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Dec
11

Weekly Mortgage Rate Forecast

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This time of year rates typically don’t change much for most home purchase and mortgage refinance programs in the U.S. With that being said, it is an election year and the “fiscal cliff” does not help an already weak economy on the brink of another double-dip recession.

As we reported last week, the pricing worsened slightly for most home loan programs as the unemployment fell nationally. The weekly mortgage rates forecast looks to remain about the same. According to the Mortgage Marketing Guide, “the Bond markets have been pressed down today with positive economic news from Germany and as the Treasury is selling a significant amount of government notes and bonds this week.”

Look for pricing opportunities possibly on Wednesday as the Federal Reserve members meet for the last Federal Open Market Committee meeting of the year. The Fed will release their monetary policy statement at 12:30 pm ET on Wednesday, so this could move interest rates.

In other financial news, Freddie Mac (FMCC) announced yesterday that  home purchase and refinance rates should remain near record lows through the first half of 2013. The Freddie Mac spokesman also mentioned that home loan rates could increase in the second half of 2013, but should remain below the four percent threshold.

We suggest, checking back with us later in this week for pricing changes and current mortgage rates that could prove to be more favorable for millions of American consumers looking to save money with record low interest rates.

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Many people have a distorted view on FHA home mortgages and first time home-buyer loan programs. One of the common misperceptions on FHA financing is that the loan programs are only for new home buyers and borrowers with low incomes. It is true that the Federal Housing Administration was formed with the intention of extending credit to all types of people fairly, but there is no minimum or maximum income requirement. However, when underwriting these government loans, the FHA mortgage lenders consider the borrower’s entire profile; rather than just a credit score or bank reserves. It’s no secret that the Department of Housing and Urban Development takes more risks on people with poor credit scores under many of the FHA loan programs.

  1. Low Down-Payment Home Loans
  2. Competitive Interest Rates for Buying a House
  3. Reduced and No Cost Mortgage Opportunities
  4. Flexible Credit Guidelines with 500 Minimum Credit Scores
  5. No Pre-Payment Penalties for Refinancing

Although FHA lenders do make exceptions on some borrowers to spend up to and even over 50% of their gross monthly income on their combined monthly debts, we prefer to keep this ratio at or below 43%. However, the automated underwriting system often approves borrowers for home loan payments that are above their comfort zone, because new homeowners often start spending more money. Buying new furniture and making home repairs can result in increased expenses.

Maybe the most notable downside to loans insured by the FHA is that they require both an upfront mortgage insurance premium and then monthly insurance payments on top of that. Unfortunately in some cases these premiums have become twice as high as the private mortgage insurance offered on conventional mortgages. The rise in FHA insurance rates can be directly attributed to the increase in loan defaults and depleted reserves under the FHA loan programs.

However with a minor down-payment of only 3.5%, lenders continue to match first time home buyers with FHA loans. According to VIP branch manager, Pat O’Connell, “You can’t forget that FHA has given millions of Americans the ability to become a homeowner with their flexible purchase mortgages.” O’Connell continued, “Many people use FHA home loans like training for new homeowners because the borrowers will often only keep the loan until they have enough equity to shed the mortgage insurance or they will refinance into a loan with lower housing expenses derived from reduced mortgage insurance premiums.”

It appears that FHA will be hiking insurance premiums once again in 2013, so it this could limit the loan origination from some FHA lenders, but as the purchase market roars back with affordable housing options, you can bet that FHA will be ready to extend first time home buyers loans to those in need.

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Over the last six years, most of the country has reported negative equity from declining home sales and foreclosures. Most homeowners find themselves stuck with an upside down mortgage because their balance owed is more than the property is worth. Millions of applicants have been turned down for refinancing because they have an “underwater mortgage”, until this new program hits the streets.

Will the Government Shut Off the Aid to Borrowers that Need a No Equity Refinance?

There have been many government loan programs that have attempted to help distressed borrowers with underwater refinancing but very few have succeeded. The FHASecure, Hope for Homeowners, EHLP, HAMP, Fannie Mae Du Refi-Plus and the Home Affordable Refinance Program all provided a program to refinance underwater mortgages, but very few loans were closed when it was all said and done. On paper, these relief plans all looked great, but when the lenders and insurance companies read the fine print of these programs they were turned off. They offered a path to achieve a low fixed interest rate with loan to values ranging from 105 to 125% but lenders never felt comfortable originating the underwater mortgage programs mostly because the risk was too great. These federal programs neglected to solve the risk factors most refinance lenders were simply not willing to take.

