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December 3, 2009

Economy: Why NOW May Be A Good Time To Refinance A Mortgage

Why Now May Be a Good Time to Consider Refinancing a Mortgage

By JENNIFER SARANOW SCHULTZ

 

With mortgage rates hitting record lows, it may be time to think about refinancing.

The rate on a 30-year fixed mortgage with no points hit 5.01 this week, slightly up from 5 percent last week but down from 5.97 percent this time last year, and the 15-year fixed mortgage rate hit 4.46 percent, compared with 4.47 percent last week, according to the latest data released Wednesday from Bankrate.com. These rates are at, or close to, the lowest levels since the company’s tracking began in 1985.

At the same time, the Mortgage Bankers Association said interest rates on the 30-year fixed-rate mortgages it tracks fell for a sixth straight week, remaining below the 5 percent level, “widely viewed as a psychological tipping point” according to this article.

The record lows are thanks to a combination of the Federal Reserve showing no inclination to raise short-term interest rates and investors and foreign central banks maintaining a healthy appetite for debt issued or guaranteed by the United States government, said Greg McBride, Bankrate.com’s senior financial analyst. And they come as many homeowners are finding themselves owing more than their house is worth and are having trouble making mortgage payments.

There is also a limited-time government program that helps people to refinance if they are slightly underwater. The “Home Affordable Refinance Program” is not as widely discussed as the related loan modification program. And it has been criticized by some housing experts for helping financial players profit. Still, it aims to help homeowners who have a mortgage balance equal to or greater than the value of their home refinance and obtain more affordable monthly mortgage payments.

The program is available until June of next year to homeowners who meet certain qualifications, including having loans owned or guaranteed by Fannie Mae or Freddie Mac and having a first mortgage that does not exceed 125 percent of the current market value of the home. (See if you qualify and find out how to apply if you do here).

With the risk that rates may not stay this low for long and that the government program will end, “there is a window of opportunity” for refinancing that will not be available for long, Mr. McBride said. He recommended that those who think they may not qualify for the program to double check what their home is worth to confirm this. Then, even if you don’t ultimately qualify, he suggested considering trying to refinance anyway if you are paying a higher rate on a fixed-rate mortgage or have an adjustable-rate mortgage.

“Today’s record low mortgage rates represent an opportunity for homeowners to refinance at lower fixed rates or to trade out of an adjustable rate mortgage before an inevitable increase in rates and lock in permanent payment affordability,” he said.

Are you considering refinancing in this environment? Why or why not? If so, what kinds of problems and hurdles, if any, have you run into trying to refinance? (Find more information about mortgages here and more information about loan modifications here).

Original link: http://bucks.blogs.nytimes.com/2009/12/02/why-now-may-be-a-good-time-to-consider-refinancing-a-mortgage/

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February 22, 2009

President Obama’s Housing Plan Will STEADY The Market For All of Us

happy house President Obama proposed a housing plan last Wednesday that will help to start clearing a path that will end the foreclosure crisis we’re in.  It’s not perfect but it’s a GOOD start!

Yes, it will help some people who don’t “deserve” to be helped, just as the bank bailouts have helped Wall Street executives – none of whom deserved to be helped. Let us be reasonable, realistic and rational – there is NO perfect solution to this huge problem.  If you ask 100 of the greatest economic minds to come up with a solution for this crisis you will get 100 different answers that will each have merits and flaws.  

The ninety percent of us who were not naïve or fooled by the smooth-talk and blarney of greedy mortgage brokers under normal circumstances would never be asked to bail out the 10 percent that needs it — but these are not normal times.  If we don’t help those who are destitute right away we will all be pulled into a deep dark hole that none of us will be able to get out of anytime soon.  This is our choice plain and simple; help those who need help or continue to bitch, moan and do nothing and see our economy plunge to depths that will make today seem like the good times. Stopping the cycle of foreclosures is critical and is the only thing that will slow our country’s downward economic spiral and help the markets.

President Obama’s Housing Plan will help people who got plain-vanilla conforming mortgages and who have never fallen seriously behind on their monthly payments. They will most likely qualify to refinance at lower guaranteed interest rates — even if they owe as much as their house is worth.

It will also help people who have subprime mortgages or exotic loans, such as pay-option adjustable rate mortgages.  These folks might qualify to keep their current loans but will have them modified to make the payments more affordable.

The mortgage modifications in the plan include three essential elements that will bring us stability and help homeowners who have one home that they are living in. These mortgage modifications will only apply to the existing loans that have caused all the trouble we’re in.   These modifications will not apply to loans made in the future and will therefore not hurt the mortgage market.

The first element will help homeowners currently at risk of foreclosure. It would provide cash incentives to lenders in exchange for modifying a loan until the borrower can comfortably pay it. Lenders would receive the incentive for modifying the loan before it becomes delinquent.

The second element is for homeowners who are still making their mortgage payments on time but can’t refinance because they don’t have enough equity in their homes and owe more than their homes are worth. If a homeowner’s mortgage is held or guaranteed by Fannie Mae or Freddie Mac (which 2/3 are) the homeowner would be guaranteed a lower interest rate and allowed to refinance.

The third element allows Fannie Mae and Freddie Mac to expand their mortgage lending by pledging an additional $200 billion in government capital. Since private lenders are still refusing to make mortgage loans, it makes sense for the government to encourage Fannie Mae and Freddie Mac to lend and start the credit wheels rolling again.

The Obama administration is wisely taking advantage of the government’s new ownership of Fannie Mae and Freddie Mac by putting the two entities to work for the people of America. 

At the same time the Obama administration is offering aid to responsible homeowners who might be infuriated with the idea of helping “irresponsible” homeowners.  Our fellow citizens who read the fine print and made smart fiscal decisions by purchasing homes they could afford but were whacked by the housing bust will benefit from lower interest rates and other resources. This is the administration’s way of acknowledging that they see and hear the frustration of the masses and will extend a hand with some assistance to the responsible ninety percent.

The very capable and intelligent Shaun Donovan, Secretary of Housing and Urban Development believes that by doing all these things they will be able to stop most of the out of control foreclosure, stop property value from depreciating while simultaneously increasing property value across the nation by approximately $6,000.  This would be great since we’ve only seen housing prices decline these past two year.  Yeah for some growth!

President Obama still has to get some of these vital proposals through Congress. Republicans and financial service lobbyists has already declared a ferocious opposition to the proposal to change the bankruptcy law that would allow judges to modify distressed homeowners’ mortgages.

Now is not the time for selfishness – think of your fellow citizens in places like Nevada, Florida and California where foreclosures have reached a critical mass. In these and other states foreclosed properties are driving down the value of homes in communities, property taxes are not being paid, streets are not be cleaned, garbage not being picked up and teachers, police and fire men are being laid off.

It is predicted that if something isn’t done now, there could be as much as 8 million foreclosures over the next four years.

Americans are ready to move forward and start the healing of America.  Since President Obama announced his plan on Wednesday, mortgage lenders have already reported a dramatic increase in the number of calls from homeowners who want to refinance. LendingTree.com has said that refinancing volume shot up 88 percent over the previous week because of Obama’s plan.

The plan may not be perfect but it is a step in the right direction and will stop the foreclosure roller coaster and help credit to start flowing again.

What’s good for the people is usually not good for politics.  Let us do what’s good for the people and get beyond party politics, principles and philosophies so we can get stability in our financial markets. WE need stability, stability and more stability now.  Let us think more about WE as a nation and less of ME as an individual as WE go through this time of national crisis.

America is still the greatest country in the world, let’s work together and keep it that way!

 

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