s in accordance the governing PSAs (pooling and servicing agreements) and consistent with accepted industry practice,” Ocwen Executive Vice President Paul Koches told HousingWire.

…

While GMAC and Ocwen have shown that they’re ramping up writedown efforts, JPMorgan analysts said the effort is not seen industry wide.

“Bank servicers have not yet shown strong evidence of forgiveness,” analysts said.

Most lenders are loath to forgive principal for struggling homeowners. Lenders prefer to lower interest rates if they must do anything at all. That way the bank at least still has the right to collect the full amount lent. However, foreclosing on a property costs lenders more money than principal write-downs cost so in some cases the lenders go for that option. It is still rare but it appears it is becoming slightly less rare as of late.

Contact us in the sidebar for more information of this or other refinance programs.

After a rough couple of months at the end of 2010 where mortgage interest rates rose pretty consistently every week from early November until the end of the year, borrowers are starting to get a little relief in 2011. Over the first couple of week of 2011 interest rates have changed course and have been inching downward again. If you have been considering refinancing into a better mortgage now is still a good time while the government continues to do what it can to compress rates. Contact us in the sidebar to learn which programs apply to your situation.

There is a new program launching today in California designed to help unemployed homeowners avoid foreclosure. Here are some details from a recent article over at SFGate:

On Monday, more than two months behind schedule, the California Housing Finance Agency will begin taking applications for a federally funded program that will give some unemployed homeowners up to $18,000 each over six months to pay their mortgage.

To qualify, homeowners must meet income and other restrictions and their loan servicer must participate in the program. As of Friday, only three servicers had signed up, but CalHFA expects to have up to 10 by the end of this week.

The program is the first of four in California that will be financed by the Hardest Hit Fund, a $7.6 billion pot of money the Treasury Department is providing to 18 states with high unemployment rates or big drops in housing prices.

The Obama administration announced the fund in February but kept adding states and money to it throughout last year. California was one of the first states to qualify and stands to receive almost $2 billion, but has not yet launched a program.

Contact us in the sidebar to learn more about the programs that would best apply to your situation.

If you have a mortgage backed by Fannie Mae and are facing hardships, the folks at Fannie Mae have launched a new web site that is designed to educate borrowers on methods to avoid foreclosure. The instructional video is called WaysHome and the website is at www.knowyouroptions.com.

The folks over at HousingWire had this to say about the launch:

Fannie Mae’s new WaysHome interactive multimedia tool walks homeowners through options if they are struggling to pay the mortgage — even allowing them to select a character and be a part of an interactive video.

The WaysHome video is set in a neighborhood that has been hurt by the foreclosure crisis. Real actors play three residents of the neighborhood — each in financial distress. Homeowners select to play one of the residents and, as their stories unfold, make financial decisions for them and see how the consequences of these decisions play out. Fannie Mae provides tips, tools and links during the process and users have the ability to go back and revise their decisions. Most choices lead to an immediate consequence followed by a related teaching point.

WaysHome asks the homeowner input some basic information about his or her situation. For example, the homeowner is asked about whether they have short-term or long-term income issues, and whether they want to stay in the home or leave. It then provides some options that the homeowner should consider.

You can contact us in the sidebar for other questions or if your current loan is not backed by Fannie Mae.

As you might have heard already, mortgage interest rates have been slowly rising for a couple of months now. This is true for both government-backed mortgages and conventional mortgages. The good news is that rates were so low a couple of months ago that even after two months of increases, the average rates on 30 year fixed mortgages in the US were still in the 4′s as of last week. That is still a surprisingly low number.

People who have adjustable rate mortgages (ARMs) have also benefited from the low rates recently without even refinancing. Most people with ARMs have seen their payments drop over the last year. However, the problem with ARMs is that the higher overall rates get the higher their payments get. So while someone with an ARM might be enjoying paying something like 4% on their loan now, they could find themselves paying 6-10% on the same loan in the years to come if rates continue to rise.

If you have an adjustable rate mortgage now might be a good time to contact us to look into programs that will allow you to lock in a fixed rate below 5%. If current trends continue the opportunity to get a fixed rate that low could be passing quickly.

Contact us in the form in the sidebar to learn more.

After hitting shocking lows over the Fall of 2010 interest rates on government-backed loans have been slowly inching higher since then. Nevertheless rates on 30 year fixed loans are still currently in 4′s on average, in the high 3′s in some cases for 15 year mortgages, and even lower on some 5 year and 7 year ARMs. So if you have a mortgage with a rate in the 5′s or higher and plan to own your home for five of more years now is the time to look into locking in a lower interest rate. It is no secret that the rates are being artificially compressed by the Fed right now but sooner or later rates will go back up to more normal levels and the chance to lock in rates not seen in 50 years will pass for good.

December tends to be a really good month to get the ball rolling on a refinance because borrowers tend to procrastinate getting started due to the holidays. That leaves extra time for authorized lenders to help people who don’t procrastinate. So if you have a fixed interest rate at 5% or higher or an ARM that you would like to fix in, contact us in the sidebar right away to see about taking advantage of the government-backed mortgage refinance programs.

The holidays and government-backed mortgage lending have a rocky relationship. The problem is that even when authorized lenders are at full strength, completing a refinance normally takes about three weeks. But the holidays always cause additional delays. First there are all those actual holidays that reduce the number of business days in November and December. Add to that the extra time processors and underwriters normally take off and you are often looking at weeks added to the process of completing a mortgage transaction. For those reasons, if you were considering looking into refinancing your mortgage at the start of 2011 it would probably be wise to start your investigations now.

Further, some banks are holding off on foreclosures until January. When banks get back to foreclosing on homes at the start of 2011 that could further depress housing values throughout the country. That in turn could reduce the amount of equity you have in your home. In cases where the equity is tight already waiting too long could cause troubles.

So if you have been thinking about refinancing while rates are still near historic lows we recommend you get a jump on the post-holiday crowd and contact us in the sidebar right away. Our counselors can help you figure out which programs are available for your situation. Getting the ball rolling now could save you time and headaches in January.

Interest rates on government-backed mortgages are still near the recent historic lows. However they have been slowly inching higher for a few weeks now. The trend continued this last week with average rates moving slightly higher. If you have considered looking into a refinance the time to investigate is now before the record low interest rates go away for good. Contact us in the sidebar to learn which programs apply to you.