Looking at statistical data from the past week, close to 77% of mortgage applications consisted of refinancing. As reported by the Mortgage Bankers Association, this is the highest total since March 2nd.
Indeed, HARP 2.0 is intended to help many struggling homeowners take advantage of today’s historically low interest rates. To become eligible for the new HARP, a homeowner must have a mortgage sold to Fannie Mae or Freddie Mac on or before May 31, 2009. The homeowner must also be current in their payments and without any late payments in the past six months.
Additionally, some fees were also eliminated on loans that run 20 years or less and lowered on longer term mortgages. In some cases, the homeowner will also no longer need a new appraisal on the home, which should reduce the refinance costs.
Also note worthy is the fact that there is no limit on how deeply underwater someone can be as long as they re-finance into a 30 year fixed mortgage.
The new changes should not only benefit many homeowners, but should also help financial institutions become fewer homeowners will eventually default.
But one of the biggest factors that will drive the success of this new program will be interest rates. Today interest rates are hovering at historically low levels. For instance, the average rate for a 30 year mortgage today is 4.2%. If interest rates rise, however, this program may not be as attractive to many.
Unfortunately, however, the imbalance between refinancing and home buying will continue into the near future. Historically low rates have given people real options that they haven’t had in a quite some time. So whether your looking to refinance, enter into a short sale, or buy a new home, the experienced Real Estate Attorneys at Alvarez & Barbara, LLP can assist you today. Pick up the phone and call us today.
But with the good also comes the bad. It turns out that banks are actually tightening their lending standards because they are reluctant to expose themselves to potential defaults for minor profits. Furthermore, the issue of low profits affects the banks ability to unload the mortgage interest to potential investors.
Banks seem to have learned their lesson from the subprime loan debacle. By becoming cautious lenders, they avoid the potential risks inherent with foreclosure litigation, specifically time and money.
Breaking it down even further, the low rates coupled with new lender standards have the potential of hurting the economy even further. Why? Well put simply, those who can help turn around our economy are the ones being turned away by lenders. The average American buyer is the segment of America that might actually heal the industry.
On the flip side, but also adding to the market woes, the relatively high affordability of housing has prevented individuals from placing their homes on the market. This has a direct impact on inventory, which makes it less likely for a buyer to find his or her new home.