Mortgage buyer, Freddie Mac, announced that FHA rates dropped to 4.98% from 5.03 % a week earlier. The interest rate drop was just short of the record low 4.96 % touched the week of January 15th. Bloomberg reported that the average U.S. rate on a thirty-year fixed mortgage fell this week as the Federal Reserve announced it would double purchases of mortgage debt as part of its effort to lower rates and lure homebuyers to the market.
The Federal Reserve announced yesterday that it plans to buy up to $300 billion of Treasuries and increase purchases of mortgage-backed bonds. Falling real estate and stock prices, record home-loan defaults and job losses have cut demand for new and existing homes in the U.S. The nation’s jobless rate rose to 8.1 % in February as employers reduced payrolls by 651,000, according to the Labor Department.
Home loan delinquencies jumped to a seasonally adjusted 7.88 % of all loans in the fourth quarter, the highest in records going back to 1972, the Mortgage Bankers Association said March 5th home loans in foreclosure rose to 3.30 %, also an all-time high.
FHA home loans will be the only opportunity for non-prime refinancing, but even the FHA loan guidelines are tighter in 2009.HUD requires 2 full URAR appraisals for FHA cash out refinance loans that exceeds 85% loan to value.Borrowers can still use FHA loans for cash refinancing up to 95%, but two appraisals slows the process down and increases the closing costs as well.Many FHA lenders are reporting minimum credit score requirements implemented for higher risk FHA home mortgages.FHA mortgage rates for purchase or refinance are being reported with fixed rates as low as 4.5% on thirty year home mortgages.
Metro Housing of Flint is a non-profit agency. If you’re about to refinance, they suggest waiting until Wednesday before locking in your mortgage rates. “It’s going to be an impact day, and you’re going to see the interest rates hover and loan officers remain excited because of the significant amounts opportunity for home refinancing. It’s going to be a big day,” Crews predicted. If you have bad credit, or if your mortgage balance is greater than what your house is actually worth, qualifying for a refinance loan will be impossible.Mortgage rates are low, but lending guidelines are tighter than ever.Mortgage refinancing can be tricky, but not impossible. “Every time there’s a strategy. What happens is we don’t want to do the strategy, and we want to do it now, but we have to take the steps and get there,” Crews advised.
To ease the confusion, Metro Housing is offering free seminars titled “Know Your Loan, Save Your Home.”“We need to know what your rates are. We need to be able to look at your credit, and what the recapture period is. Then we can figure out what products can get you back to a safe place,” Crews explained.If mortgage rates drop again on Wednesday, there’s no way of knowing just how long they will remain that low. Metro Housing’s best advice is to get your act together now, before you miss your opportunity and it’s too late.“Know your mortgage. If you don’t take action, it will pass you by,” Crews said.
Why the Fed Meeting Matters so Much… Former Dallas Fed President Gerald O’Driscoll talks about what to expect from the next Federal Reserve meeting.
It becomes more and more evident that the government wants homeowners to be able keep their primary residence homes and weather the storms. Clearly they will need more cooperation from the mortgage lenders and investors that hold the FHA mortgage rates continue to benefit from Fed interest rate cuts.
How will Fed Rate Cut Help Homeowners with Mortgage Rates for Refinancing?
Furthermore, Bernanke said that the interest rates borrowers pay under the program could be reduced from the current level of about 8%, which remains so high because it is hard to find buyers for FHA loan backed securities. To fund the rate reductions, he said, Treasury could buy up mortgage-loan securities bundled by government-sponsored loan securitizer Ginnie Mae, or Congress could choose to subsidize the rate.Bernanke also announced that would support putting borrowers into home mortgages they could afford over the long haul.Industry sources said Wednesday that Treasury is contemplating a plan to buy mortgage-backed securities to reduce 30-year fixed mortgage rates down to 4.5% from their current 5.5% level, but it appears this plan might be aimed at helping new homeowners, not distressed borrowers seeking mortgage relief from FHA home refinancing.He also recommended a plan that would have the government share the cost if the loan servicer reduces the borrower’s monthly payment. Current government initiatives have encouraged servicers to lower borrowers’ payments, but the plans have offered little incentive to do so. Bernanke said this approach would increase the incentive, which would “improve the prospects for sustainability.”
