Tag Archives: refinance


Rising Prices Could Lift 3.5M Homeowners Out of Negative Equity

While almost one-quarter of homeowners remain underwater, rising home prices over the past year have some economists hopeful negative equity could begin to diminish in coming months.

“The negative equity problem is still crippling many homeowners and the wider economy,” Capital Economics stated in a report.

In addition to the almost one-fourth of homeowners who owe more on their mortgage loans than their homes are worth, almost half of homeowners do not meet the 80 percent loan-to-value ratio required for a standard refinancing.

While “[a]dmittedly, the recovery is still in its infancy,” Capital Economics sees the potential for 3.5 million homeowners to move out of negative equity positions over the next 12 months.

CoreLogic reports prices have risen 5 percent over the past 12 months, and Capital Economics reports the greatest movement is occurring in the same locations that experienced the greatest price declines and highest instances of foreclosures and negative equity during the housing crisis.

For example, about 40 percent of homeowners in Arizona and Florida are underwater. However, home prices have risen 18.7 percent and 6.3 percent, respectively, in these two states over the past year.

While Capital Economics is sticking to its prediction that house prices will rise about 5 percent next year, the economists admit “the upside risks to that forecast are clearly rising.”

So far this year, rising home prices have helped 1.3 million households rise out of negative equity, according to CoreLogic.

If home prices were to rise by 10 percent next year, about 3.5 million borrowers would be lifted out of negative equity and 6 million would become eligible for standard refinancing after seeing their loan-to-value ratios fall back to or below 80 percent.

“The faster prices rebound, the quicker the negative equity problem will be resolved,” Capital Economics stated.

With home prices still about 27 percent below their 2006 peak, 10 percent under-valued compared to current rental rates, and 20 percent under-valued compared to per capita incomes, Capital Economics sees no need for concern over another bubble as prices continue to rise.

By: Krista Franks Brock, DSNews


Three Refinancing Bills Propose Cutting Red Tape to Expand Eligibility

   

At a time when mortgage rates have hit record-low numbers, HUD Secretary Shaun Donovan stressed urgency in passing housing refinance bills on President Barack Obama’s “to-do” list for Congress.

During a teleconference Friday, which preceded Obama’s stop into Reno, Nevada, to boost support for the housing proposals, Donovan outlined the three bills, which he said were introduced to Congress that week.

The first bill, sponsored by Barbara Boxer (D-California) and Robert Menendez (D-New Jersey), looks to reduce the cost for refinancing, increase servicer competition, and streamline the refinancing process. The bill would also allow borrowers with a second lien or home equity line of credit to refinance.

The second bill, introduced by Diane Feinstein (D-California), proposes to expand eligibility for refinancing to non-GSE backed loans.

Donovan said there are about 3.5 million families who are doing the right thing, paying their bills, but have been locked out of refinancing because they have a private label security loan.

The third bill looks to rebuild equity into homes of underwater borrowers. Introduced by Jeff Merkley (D-Oregon), the bill would allow borrowers to refinance into shorter terms with lower interest rates and apply their savings to reduce their mortgage balance.

Donovan said the bills would save homeowners an average of $2,500 to $3,000 a year, and overall, will help families, the economy, and even taxpayers by preventing GSE-backed mortgages from defaulting.

By Esther Cho for DSNews


Mortgage-Related Jobs Are on the Rise: Report

The third quarter of 2011 saw a net increase of 2,738 mortgage-related jobs, according to recent industry data. This increase is the first recorded in five quarters.

The recent increase in refinances – encouraged by remarkably low interest rates – sparked a demand for loan originators and processors, while continuing high levels of delinquencies and foreclosures bolstered the need for servicing staff.

The third quarter saw 2,502 layoffs countered by 5,240 hirings, according to the Third-Quarter 2011 Mortgage Employment Index released by MortgageDaily.com.

The 2,738 gain compares to a net loss of 464 jobs in the previous quarter and a loss of 936 jobs a year ago.
JPMorgan Chase was a major source of the rise in hirings in the third quarter with 3,314 hirings of its own.
MetLife added 351 jobs, and CashCall Mortgage added 230.