Finally the Federal Government, Fannie Mae, Freddie Mac and FHA came together to overcome the obstacles that lenders and insurance companies had and they rolled out several solutions for distressed borrowers to actually achieve an underwater mortgage refinance. With home values going up and down like a row boat drifting out to sea with hurricane swells, it became clear that a 125% cap on loan to value ratios was not enough nationally. In many regions like Arizona, California, Nevada, Florida, Georgia New Jersey, Maryland and Virginia, loan to values greatly exceeded the 125% threshold. We saw reports of upside down mortgages at 200 and 300% loan to value in some hard-hit regions. So the only way to overcome the negative equity dilemma was to completely scrap the ratio between loan balance and property value. The other issue was the “lender risk”, so the Federal Agencies agreed to minimize the risk so that loan companies and banks would participate in the underwater refinance programs. The HARP 2.0 was born with loan to value limits and limited liabilities for HARP lenders.

1. Are you eligible for no equity refinancing from one of the government sponsored entities like Fannie Mae or Freddie Mac? You may have an upside down mortgage, but your lien must be owned or serviced by Fannie Mae(FNMA) or Freddie Mac(FMCC) and have been closed prior to June 1, 2009.

2. Verify with Fannie Mae whether your 1st loan online is owned by them > Fannie Mae Loan Look Up

3. Check to see if Freddie Mac owns your mortgage > See if Freddie Own Your Home Loan

4. Verify if you meet the 80% minimum loan to value criteria under the HARP 2.0 guidelines

5. Are you below the 45% maximum debt to income ratio limit?

According to a KBW Research report, over than 1.6 million homeowner have closed on a HARP refinance loan to date, of which 618,217 refinances took place in 2012. The reality is that the pool of qualified HARP applicants is shrinking significantly. Many consumers bought homes in the U.S. after the “May 31, 2009” cut-off that Fannie and Freddie require for refinancing under the HARP umbrella. That means that there are tens of millions who have an underwater mortgage but do not meet HARP requirements to refinance.

Looking forward at Obama’s second term, many finance analysts believe that the Obama Administration will have more liberty to take their mandate and force the issue of the Federal government’s role in housing and how it relates to the home finance industry. Only time will tell, but to Obama’s second term may lead to HARP 3 and the federal mandate that banks write-down mortgages to current values. Of course these are very controversial topics that you can expect to see fighting on the Hill as the Republican led Congress and the Democratic led Senate make these issues political.

 

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Some good news for distressed homeowners that were hit by Hurricane Sandy is that the government sponsored agencies, Fannie Mae and Freddie Mac have committed to offering mortgage relief . Unfortunately thousands of families will be forced to deal with the devastation of Sandy.  According to a Reuters report thousands of homes in Delaware, New Jersey and New York have been severely damaged or destroyed by the hurricane this week.

Both Fannie Mae and Freddie Mac have been pretty good about extending mortgage relief to borrowers that have been hit by natural disasters like Hurricane Sandy. If you have been struck by the disaster may be eligible for a temporary break on their mortgage payments from Fannie Mae (FNMA) 0.00% and Freddie Mac (FMCC) 0.00%.

Both Fannie and Freddie confirmed Tuesday that home loans companies that collect payments for them can extend relief to homeowners that were directly affected by the storm. According to the Wall Street Journal, the “mortgage aid will come in the form of a forbearance plan, which allows homeowners to delay payment on some or part of the loan, but the amount is still owed.”

Fannie Mae Relief: In addition, Fannie Mae announced that mortgages servicers cans temporarily suspend or reduce a homeowner’s mortgage payments for up to 90 days without reaching the homeowner. After that, homeowners may get additional aid, typically for up to a year. “We understand the disruption that a storm such as Sandy can have on people’s lives, and we’ve made it easy for our servicers to offer relief to those who need it,” said Leslie Peeler, senior vice president of Fannie’s loan servicing operations.

Look for Fannie Mae Announcements- When a major disaster like Hurricane Sandy hits home it can have adverse effects either the property value of properties and can significantly hinder the borrower’s ability to make their loan payments on time or for a period. Fannie Mae will be issue special announcements, lender letters and Notices with updates in regards to temporary relief policies in conjunction with Hurricane Sandy. To reach Fannie Mae, visit their website in regards to Fannie mortgage help for disaster victims or call 1-800-732-6643.

Freddie Mac Relief: Freddie Mac, meanwhile, said homeowners can receive a break on payments for up to a year. The company also said it encourages loan servicing companies to suspend foreclosures and evictions on borrowers for up to 12 months, waiving fees and not reporting delinquencies caused by the disaster to credit bureaus.

Call Freddie Mac at 1-800-373-3343, or read Freddie Mac’s disaster relief policies.

