New Changes to the HARP Loan Program Means More People Getting Much-Needed Help

Watch on your mobile device >>

The announcement made recently by the Federal Housing Finance Agency about proposed changes to the Home Affordable Refinance Program (HARP) could mean that many more homeowners will get much-needed assistance during this difficult economic time.  Homeowners that are underwater have traditionally turned to HARP loans to help them refinance their homes, being able to keep them rather than losing them to foreclosure.  Here are the main differences between the old and the new programs and how they will potentially affect homeowners going through times of strife.

No More Glass Ceiling for HARP

With the old program there was a limit to how much borrowers could borrow with respect to thehome’s loan to value.  This posed a problem for many people that owed far more on the home than it was valued – given the steep decline in housing values during the past two or more years. 

New changes to the program will allow homeowners to refinance no matter how foregone the situation is with respect to more money owed on a property than its market value.  The elimination of the 125 LTV ceiling for fixed-rate Fannie Mae or Freddie Mac backed mortgages is by far the most impactful proposed change to the program.  This change will quite possibly help millions of people avoid undergoing foreclosure. 

Fewer Fees or Better Yet, No Fees For Some

As per the current HARP loan process, risk-based fees are assessed and applied to loans to protect the lender.  Considering borrowers’ credit profile, the lower the credit scores, the higher loan to value and that translates to greater risk to the lender.  Fees that are traditionally associated with this risk are a huge burden for buyers.

With the expected new HARP guidelines there will be no more risk-based fees for homeowners that refinance their home into short-term mortgages and fewer fees for others.


No Longer A Need For a Property Appraisal

The cost of getting an appraisal done on a home can get quite expensive and adds up when you factor in all the other costs of getting into a new home.  Most home purchases entail having an appraisal done on the home – at the buyer’s expense. 

The changes that are looking to be implemented soon for people seeking assistance through HARP will include eliminating the requirement of a new property appraisal.  The only thing that buyers need to be wary of is that there must be a reputable AVM estimate in lieu of the appraisal.

The Absence of Warranties That Put Lenders In a Stronghold
Lenders are at a huge risk when borrowers default on their loans and as a protective measure Fannie Mae and Freddie Mac guarantee those loans but not without a long list of warranties that protect the creditor.  At present, refinance loans that have these warranties or stipulations on them cause lenders to comb through each application very carefully before considering an approval.

With the proposed changes taking place, the warranties will be waived, reducing secondary exposure to lenders of buying back the loan in case of default or even indication of default.  The change will make it far easier for homeowners to obtain the refinance loan they seek to help get them out from underwater. 

More Time For Homeowners to Get Afloat

The HARP loan program began in April of 2009 and after an extension in March of this year (2011) the deadline was extended to June 30, 2012.

According to the list of projected enhancements to the program, the program’s deadline will be extended to December 31, 2013 – giving more homeowners more time to avail this opportunity.

~
Now that the new proposed changes have taken effect, there are a few important points to remember. First, not only does the HARP loan apply only to homeowners that have a mortgage owned by Freddie Mac or Fannie Mae, the mortgage being refinanced must have been obtained on or before May 31, 2009.  Second, this applies only to homeowners who have not previously refinanced their home.

It is also important to note that these are projected changes – and they can change at any time contingent upon policy at Fannie Mae and Freddie Mac.

Staying On Top of Mortgage Interest Rates

Watch on your mobile device >>

With all the changes going on in the real estate industry – almost on a daily basis – it makes perfect sense to want to stay ahead of the game and know what the interest rates are doing on the market.  One way is to search online, where countless generic interest rate calculators will tell you nothing more than a range that you can go by.  But if you want a more accurate reading, one of the best-known industry secrets is to use the ten-year Treasury bond as a gauge.  By tracking the ten-year Treasury note, you get an insider’s view of how interest rates are moving.

How Do You Calculate the Current Interest Rate?

