What the End of the World Will Mean for Mortgage Rates 12-21-12

By Daniel Duffield

With the earth stuck in a limbo between the forces of nuclear winter and global warming, mortgage rates have decreased in four of the five popular loan programs. While the problems of the fiscal cliff remain to be solved, the United States must learn to cope with the ongoing firestorms brought on by the end of the world. However, despite this radical shift to post-apocalypse, homeowners will still be responsible for mortgage payments, and those who did not survive the devastation will find their homes foreclosed and credit badly damaged if they do not keep current on their monthly mortgage payments by wiring the funds from the great beyond. Thankfully, the government has created the HAARP program (Home Affordable Apocalypse Relief Program) for just such an occasion, although analysts expect few to qualify until the release of HAARP 2.0.

In terms of the conventional 30-year fixed-rate mortgage, interest rates dropped 0.01% worries that clouds of radioactive vapor hovering above the U.S. could turn innocent borrowers into mortgage zombies.

For the 15-year FRM, rates likewise declined 0.01% to 2.76%, likely as a result of increase homebuilder confidence with so many homes to rebuild.

The FHA 30-year FRM remained constant at 3.25%, stubbornly making no movement in mortgage rates despite the turbulent events of the end of the Mayan calendar.

Non-conforming conventional loans also saw a decline in mortgage rates, falling 0.01% to 3.62% even as the U.S. economy collapses and humanity reverts to tribalism and, in some regions, cannibalism.

In terms of adjustable-rate mortgages (ARM), rates have also fallen at an average of 0.01% to 3.01%, although with the apocalypse driving mortgage rates lower and lower, not many borrowers are expected to choose this repayment type over an FRM.

Borrowers who are currently floating should be careful of the radioactivity of the majority of the world’s water sources. Those looking to acquire a home mortgage or refinance should carefully evaluate the area to determine whether it is safe to leave the home and find a mortgage lender. Fun fact: mortgage lenders are immune to the effects of radiation, and thus borrowers will have no trouble finding lenders in the aftermath of the world’s end. However, as always it is important to take precautions to secure optimal interest rates by setting minimum and maximum limits, thereby locking in the best rates should rates rise like the rising empire of super-mutant ants or decline like the general direction of humanity from today until the end of chronicled time. We wish everyone good luck in the wasteland and a happy new year!

2013 Reverse Mortgage Loan Limit Extension

By Daniel Duffield

On December 6, 2012, the Department of Housing and Urban Development (HUD) released an extension of the reverse mortgage loan limit for the Home Equity Conversion Mortgage (HECM), the most common and safe reverse mortgage product available. Previously set to expire, this limit will remain at $625,500, rather than returning to the former limit of $417,000. With new this extension, the lending limit will remain active until December 31, 2013.

Essentially, this extension will benefit borrowers with homes valued above $417,000, who will be able to tap into a greater portion of their equity and to acquire more funds through their reverse mortgages. Since reverse mortgage eligibility can be contingent on the value of the home or the HUD maximum limits for reverse mortgages, borrowers living in homes with higher values than their local limits can benefit tremendously from this extension.

Following the mortgage market collapse, including the near complete extinction of jumbo reverse mortgages, also known as proprietary reverse mortgages, a vast majority of borrowers have acquired the HUD HECM reverse mortgage.

With current regulations in place, borrowers with exceptionally high home values will not receive more funding than borrowers with properties valued at the limit of $625,500. Basically, the federal government initiated this increased loan limit as a section of the American Recovery and Reinvestment Act of 2009, and consequently, reverse mortgage borrowers have access to greater amounts of funds for expenses such as medical bills, college tuition for grandchildren, etc.

For instance, a 70 year old borrower who owns a property valued at $650,000 would be able to acquire a reverse mortgage loan with a principal limit of $414,706. However, the same borrower would be able to obtain the same amount of funding with a property valued at $625,500 or even $1,500,000. Essentially, this constitutes the maximum benefit as assessed by the HUD Lending limit and greatly exceeds the limit under the previous guidelines, with borrowers only able to withdraw $276,471. With a difference of $138,235, borrowers will be able to acquire approximately a third more than previously obtainable.

Although not as beneficial for borrowers with properties valued between $417,000 and under $625,000, borrowers with homes within this range can still obtain additional funding. Moreover, this higher reverse mortgage loan limit increases eligibility for many borrowers, making this extension beneficial for all potential HECM borrowers with high-valued properties.

Questions to Ask HARP Lenders

HARP Lender Questions to Determine Lender-Specific HARP Requirements

By Daniel Duffield

When refinancing through the Home Affordable Refinance Program (HARP), many borrowers mistakenly believe that after being denied on a HARP 2.0 application, they simply do not meet the necessary qualifications; however, such is rarely the case. For HARP and many other loan programs, some lenders impose their own guidelines over the inherent restrictions of the program, making the loan somewhat safer to offer but also making it more difficult for borrowers to gain approval. To navigate these scenarios more effectively and potentially avoid wasting several weeks, HARP-eligible borrowers should always be prepared to ask lenders several questions prior to beginning the HARP 2.0 application.