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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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The U.S. economy has been fighting to escape the recession and the housing crisis has emerged as the National focus. Meanwhile the Obama Administration, the Federal Reserve and the entire mortgage industry have joined forces with record low refinance rates and aggressive home loan programs. Can these creative financial minds put an end to the unstable housing sector? Only time will tell, but we are giving these entities an “A” for effort.

This will be Remembered as the Era for Record Low Rate Mortgage Refinancing

The Mortgage Bankers Association announced earlier this month that 2012 has seen the lowest rates for mortgage refinancing since they have been keeping records.

The time for securing the best rate from a refinance loan has never been more right than today. Qualifying for these record low interest rates has been a challenge for many who have seen their incomes and credit scores fall in recent years.

The following refinance loans below have emerged as the leading refinance solutions in America at a time when finances are more important  than ever. The stakes are high for refinancing because many homeowners have an opportunity to save thousands of dollars a year.

1. HARP Refinance – The guidelines for the Home Affordable Refinance have seen drastic changes in 2012. Just try and stop these underwater borrowers from refinancing. Fannie Mae and Freddie Mac made the “loan to value” stipulations disappear for the first time ever.

2. FHA Streamline Refinance –The Federal Housing Administration nearly copied the refinance guidelines from Fannie and Freddie when the altered the home equity requirements to become a non-factor. No appraisal is needed now for existing FHA customers that seek to lower their interest rate through the streamline program. Another reason why the streamline has become so popular is that it is one of the few loans that do not require income documentation. Refinance lenders simply verify the borrower’s employment rather than examining their W2’s, pay-stubs and tax returns for income like most loans require.

3. Bad Credit Refinance –  The average credit score has plummeted in the last few years causing the demand for refinancing with bad credit to soar. Fortunately, Nationwide has become a subprime leader for refinancing. The VA continues to have no minimum credit score for borrowers seeking a refinance and FHA is only asking for a minimum credit score of 500.

4. Cash Out Refinance – With interest rates shattering record once again in 2012 it should come as no surprise that homeowners have been looking to get refinance and get cash out.  FHA allows cash back on 85% LTV refinancing and VA approved military borrowers to get cash back at 90% LTV. Conventional lenders have been requiring 80% LTV for borrowers that want money back and homeowners who are blessed with 20% home equity in their property continue to tap it because money is so cheap. Imagine how much money people are saving who are consolidating 20% credit card debt into a mortgage below 4 percent.

5. 30-Year Fixed Mortgage Refinance – With fixed 30-year rates available at 3.5% (APR 3.67%)  it makes sense that homeowners would migrate towards the most secure and affordable loan of all-time. With many refinance lenders easing the guidelines for the 30-year mortgage it has become a natural progression for new homeowners to refinance when the rates fall and the guidelines improve.

By now, most consumers understand that mortgage refinance loans cannot be this attractive forever. Expect to see interest rates jump when the housing crisis is visible in the rear-view mirror or if defaults begin to mount again. At the end of the day 2012 will be remembered for high unemployment and historic interest rate opportunities for mortgage refinance loans.

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If you are a first time home buyer considering jumping into the market next year, you will likely consider FHA home loans.

Getting approved for home financing has become challenging for most Americans so we decided to explore why FHA has become so popular with first time home buyers.  The Federal Housing Administration was created by the U.S. government during the Great Depression in an effort to promote home ownership across the country.

Since then more than half of first time home buyers have chosen FHA mortgages for many reasons. Over the last 20 years, FHA has dominated the market for first time home buyer loans.

1. Borrowers only need a 3.5% down-payment to purchase a home compared to 10 to 20% needed for traditional loans from private lenders.

2. FHA interest rates are as low as any interest rates in the land helping to ensure that purchase mortgage financingis affordable.

3.  There is no penalty for home refinancing or early pay-off.

4.  Americans also like FHA because they are lenient with their credit guidelines. Consumers with a range of credit scores can get financing at the same interest rate regardless of their credit. This government program encourages lenders to offer a home loan for bad credit if the borrower can demonstrate significant compensating factors like solid money in savings or the ability to to make a larger down-payment.

5.  FHA makes refinancing easy with flexible guidelines that do not require as much equity as private home loan lenders. People can refinance easily with only 3.5% equity because the loan to value guidelines permit refinancing up to 96.5%.

6.  FHA even allows you to get cash out and refinance debt up to 85% loan to value.

7.  FHA even offers the streamline refinance in case the interest rates fall after a new home buyer gets a mortgage.

We anticipate that FHA will remain popular in 2012 but if HUD continues to raise the mortgage insurance rates we predict their will be a backlash against government financing. Many finance executives believe that private money lenders will roll out some aggressive home loan programs in 2012 and 2013 and that could erode the FHA market-share as well.

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