Wells Fargo (-686), CoreLogic (-600), and Bank of America (-364) all lost jobs during the quarter.
California-based CoreLogic anticipates about 1,000 layoffs during the second half of 2011, according to MortgageDaily.com.

With an increase of 699 mortgage-related jobs, Texas posted the largest increase, and according to the index, “[t]he Dallas area has become a Mecca for mortgage servicers.”

Iowa, on the other hand, saw a decrease of 159 positions, largely due to Wells Fargo’s downsizing.
So far, the fourth quarter is seeing more hirings than layoffs.

This article is from DSnews.com.


Big Four Set to Participate in HARP 2.0

The industry’s four largest mortgage servicers all say they will be taking part in the revamped Home Affordable Refinance Program (HARP).

Bank of America, Chase, Citigroup, and Wells Fargo have each expressed their support of the program and the changes that will allow more underwater homeowners to refinance at today’s lower interest rates.
Government officials expect the program’s revisions – particularly the GSEs’ waiver on representations and warranties – to increase competition for mortgage refinancing.

An executive with JPMorgan Chase told the company’s investors this week that HARP 2.0 will facilitate “cross-servicing refinancing” because with the rep and warranty waiver, the new lender is not required to assume responsibility for underwriting deficiencies that may have occurred with the original loan.

Chase explains that HARP may be used to replace an adjustable-rate or interest-only loan with a standard fixed interest rate loan, and typically reduces the borrower’s monthly payment.

Frank Bisignano, CEO of mortgage banking at Chase, estimates that with the new HARP guidelines, thousands of Chase customers could lower their mortgage payments by an average of $2,500 a year.

Citi said in an emailed statement that it “supports the program and expects to participate.”
Wells Fargo, likewise, said in a statement that it “welcomes the addition of the new HARP features.”
Veronica Clemons, a spokesperson for Wells Fargo Home Mortgage, says the company is waiting for specific guidelines and requirements from Fannie Mae and Freddie Mac in order to put the changes into practice.

She adds that once the company’s mortgage servicing team has the guidelines in hand, “it will take us some time – depending on the complexity of the guidelines – to make the necessary systems changes to begin offering the new enhancements to our customers.”

The GSEs’ regulator, the Federal Housing Finance Agency (FHFA), says Fannie and Freddie plan to issue guidance with operational details about the HARP changes by November 15th.

“Since industry participation in HARP is not mandatory, implementation schedules will vary as individual lenders, mortgage insurers, and other market participants modify their processes,” FHFA said.

Bank of America says it will participate in the enhanced Home Affordable Refinance Program announced by the administration, and it expects the new guidelines and eligibility criteria to go into effect after December 1st.
“Despite ongoing economic challenges, nearly 90 percent of our customers remain current on their mortgage,” BofA spokesperson Rick Simon said. “HARP helps these homeowners who remain current on their mortgage with options to lower their monthly payment when, otherwise, conventional funding options are limited.”

The GSEs have removed the 125 percent loan-to-value (LTV) cap under the program. Now any borrower with an LTV ratio above 80 percent is eligible for a HARP refinance, as long as the loan was sold to Fannie or Freddie prior to May 31, 2009, and the borrower is not delinquent on their payments.

Since HARP was launched in 2009, nearly 900,000 loans have been refinanced through the program. Government officials estimate that an additional 1 million homeowners will receive assistance under the new guidelines.
In its announcement of the program changes, FHFA encouraged borrowers to “contact their existing lender or any other mortgage lender offering HARP refinances.”

Article from DSnews.com.


Administration Announces Refinance Program for Underwater Borrowers

It’s official. The Federal Housing Finance Agency (FHFA) unveiled a new, revamped government mortgage refinancing program Monday.

The initiative involves a series of rule changes to the Home Affordable Refinance Program (HARP) to allow more underwater homeowners to reduce their mortgage debt by taking advantage of today’s rock-bottom interest rates.
Mortgages backed by Fannie Mae and Freddie Mac, and originally sold to the GSEs on or before May 31, 2009 are eligible for the program.

Under the revised HARP guidelines, the 125 percent loan-to-value (LTV) ceiling has been eliminated. Previously, only borrowers who owed up to 25 percent more than their home was worth could participate in HARP. That limitation has now been removed. The program will continue to be available to borrowers with LTV ratios above 80 percent.

