Mortgage Market Update – Harp Expansion

Mortgage Market Update & HARP Expansion

This Week’s Mortgage Rates

Mortgage Market Update & HARP Expansion

Mortgage rates this week have changed slightly from last week’s rates. Freddie Mac said Thursday that the rate on the 30-year fixed mortgage fell to 4.10% from 4.11% last week. Three weeks ago, it dropped to 3.94 percent.

The average rate on the 15-year fixed mortgage was unchanged at 3.38 %. The rate for this loan it hit a record low of 3.26% three weeks ago.

Although overall rates have increased marginally from the record lows we’ve seen in the previous months, the numbers are still very attractive to potential homebuyers and those looking to refinance. Unfortunately high unemployment rates and depressed home values make qualifying for loans much more difficult.

This may not be the case for much longer.

Obama’s Refi Plan- The Saving Grace?

President Obama traveled out west this past Monday to unveil his revamped mortgage refinance plan for troubled homeowners. He delivered his speech in Las Vegas, Nevada, as Nevada is one of the states hit hardest by the housing market crash (along with Florida and California).

The Home Affordable Refinance Program (HARP) was created for homeowners with mortgages owned or backed by Fannie Mae or Freddie Mac, which accounts for about half of all U.S. mortgages.

The program has been modified to reach out to even more homeowners. Since the release of the initial program in 2009, only about 894,000 borrowers have taken advantage of HARP.

HARP currently allows borrowers to refinance up to 125% of their homes’ value. The new rules will remove that limit and allow homeowners who are current on their mortgages to refinance regardless of their value.

The program will be available to borrowers with mortgages currently owned or secured by Fannie Mae or Freddie Mac and originated before May 31, 2009. Borrowers will have the chance to refinance at a lower interest rate as long as they haven’t missed any mortgage payments in the past six months.

The specific details of the new regulations will be officially announced on November 15. According to the Federal Housing Finance Agency, it is estimated that the improved program introduces a variety of options that could double the number of mortgage refinances by the end of 2013.

Other attractive features of the program were highlighted in Obama’s speech. Fannie and Freddie plan to eliminate certain fees for borrowers who refinance into shorter-term mortgages. Because the upfront costs of refinancing may turn potential borrowers away, it is more likely that borrowers will be able to afford reduced fees.

And because the new program won’t rely heavily on the LTV for refinancing anymore, there won’t always be a need for a home appraisal in the loan process. This could cut refinancing costs since the appraisal is typically the borrower’s expense. In addition, skipping the appraisal altogether would certainly speed up the loan process.

Supporters of the program’s modifications believe that the benefits could certainly open the door to new opportunities that were previously unavailable to struggling homeowners.

Critics have far more questions and anticipate the program bringing about more consequences than rewards. For example, they believe that it could hurt the housing market in the long term by not allowing it to naturally hit rock bottom and begin recovering on its own.

Only time will tell the ultimate success of the program’s renovations and its impact on our damaged economy. According to President Obama, “these are important steps that will help more homeowners refinance at lower rates, save consumers money and help get folks spending again.”