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Low Mortgage Rates and More Aggressive Home Loan Programs for 2013 and 2014

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All signs are pointing towards affordable housing with low interest rates over the next few years regardless of who gets elected to be the next President of the United States.  Just last month the Federal Reserve committed to QE3 and further backing on mortgages which will enhance secondary markets. Money has been cheap for the last few years in the residential financing arena and with the economy sputtering along with an anemic 1.3% GDP, we anticipate low rates for home loans and refinancing at least for the foreseeable future.

Can Rates on Home Loans Stay Low Forever? The short-answer is “No”, but with a double dip recession looming and an eager Federal Reserve not afraid to increase cash flow by printing more money, the record-low rates could stretch out for a few more years.

Can Interest Rates Drop Even Further? “Yes”, it is hard to believe but we could actually see the fixed 30-year mortgage fall below 3% for the first time in history this year. The fixed 15-year mortgage could fall below 2.5% and home improvement loan rates may fall to 3% as well.

If the bond market responds positively to the poor results in the economy, lower rates are possible in 2013 and beyond. If Romney is elected, we may see the Dodd-Frank laws vanish and that would certainly ease the requirements on mortgage lenders. This would like bring down the lending costs significantly and we may see no cost mortgage refinancing with even lower interest rates. Many pundits in the media have speculated that Romney may eliminate the “mortgage interest deduction”, but I find it hard to imagine anyone stripping away such a popular deduction that would affect so many “middle class” Americans. Romney has made it clear that he want to   the housing sector to rebound quicker than it has been so the mortgage interest deduction certainly appears to be safe for now.

The HARP program has certainly helped thousands of underwater homeowners get into a mortgage with a lower interest rate. If HARP 3.0 is expanded to borrowers that do not have loans owned by Fannie Mae (FNMA) or Freddie Mac (FMCC), we will likely see the biggest surge in home refinancing of our lifetime, because millions of consumers that were previously not eligible for the first two HARP programs will have a new opportunity to refinance their upside down mortgages regardless of how much negative equity they may have incurred.

Some of the looming questions that could adversely affect the mortgage industry; Will the Federal Housing Administration continue to extend financing to borrowers with low credit scores?, Will FHA raise down-payment requirements from 3.5% to 10%? Will Fannie and Freddie return to the form 5-years ago when they were buying risky mortgages with little or no income documentation?

Only time will tell, but the executives at Nationwide are hopeful that 2013 will be a strong year for origination and the housing sector in general. My God bless America with Affordable Housing in the year to come.

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2 Comments

1

I was wondering which candidate for president would be better for the housing industry? It seems like Obama was able to get rates really low and that’s great but I think we are more in debt as country because of all the bad loans the government bought. I’m also not comfortable with how the Fed has just been printing money, but would Romney be any better? I’m interested in your opinion Mr. Dornan.

2

I am underwater and current on mortgage. I tried to re-finance but could not because my loan originated after May 31, 2009. Do you think Harp 3 would include these loans? My home loan is backed by freddiemac. I had a resent permanent reduction in income and it is becoming more diffucult in making payments. What are the terms for a HARP refinance loan today?

Thanks
Don

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