The US Federal Reserve finally reduced its target for a key mortgage rate by half a point to 1.5%. The Fed cut interest rates in response to the deflated stock market and declining home values across the United States. The rate reduction for federal funds rate came simultaneously with interest rate cuts by other central banks as financial markets plummeted around the world amid the panic regarding the global mortgage melt-down.”According to mortgage banker, Jeff Moran, “It’s still unclear how the Fed cut will affect the FHA mortgage rates for refinancing.”Moran continued, “As long a home values are decreasing, you can expect the Federal Reserve will be actively lowering mortgage rates in an effort to hold off foreclosures.
The Federal Reserve released a joint statement by central banks stating they had been in “continuous close consultation” throughout the current financial crisis and “cooperated in unprecedented joint actions such as the provision of liquidity to reduce strains in financial markets”.“The recent intensification of the financial crisis has augmented the downside risks to growth and thus has diminished further the upside risks to price stability,” the statement said.“Some easing of global monetary conditions is therefore warranted. FHA mortgage refinance applications rose slightly last week so the activity does hint at some revival.
The Housing Wire reports that the Standard & Poor’s Ratings Services lowered Fannie and Freddie’s preferred stock rating to ‘BBB-’ from ‘A-,’ while cutting a host of other ratings as well, and warning that further cuts may be coming in the future. The ratings agency said it cut the ratings over “increasing uncertainty about whether government support will extend to these securities in the context of further deterioration” in each GSE’s assets. It further reports that it’s becoming clear that holding preferred interests in either GSE is going to be hazardous to Q3 earnings.
Shares of the two mortgage financing giants each hit a new 52-week-low. They’ve lost more than a fifth of their value on Wednesday as fears mounted that the companies will soon need government support. Regional banks and insurers hold the majority of Fannie and Freddie’s $36 billion in preferred stock, and any bailout would hang these stockholders out to dry. Many financing experts wonder why Fannie and Freddie have not moved to a insured home loan platform like FHA. The government has backed FHA home loans and FHASecure for fixed rate refinancing and foreclosure prevention
Dow components Bank of America (BAC, Fortune 500) fell nearly 4% while Citigroup (C, Fortune 500) was down 2.5%. Wachovia’s (WB, Fortune 500) stock fell 7%. And shares of the investment bank Lehman Brothers (LEH, Fortune 500), which is facing its own concerns about the need for more capital, plunged 9%.“There’s a big negative feedback loop and there’s no way out of it,” Friedman, Billings, Ramsey & Co. analyst Paul Miller said in an interview. “As the stock falls more and more, it’s more likely the government steps in and more likely equity holders get wiped out.”
It’s looking more and more like the government bailout of Fannie Mae and Freddie Mac will become the taxpayers’ burden. JP Morgan Chase & Co.’s CEO, Jamie Dimon said in a Q2 earnings call that prime mortgages looked “terrible.” This is an indicator that it’s not just sub-prime mortgages with bad credit that are going sour. Even with all of the loan modifications, the home foreclosures are not stopping.
Fannie Mae has reported a loss for the past two quarters while Freddie Mac has posted three consecutive quarterly losses. Both companies are expected to report a loss in the second quarter as well.Fannie Mae’s chief executive sought to reassure investors that no bailout is imminent. They haven’t offered anything and we haven’t asked for anything,” Fannie Mae CEO Daniel Mudd said in a public radio interview Wednesday morning. “I don’t anticipate that they will do that.”
Armando Falcon, who served for six years as Fannie and Freddie’s chief government regulator, expects a full-fledged government takeover before year-end. The companies’ financial picture is far worse than they have acknowledged, he said, particularly for riskier mortgage loans they purchased as investments.
With FHA, cash out refinancing is available to 95%. FHA streamline refinance loans, rate and term refinancing and home purchase loans are available to 97.5% loan to value.
Refinance and Avoid a Foreclosure
Don't ignore the letters from your lender Contact your lender immediately.
Contact a HUD-approved Housing Counseling Agency