The formula is very simple.  Determine what the ten-year bond is at – and simply add two hundred basis points to that number to find out the current interest rate.  So for example, if the ten-year note were at 200 basis points, then you would add 200 more to get to 400 – which translates to a 4% interest rate.  When you notice the bond going up – you can safely assume that so will interest rates.  Conversely, when the ten-year bond note goes down, the same thing will likely happen with interest rates.

What Other Factors Affect Interest Rates?

Keep in mind that while this is a great way to stay on top of interest rates, it does not translate to the exact rate you might receive on a loan.  Other factors that determine what the interest rate will be include things like the borrower’s credit score and profile, the amount of down payment put on the house, the type of loan (FHA, conventional, other) and also the loan to value. The price of mortgage bonds, of course, indicates interest level activity as well. On a general level, interest rates are also largely determined by the unemployment outlook as well as consumer confidence.

How Does This Benefit Most People?

One of the best things about knowing where things seem to be headed is of course if there are any questions about the interest rates you may see advertised you can confirm actual rates with this tool.  If you see something that does not look right or need better accuracy, this is the way to go to base where the market needs to be.  It is important not to consider the ten-year bond price – rather it is the yield that indicates interest rate levels.
~
This technique is ideal for almost anyone. Consumers, buyers, sellers, Realtors and financial planners – all utilize the ten-year Treasury bond as a measuring tool to be able to gauge in advance how the market might be performing in terms of interest rates.

Savvy Mortgage Shopping –Three Key Questions To Ask Lenders

Watch on your mobile device >>

For many potential homeowners looking to buy a home, especially in today’s market, once they find themselves sitting in front of their loan officer they have no idea what to ask.  Oftentimes they succumb to whatever is told to them rather than realize that they should inquire in great detail about the products and services available.

To help homebuyers obtain the best mortgage possible in the market today where there are a host of options being offered to consumers, here are three very essential questions to ask.  Being prepared will yield excellent results, a great interest rate and a mortgage that will most likely be tailored to meet your specific situation and needs.

What Types Of Loans Are Being Offered?

Believe it or not, despite the tight mortgage lending practices the industry is going through nowadays, the mortgage lending industry is very busy.  With more than several options offered to most clients it is essential that homebuyers know what their choices are.  It is important to ask whether the lender is offering an FHA or conventional loan; is the application for a jumbo loan or is it an Adjustable Rate Mortgage (ARM)?  There is also the possibility that there is an interest-only mortgage on the table.  All these options will result in different interest rates directly impacting your monthly, annual and overall bottom line.

How Much Will It Cost To Borrow From This Lender?

Lender fees are a major component when it comes to comparing one lender to the next.  Borrowers should ask up front what it would cost to borrow the amount they are considering for the home purchase.  When all aspects of the loan are factored in, including the appraisal fee, credit report fee, documentation and recording fees, application processing and other miscellaneous fees – what is the total amount?  If the lending fees seem exorbitant then it may be a good idea to shop around for at least a few other quotes on the same amount and same product type for an accurate comparison.

Are You Paying Discount Points To Get a Low Rate?

Many homebuyers that are lured by super low interest rates but have not read the fine print end up being shortchanged in terms of overall value of the loan.  Where lending fees and initial costs may cost several thousand dollars for a rate of 3.5% for example, you may be paying more than you need to in order to obtain that low rate.  It is very important to ask the lender if you are paying discount points in exchange for the low rate you are getting on the mortgage.  If that is the case, once again it is a good idea to shop for more options.

~
The best move any prospective homebuyer can make is to be prepared with as much knowledge as possible.  It is important to obtain that information from reputable sources rather than relying on questionable sources.  Talk to preferred lenders that have worked with others in your social and professional circles.  Engage in conversations with industry experts.  Research quality sources online to find out what is happening in the mortgage industry at present.  The more you know about the process, the less chance there will be that you will miss out on the best opportunities out there!

Images provided by http://www.freedigitalphotos.net/images/view_photog.php?photogid=2023