The Home Affordable Refinance Program has now been sweeping the Nation, or should I say parts of California, Arizona, Florida, and Nevada for just over a month. HARP II as it is referred to, is the brain child of the President. Never in history has such a program existed. Allow those homeowners with a Fannie or Freddie guaranteed loans, which have been making payments on time, to refinance to a lower interest rate, regardless of how much they owe. Fantastic idea! The problem, Fannie and Freddie do not make loans directly to the public. There is not a Fannie or Freddie “retail” presence. Loans need to be originated by mortgage lenders, and mortgage lenders need to participate in the program for it to work; although they can simply choose not to.
Who wants to willingly take on the responsibility of originating a new mortgage that is greater than the value on the property which is being used as collateral (without an appraisal in most situations)? Some of the risks have been diminished by Fannie and Freddie, but there is still risk. So, if you do have to take back a loan, you now own, for example a $200,000 mortgage and the property (collateral) has a “stated” value of $100,000. That would be considered by most as a bad business decision. Unfortunately for most home owners, the majority of mortgage lenders have taken this stance.
Most of the “Big Banks” and large mortgage servicers do not offer HARP II, and if they do it is offered at excessive costs and with many restrictions. Geneva Financial, LLC is a relatively small community mortgage bank that has lending relationships with over 50 investors; including all the BIG banks that are still in the mortgage business. Of those 50 or so investors, about a dozen offer HARP II at some level. Of those that offer HARP II, only 2 or 3 offer HARP II will little or no lender “overlays.” What that means is that hundreds of thousands of loans are going through a few lending channels. The process is a slow one at best. Ultimately, the good news is that people that are upside-down and been paying higher than market interest rates, can now refinance and in many cases, drastically lower their mortgage payment. It just takes some patience.
HARP II is also changing. The few lenders that do offer HARP II, without notice have changed not only guidelines, but rates; mostly to slow loan submissions. But the GSEs are also making changes. Both Fannie Mae and Freddie Mac have manipulated their automated underwriting engines since the HARP II release, just over a month ago. There will likely be more changes ahead of us. If you currently are in the HARP II refinance process, be patience. It may be a slow process, but we will get it down.
HARP II RECAP
- Appraisal requirements vary based automated underwriting findings. Most do not require an appraisal.
- High rate of approvals on Fannie and Freddie loans; although Freddie loans are slightly more challenging.
- Maximum Loan to Value: Unlimited. Value is not an issue.
- Maximum Combined Loan to Value: Unlimited
- Occupancy: Owner Occupied, Non Owner (Investment Properties) & 2nd Homes allowed.
- Loan must be guaranteed by Fannie Mae or Freddie Mac.
- If there is a 2nd mortgage, 2nd mortgage lender must agree to subordinate.
- Loan must have been originated and delivered prior to June 1st, 2009.
- No cap on number of financed properties.
- Income documentation is required, although it may be limited based on automated underwriting findings.
- Rates are great, but there are some pricing adjustments due to loan to value, credit, occupancy etc
If you have an FHA mortgage that was funded prior to June 1st, 2009, you will be able to lower your interest rate and save money.
Over the last several years, while interest rates have been on a rapid decline, mortgage insurance on FHA loans has been increasing. Due to the increasing mortgage insurance costs on FHA loans, many home owners with FHA financing have been unable to capitalize on the historically low interest rates. That will finally change in June.
On June 11th, 2012, FHA will be lowering the Up-Front MIP to 0.01%, and the Annual (Monthly) MIP to .55%.
Nearly everyone that has a FHA loan that was funded prior to June 1st, 2009 will be able to lower their interest rate, with little or no closing costs, and no appraisal. This applies to owner occupied and non-owner occupied properties.
INTEREST RATES LIKELY TO SPIKE SOON
Interest rates have been at historic lows for some time now. The FED will be winding down “Operation Twist” in June. “Operation Twist” was a program created by the Federal Reserve to buy mortgage backed securities to “artificially” drive down the long term interest rates. As the market and the economy stabilize, interest rates will rise.
FHA DELAYS COLLECTION RULING
“The Federal Housing Administration rescinded and will delay a rule that as of April 1 prohibited borrowers with more than $1,000 in disputed collections accounts from getting a federally backed mortgage, according to a notice sent late Friday. FHA postponed the rule until July, and will take public comment from lenders, builders and others in the industry until then to clarify guidance.” (housingwire.com)
FANNIE MAE REBOUND
“Mortgage backer Fannie Mae reported the best quarterly results since the housing bubble burst five years ago, saying it did not need additional billions in tax funds for the quarter and that it believes losses on past mortgages peaked at the end of last year. The company also reported just enough profit in the three months ended March 31 to cover its latest payment to the Treasury Department, and predicted better profits ahead. Fannie attributed the better results to a slowing in the decline in home prices, a drop in its inventory of foreclosed homes and better sale prices for the foreclosed homes it sold.” (cnnfn.com)
RATE WATCH
MORTGAGE TYPE
APR
30 YEAR FIXED
3.500%
3.543%
15 YEAR FIXED
2.750%2.826%
5/1 ARM
2.375%2.765%
Interest rates as of 05/09/2012. Conforming interest rates. Interest rates and APR based on loan amounts not to exceed $417,000. Loan to values not to exceed 80%. 720+ credit score. Owner occupied only. Purchase and rate in term refinances. Not all applicants will qualify. Call today for your individual scenario rate quote. Published rates do not apply to HARP programs.
Chris Tiller
Home Smart - Realtor10601 N. Hayden Rd. Suite I-100
Scottsdale, AZ 85260
Office: 602.733.5643
Cell: 602.561.1346
Fax: 1-888-292-0678
ctiller@hsmove.com
http://tillersreupdate.blogspot.com/
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