First and Foremost – LTV

·         Before asking anything else, borrowers should pose this simple question to their lenders: “Do you include any restrictions on loan-to-value (LTV) when considering HARP refinance applications?”

One of the most common reasons for HARP application denial is due to borrower loan-to-value ratio (LTV). Although the update to HARP2.0 removed all loan-to-value restrictions, many lenders still create “overlays,” or unique restrictions, that cap eligible borrower LTV ratios at 125% or even as low as 105%. As a result, asking this question first can save borrowers a lot of effort and time potentially spent applying for a loan which they will automatically be disqualified for. By posing this question first, borrowers also convey to the lender that they have some degree of experience and that they understand what is needed to qualify. By finding out the lending organization’s policies for LTV first and foremost, borrowers will know whether or not it is worth applying through this lender.

Additional Questions for Additional Concerns

·         Would you be willing to offer a HARP refinance to borrowers with mortgages that you do not currently service?

While HARP guidelines have made it significantly easier for borrowers to secure HARP refinances from lenders who do not service their current mortgage, many banks still carry restrictions regarding whose loans they will service. As such, ensure that this is not the case by posing this question relatively soon when considering a lender.

·         What are your minimum credit score requirements for HARP applications?

While the HARP program inherently includes very little restrictions in terms of credit score, some lenders will only approve HARP refinances for borrowers with FICO scores exceeding 700 or even 720. If you are concerned that your credit score may not satisfy the lender’s requirement, do not hesitate to ask this question.

·         Do you have any restrictions on occupancy or property type?

For borrowers with more atypical, specific HARP refinances, pose this question to determine whether your circumstances satisfy the lender’s expectations. Particularly, borrowers should ask this question when refinancing properties other than primary residences such as second homes or investment properties, as many lenders enforce occupancy restrictions on HARP properties. Additionally, borrowers hoping to refinance a condo or townhouse should inquire about property restrictions, as some lenders prefer to only finance HARP loans on standard properties.

Shop Around

As with other loan programs, HARP borrowers should always shop around and consider several loan offers prior to making any commitments to a single lender or offer. Due to the varying requirements of the HARP program and unique lender-imposed guidelines, borrowers should take the time to find just the right lender to finance the loan, one offering reasonable loan terms at the lowest mortgage rates. To achieve this, borrowers can utilize online tools to find and compare lenders online.

For more information on a variety of mortgage topics, visit Lender411.com and take the first step toward a smart mortgage loan.

Bank of America Projected to Reach One Million HARP 2.0 Refinances in 2012

By Daniel Duffield

In 2012, Bank of American has already issued over 700,000 Home Affordable Refinance Program (HARP) refinances, and at a rate of approximately 100,000 HARP refinance per month, statistics for December are expected to reach the one million refinance milestone in terms of HARP 2.0.

Accordingly, Bank of American analysts have anticipated HARP 2.0 to be labeled a success for the upcoming first quarter of 2013.

Early in 2009, approximately 3.5 million borrowers were eligible to receive HARP 1.0 refinances. The Federal Housing Finance Agency (FHFA) recounted that 931,000 refinances occurred from the creation of the program to October 2011, with roughly 2.5 million borrowers eligible to secure a HARP 2.0 refinance.

Considering the borrowers who have already refinanced, the current population of eligible HARP borrowers amounts to approximately 2 million. If every eligible borrower applies for a HARP refinance, mortgage volumes could remain consistently high through December 31, 2013.

A minimum of 250,000 high credit borrowers with FICO scores that exceed 750 with a loan size greater than $175,000 are anticipated to refinance and be pursued by originators.

However, lower mortgage rates and aggressive lenders may result in a negative response from the remaining 1.7 million HARP-eligible borrowers.

According to analysts, “This is where we expect capacity growth to make its biggest dent.”

In addition, the date extension of HARP eligibility and the permission of securing more than one HARP loan will greatly expand exposure and potentially increase HARP eligibility by 500,000 borrowers for each addition.

For instance, extending the date allowed for HARP refinances to May 2010 would prospectively increase the amount of eligible borrowers to 2.5 million. Additionally, extending eligibility to May 2011 and May 2012 could potentially increase this to 3 million and 3.5 million eligible homeowners, respectively.

With the current rates being paid by these borrowers, roughly $3 billion dollars could be saved annually by these homeowners collectively if they refinanced to a 3.4% interest rate.

This constitutes the equivalent of increased payments from a 0.015% increase in mortgage rates on the current $5 trillion in outstanding mortgage backed securities.

Although, if these volumes begin to slow, debate may begin as to the effectiveness of the HARP 2.0 program.

According to the report, the risk of the current Acting Director of the FHFA Ed DeMarco being replaced could compound these negative prospects.

Despite this, the outcome remains uncertain and no predictions can be made with full confidence. Statistics demonstrate that the collective borrower savings can be surpassed by an increase in mortgage rates, caused by MBS expansion.

For more information on a broad range of mortgage topics, visit www.lender411.com/.