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Good Time To Refinance With Government Program

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September 15^th, 2009

 

John Jordan and his wife bought their house in 2004. When they attempted to refinance their mortgage for their Washington D.C. home, the appraisal of their home was too low. However, the new government refinance program eventually helped them to succeed in the refinance.

 

Appraisals normally determine and unlock the door to refinancing. The mortgage amount should not exceed the current value of the property. Troubled borrowers with an adjustable rate who are struggling to make their mortgage payments coupled with historic low interest rates have every interest to refinance.

 

What Has Changed?

 

The government’s Home Affordable Refinance program that was introduced early in 2009 allowed borrowers with a first mortgage as high as 105% of the current value of their home to refinance.

 

In July 2009, the government expanded the program to allow borrowers current on their payments with a first mortgage as high as 125% to refinance. In other words, borrowers with a first mortgage and experiencing ‘underwater’ of up to 25% maybe eligible for a refinance. In July 2009, we reported this updated change in our article: Obama Extends Mortgage Refinancing Program Raising New Limit To 125%

 

 

This is highly going to benefit communities such as Las Vegas that is severely ‘underwater’. Currently in Las Vegas, 2 out of 3 homeowners with a mortgage owe more than their homes are worth. For the entire nation, 4 to 5 million homeowners whose mortgages are owned by Fannie Mae or Freddie Mac maybe eligible for lowering their monthly payments, through the government’s Making Home Affordable program. For more information and details including eligibility of the program, please visit our Loan Modification and Refinance Guide.

 

The American Recovery and Reinvestment Act of 2009 has also extended refinance opportunities to borrowers with a government Federal Housing Administration (FHA) loan. Effective till the end of 2009, the revised single-family home limit ranging from $271,050 to $729,750 will allow FHA to insure loans on amounts up to 125% of the 2007 area median house prices.

 

In May 2009, the Helping Families Save Their Homes Act removed many obstacles and hurdles which made last year’s inefficient Hope For Homeowners Act program so difficult. It was introduced by the Bush Administration but due to its technical difficulties, many homeowners did not bother applying. The new revised bill is set to help and aid homeowners with a FHA or USDA rural housing loan to modify or refinance their loan.    

 

Today, the new updated loan limits of up to 125% will cover more underwater homeowners giving them the opportunity to refinance. Since the program will only benefit homeowners with a first mortgage, many homeowners with a second mortgage may be left out.

 

For those of you who have a loan under Fannie Mae or Freddie Mac, Marve Stockert, executive director of IAMP urges homeowners who currently have trouble selling their home to take advantage of the Home Affordable Refinance program as it may not come around again and is set to expire on June 10^th 2010.

 

Interest Rate Analysis

 

Today’s low interest rates have been the result of the U.S government purchasing of $775 billion worth of troubled mortgage-backed-securities from Fannie Mae, Freddie Mac and Ginnie Mae. The demand for these mortgage-backed-securities has dried up since world-wide investors who bought, got burnt from the many mortgage defaults experienced by U.S homeowners. If the U.S housing continued to rise positively with homeowners paying their mortgages, world-wide investors would have continued to buy these securities and reaped good returns. The continued demand for these mortgage-backed-securities will help lower interest rates. Unfortunately, many investors got burnt and the market for mortgage-backed-securities shrunk with no buyers.

 

In order to prevent interest rates from climbing back up thus hurting the U.S housing market including the economy, the U.S government stepped in to purchase these mortgage-backed-securities so as lower interest rates and prop up the housing sector and economy. As the government announced their slow down in purchasing these mortgage-backed-securities (MBS) towards the 1^st quarter of 2010, Wall Street analysts are forecasting that interest rates will not go any lower, may steady or may creep higher somewhere in 2010.

 

The Fed announced that they will stretch-out their goal of purchasing a total of 1.45 trillion mortgage-backed-securities or debt from Fannie Mae, Freddie Mac and Ginnie Mae by the end of first quarter of 2010.

 

 

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