Mortgage News

President Obama announced a plan to ease eligibility rules for home owners who want to refinance to take advantage of ultra-low rates and lower their home loan payments. The administration hopes that by broadening its requirements for the Home Affordable Program that about 1 million home owners will now be able to qualify. Here are more details about the newly announced changes to the program:

• What is HARP? It’s a program started in 2009 that allows home owners to refinance their home loans at lower rates without having to meet the typical requirement of having at least 20 percent of equity in their home to do so. Under current guidelines, many underwater borrowers have been ineligible for the program because their home values had to be no more than 25 percent below what they owed their lender.
• What’s changing? Many of the extra fees to participate in the program have been waived, and home owners’ eligibility won’t be contingent on how far their home’s value has fallen. 
• Who’s eligible? Home owners with loans backed by Fannie Mae or Freddie Mac can participate. Home owners must also be current on their present home loan. 
• When will it take effect? The changes could take effect by Dec. 1. HARP also is being extended through 2013 to allow more home owners the opportunity to qualify.
• How successful will this be? The administration hopes that by home owners being able to lower their monthly payments they’ll be more likely to stay current on their home loan and avoid foreclosure. Also, the administration hopes that it will then free up household money to start spending more on other things, which could provide an overall boost to the economy. However, the administration says it realizes that aiding the housing market requires much more than a refinancing plan. 

Sources: Fannie Mae, Associated Press and Reuters.  Want to know if your loan is eligible to be refinanced under this plan? We can help you by finding out if your home is backed by Fannie Mae or Freddie Mac and analyzing other aspects of your eligibility. Just contact us.

With low home prices and ultra-low rates, the housing market is offering “perhaps the best deals of a generation,” notes a recent article by Bloomberg Businessweek. Since the housing boom of 2006, home prices have fallen about 31 percent. Also, rates have been hovering at record lows for the past few weeks. “It’s hard to see the possibility of losing on a home purchase right now, with these rates,” says economist Dean Baker. “Prices may go lower, but not by much.” The article notes the following scenario: Buying a $300,000 home with a 4 percent rate and a 20 percent down payment would mean a $1,145 monthly payment. The Mortgage Bankers Association recently predicted that home prices may fall another 3.5 percent by mid-2012 but rates will increase by a half-point. So for that same loan under that scenario, a home would sell for $289,000 while the monthly payment would be $1,171–only a $26 difference. For those who can qualify for a home loan , "playing the waiting game" won’t result in much gain, Nariman Behravesh, chief economist at IHS in Englewood, Colo., told Bloomberg Businessweek. Source: Bloomberg Businessweek

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