Breaking News: The Federal Housing Agency has eased refinance standards under the Home Affordable Refinance Program (HARP) in order to help homeowners qualify for current low rates. The modification eliminates the cap of 125 percent loan-to-value ratio, removes the representations and warrants rule, and reduces some of the program fees. The program is directed at “responsible” homeowners that have a mortgage backed by Freddie Mac or Fannie Mae, and are current on loan payments, but are not able to take advantage of the low rates for refinance due to a loss of home equity.
The original HARP program was passed in 2009 under the Obama Administration and has been underwhelming. When passed, the program sought to bring relief to 5 million struggling homeowners with Fannie Mae or Freddie Mac backed loans, but only 894,000 have refinanced thus far. Part of the problem has been that banks are reluctant to fund loans over 105 percent LTV due to an assumed risk, in which banks assume liability for any mistakes during underwriting and must purchase back the loan from Freddie or Fannie. With the cancellation of this representations and warrants rule, it is hoped that banks will loosen lending standards.
This time around the program has lower standards, and is aiming to enable another one or two million refinances. With 11 million homeowners underwater, many analysts say that the action is not enough and the impact will be minimal. Other analysts suggest that there is little reason to think banks will relax lending standards further. Some are optimistic, stating that refinance to record low rates will free up money for families to spend in other places.
FBR analyst Paul Miller told the San Francisco Chronicle that Fannie and Freddie still have 22 to 23 million mortgages with an interest rate above 5 percent.
If you have any questions about the program specifics and want to learn more, give us a call at 805.543.LOAN. Use us as a free resource.
The Senate voted to reinstall elevated conforming loan limits on mortgages backed by the government (Freddie Mac and Fannie Mae), and the bill will now go to the House of Representatives for consideration. The high balance limit for San Luis Obispo County is 561,200, but had been elevated to 687,500 under the previous extension. Senators Johnny Isakson (R-Ga) and Robert Menendez (D-N.J.) introduced the extension after higher limits expired on September 30.
Foreclosure activity decreased year-over-year in the third quarter. There were 610,337 properties that filed for foreclosure from July through September, down 34 percent from last year. This number is expected to increase through the coming months.
Mortgage applications dropped 15 percent last week, with a 17 percent drop in refinance and a 9 percent drop in purchase. According to the Mortgage Bankers Association, purchase applications are the lowest they have been since 1996.
Central Coast Lending offers rates starting with a low of 3.750 percent (3.902 percent APR) for the 30-year fixed and 3.000 percent (3.271 percent APR) for the 15 year fixed.