The new program enhancements address several other key aspects of HARP that industry participants say have restricted its impact, including eliminating certain risk-based fees for borrowers who refinance into shorter-term mortgages and lowering fees for other borrowers, as well as allowing mortgage insurers to automatically transfer coverage from the original loan to the new loan.

In addition, Fannie Mae and Freddie Mac have done away with the requirement for a new property appraisal where there is a reliable AVM (automated valuation model) estimate already provided by the GSEs, and they’ve agreed to waive certain representations and warranties on loans refinanced through the program.

Not only are loans eligible for HARP considered “seasoned loans,” but a refinance helps borrowers strengthen their household finances, reducing the risk they pose to the GSEs. Thus, FHFA feels reps and warranties are not necessary for some of these loans.

With Monday’s announcement, the end date for HARP has been extended from June 30, 2012 to December 31, 2013.
The GSEs will release program instructions to lenders by the middle of next month, and FHFA expects some lenders will be ready to accept applications by December 1.

Since HARP was rolled out in early 2009, approximately 1 million homeowners have refinanced their mortgage loans through the program. FHFA estimates that with the revised guidelines, another 1 million will be able to take advantage of the program.

To qualify, borrowers must be current on their mortgage payments, but government officials believe by opening HARP up to more homeowners with higher thresholds of negative equity, it will help to prevent foreclosures by erasing the primary motivation behind strategic defaults.

Economists at the University of Chicago Booth School of Business estimate that roughly 35 percent of mortgage defaults are strategic. Numerous industry studies have found that homeowners who owe significantly more than their home is worth are more likely to throw in the towel and walk away from their mortgage debt even if they have the ability to continue making their payments.

“We anticipate that the package of improvements being made to HARP will reduce the Enterprises credit risk, bring greater stability to mortgage markets, and reduce foreclosure risks,” FHFA stated in its announcement Monday.
Fannie Mae and Freddie Mac also released statements in response to the announcement.

Michael J. Williams, Fannie Mae’s president and CEO, called the program a “welcome development.”
“By removing some of the impediments to refinance, lenders can more easily participate in the program allowing more eligible homeowners to take advantage of the low interest rates,” Williams stated.

Charles E. Haldeman, Jr., CEO of Freddie Mac said, “These changes mark another step on the road to recovery for the nation’s housing market.”

Article is from DSnews.com.


Is Now the Best Time to Refinance Your Mortgage?

Some homeowners in their 50s are taking advantage of historic low rates to refinance their homes and score themselves a mortgage-free retirement.

Mark and Jan Sass, 55-year-olds who live in Cincinnati, Ohio, refinanced their home last week to lock in lower rates, Reuters reported. They switched from a 20-year fixed-rate loan of 4.875%, with 12 years remaining, to 10-year mortgage with a 3.5% rate.

“The opportunity to look 10 years out and know that – unless things change – we won’t have a mortgage when we retire looked like a smart decision,” Sass told the news agency.

A Refi surge

They aren’t alone. U.S. banks have seen a recent surge in loan applications that’s almost entirely due to refinancing, Greg McBride, senior financial analyst at Bankrate.com, told DailyFinance.

Mortgage applications for the week of Aug. 5 rose more than 21% over the previous week and three quarters of those applications were for were for refinancing, according to the Mortgage Bankers Association, also known as MBA.

“Over the past month, refinance application volume has increased by 63%,” Mike Fratantoni, MBA’s vice president of research and economics, said in a statement. “Refinance applications for jumbo loans increased by almost 75% relative to last week. Despite these low mortgage rates, applications for home purchase have remained little changed through the summer.”

According to a Bankrate.com survey released Thursday, the average 15-year fixed rate for a mortgage reset is 3.61%, while 30-year fixed-rate mortgages average out at slightly less than 4.5%. The jumbo 30-year fixed rate set a new record of 5.02%, the Bankrate.com survey found.

Should You Refinance?

So with all the chatter about low interest rates, is refinancing right for you? To answer that question — or to pick the right mortgage for a refinancing deal — homeowners should consider their home equity, credit history, time horizon, age and cash flow.

See the full story at DailyFinance.