The Obama plan would temporarily approve Fannie Mae and Freddie Mac to provide mortgage refinancing that they own or guarantee with loan-to-value ratios (LTV’s) of as much as 105% without appraising the property or requiring additional mortgage insurance.   That means that first and second mortgage loan balances can be 5% greater than the property’s appraised value.  This is good news for thousands of homeowners who recently found themselves upside-down with mortgage balances that exceeded that home values. Because of the lack of home equity, these homeowners were previously unable to qualify for traditional or FHA refinance loan.

Borrowers who don’t have mortgage insurance on their current home mortgages will not need it under the plan, Lockhart said.   Without new appraisals, the loan-to-value ratios could be far higher than 105%, masking the companies’ true risk, said Paul Miller, an analyst at FBR Capital Markets in Arlington, Virginia.   “They’re a public policy arm of the federal government right now,” Miller said of Fannie and Freddie. “They aren’t being run for profitability.”  

In a recent Washington Post article written by Kenneth Harney last weekend introducing new mortgage fee increases, for FHA loans and stricter down payment rules and higher credit score requirements from HUD, Fannie Mae and Freddie Mac as soon as April 1st.  According to the article, “Most major FHA mortgage lenders are already pricing in these higher fees, effectively raising costs to borrowers immediately and reducing the impact of housing stimulus efforts from Congress and the Obama administration.”

Falling FHA Mortgage Rates

The new FHA loan guidelines mean that even borrowers with good credit scores will be charged more for a mortgage loan unless they can make a down-payment of 30% or more.  Even someone with a 739 FICO -- once considered a platinum guarantee of the best rates available -- will get dinged with a quarter-point add-on.  Harney points out, fico scores in the upper 600s were deemed good enough for prime rate home financing just a couple of years ago. Now some borrowers with credit scores of 720 to 740 may not be enough to prevent an add-on fee to their FHA home loan, especially if they are buying a condominium or town home.

Potential home-buyers need to do all they can to increase their credit score and to accumulate enough funds for a more substantial down-payment, both moves which make good financial sense anyway.  But the best home loan solution is the basic FHA mortgage: Apply for an FHA loan, which requires a down-payment of just 3.5% and in most cases has lower credit score requirements.  FHA mortgage rates remain at record levels with national lenders reporting interest rates as low as 5.25% on 30-year fixed rate mortgages.

“In today’s weakened economy where access to credit is being restricted, we need to make home mortgages more available to households throughout the country, and especially in high-cost areas,” said Preston. “These new FHA loan limits will ensure HUD can to continue aid distressed homeowners with safer home refinancing featuring secure fixed rates from affordable government-insured loans that enable many first-time buyers take advantage of today’s buyers market”

FHA mortgage loan limits were increased recently back to 2008 FHA loan limits in high cost housing areas, too -- to a maximum of $729,750 in some areas. Visit the FHA website to check the FHA loan limits for your area.  This website enables consumers to look up the maximum FHA mortgage limits for your area or several areas, and then list them by state, county, or Metropolitan Statistical Area.

Hope for Homeowners is the widely discussed FHA refinance loan that requires lenders to reduce the principle mortgage balances down to 90% of today’s appraised value.

Fox Business New’s Rich Edson reports on Rep. Barney Frank’s work to overhaul the Hope for Homeowners program.  So far, this FHA loan program has been unsuccessful.  FHA lenders offering the H4H home refinancing product would have to reduce the mortgage balance to 10% below the current market value. 

Government eliminates some liability for mortgage lenders who participate in this FHA loan program design to minimize the foreclosure crisis with a loan modification type solution for struggling homeowners. 

FHA mortgage rates remain very attractive for borrowers who do not have much home equity left.  Qualifying for a home loan that is fixed for 30 years is still a great day for home financing.  FHA home loans enable borrowers with less than perfect credit qualify for home refinancing. Gone are the days of the zero down home loans that enable homeowners to consolidate credit card debt or take out a cash out second mortgage that homebuyers would have to quickly refinance. 

FHA continues to offer great 1^st time homebuyer programs with new home financing requiring only 3.5 percent down. FHA mortgage lenders remain optimistic that Hope for Homeowners may help some of their borrowers prevent foreclosure. Home financing guru, Jason Cardiff said, whether its FHA or a loan modification, homeowners need to get up and do something to stop foreclosure.  Cardiff continued, “Lenders are offering loan workouts like we’ve never seen before, so contact a mortgage lender to refinance or seek counsel from a law firm that has a good track record of loan modifications with your mortgage lender.”

Federal Rate Cut Lead to Lowest Mortgage Rates Ever

The Federal Reserve cut the federal funds interest rate on Tuesday The Fed cuts the benchmark interest rate to nearly zero, and CNBC’s Diana Olick said this might help lower mortgage rates. Susan Wachter, a professor of real estate, finance and city and regional planning at the Wharton School of the University of Pennsylvania, said cutting the interest rate will help change the housing market and move toward a bottom on housing prices, although it may take a while for banks to start originating much need mortgage loans. Olick added that to get those cheap rates, buyers must have impeccable credit and money to put down on the home loan.