New Refinance Program Probably Won’t Mean Much

Last updated on January 9th, 2018


During President Obama’s speech to the nation last week, he mentioned that the White House would be working with the federal housing agencies to help more homeowners refinance their mortgages at today’s low rates.

And on Friday, the Federal Housing Finance Agency (FHFA) released a statement, noting that it “has been reevaluating an existing program, the Home Affordable Refinance Program (HARP), to determine if there are ways to extend the benefits of this refinance product to more borrowers.”

Currently, in order to be eligible for a HARP refinance, a borrower must have a mortgage owned or guaranteed by Fannie Mae or Freddie Mac, be current on mortgage payments, and have a first mortgage that does not exceed 125 percent loan-to-value.

That last bit seems to be the issue at hand, as there are scores of borrowers who meet the first two guidelines, but not the third.

To give you an idea, 85 percent of the Miami and Orlando MSAs were underwater as of last year, with average LTV’s of 150% and 140%, respectively.

In Riverside, California, the average LTV was around 164 percent last year, and has probably worsened since then.

So pretty much all of the hardest-hit borrowers haven’t been eligible for HARP.

LTV Ceiling Lifted?

Under the new refinancing plan, the LTV ceiling would be lifted or possibly removed, allowing these types of borrowers to refinance to take advantage of the record low mortgage rates currently available.

But it’s very likely that you would still need to be current on mortgage payments to qualify.

And while the new proposal sounds decent in theory, many of these borrowers have been grappling with a lack of home equity for years now.

So if they were going to walk away, they probably would have by now. Or they would have at least missed a payment or two.

If payments are lowered for the select few who have stuck it through, but are deeply underwater, they’re still left holding onto a house worth much less than the mortgage.

How much better off will someone be paying $200 less per month on a $300,000 mortgage worth just $150,000?

Even if it does make a big difference, the program still banks on mortgage rates remaining low and home prices reversing course in a major way, as it doesn’t address principal forgiveness.

Targeting the Wrong Group?

Then there are the homeowners with mortgages not backed by Fannie and Freddie, which while far fewer in number, account for a huge chunk of the problem loans.

A few years back, former FHFA director James B. Lockhart noted that these private-label securities accounted for 62 percent of all seriously delinquent mortgages, and thus, were the root of the problem.

These have yet to be addressed on a large scale, and probably won’t be, aside from on a case-by-case basis.

And so there may be some economic stimulus associated with this program (more money in some pockets), but it certainly won’t be a silver bullet.

Perhaps only time will sort things out, as impatient as we are.

Concrete details of the program should emerge later this month…

Read more: Can I refinance with negative equity?

About the Author: Colin Robertson

Before creating this blog, Colin worked as an account executive for a wholesale mortgage lender in Los Angeles. He has been writing passionately about mortgages for 15 years.


New Petition Urges Mortgage Re-HARPing

Well, file this one under “was bound to happen,” or, “was only a matter of time.”

A clever guy by the name of Marcus J. from Clementon, New Jersey has created an online petition to eliminate the securitization cut-off date for HARP eligibility.

At the moment, this ever-important cut-off date is May 31, 2009, meaning if your mortgage was sold to Fannie Mae or Freddie Mac after that date, you’re not eligible for a HARP refinance.

Unfortunately, many homeowners already refinanced their mortgages under HARP, perhaps when it wasn’t as attractive as it is now, seeing that there is a much more flexible HARP 2 nowadays.

At the same time, mortgage rates have marched lower and lower since HARP was originally unveiled, again, likely frustrating homeowners who refinanced early on.

There are also the many people who purchased homes after that cut-off date, who are now underwater and likely seeking a HARP refinance.

Eliminate HARP Cut-Off Date?

The petition essentially calls for the elimination of the cut-off date, which Marcus J. refers to as “arbitrary,” along with the one-time HARP limit. This would allow for so-called “reHARPing.”

He argues that removing these roadblocks would permit millions of Americans to refinance their mortgages to lower rates, thus saving thousands on their monthly mortgage payments over time.

Note: You can reHARP a Fannie Mae loan that was refinanced under HARP from March to May 2009.

Interestingly, he isn’t the first to propose such an idea. Back in May 2012, U.S. Senators Robert Menendez (D-NJ) and Barbara Boxer (D-CA) proposed extending the cut-off date an additional year to May 31, 2010.

That seemed to fall on deaf ears, so it’s unlikely a complete removal of this key date will be approved.

As much as it sounds like a good idea (maybe), it’s a bit of a slippery slope. If you remove the date, borrowers could just refinance over and over until they saw fit, assuming rates continued to fall.

And this isn’t a traditional refinance program – it’s essentially a loss mitigation tool for distressed borrowers, or those at risk of walking away.

A line has to be drawn somewhere, otherwise it would become something of a free-for-all.

Does the cut-off date deserve a second look? Absolutely; the FHFA should dissect the data to determine if extending it will provide a net benefit.

But removing the date entirely might be a bit extreme.

When it comes down to it, timing can be your best friend or your worst enemy, and we can’t rely on the government to extend the program every time rates drop, especially when there’s not even a refinance program for non-agency mortgages.

Ironically enough, you can blame the government for creating this situation, seeing that they simultaneously worked to push mortgage rates lower and lower long after HARP was released.

Petition Needs 25,000 Signatures


It will certainly be interesting to see if the petition receives the necessary 25,000 votes to at least “get a look.”

It’s currently available for online signature over at, which is the official website to have your voice heard.

At the moment, it only has 26 signatures, so an additional 24,974 are needed by February 8th, 2013 in order for an official review and response from the Obama administration.

Additionally, it needs at least 150 signatures to be publicly searchable on the website, meaning it’s got zero visibility right now.

If you’re interested, you can sign here.

(photo: Feral78)

About the Author: Colin Robertson

Before creating this blog, Colin worked as an account executive for a wholesale mortgage lender in Los Angeles. He has been writing passionately about mortgages for 15 years.


Mass Mortgage Refinancing Plan: Obama’s Ace In the Hole

Last updated on January 25th, 2018

We’ve heard talk of mass refinancing plans for years now, but nothing has quite delivered.

Sure, the Home Affordable Refinance Program (HARP) was recently expanded to allow just about any homeowner to refinance, regardless of negative equity issues.

But since it was announced in late October, I haven’t heard too much about it. Perhaps because it’s voluntary for mortgage lenders and still comes with cumbersome underwriting requirements?

Now there’s word of a “true mass refinance program,” one that allows pretty much anyone to refinance to today’s super low mortgage rates with few, if any restrictions.

A blog post written by James Pethokoukis that appeared on the American Enterprise Institute website yesterday is grabbing some serious headlines at the moment regarding the supposed plan.

In short, it suggests that Obama is looking to replace the current FHFA director with one of his own, which will allow the President to implement such a program. Just in time for election season too (not that I want to get political about this).

And because the FHFA oversees both Fannie Mae and Freddie Mac, anyone with a mortgage guaranteed by the pair, which is most homeowners, will be able to participate.

How the Mass Mortgage Refinancing Plan Would Work

Apparently it would be modeled after a plan originally thought up by Columbia University economists Glenn Hubbard and Christopher Mayer.

Every homeowner with a Fannie/Freddie backed mortgage would be eligible to refinance their existing first mortgage to a fixed rate of 4% or less.

The only requirement would be that the homeowner is current on their mortgage, or that they become so for a minimum of three months.

Even those with FHA loans and VA loans would be eligible, though interest rates would be higher.

No other qualification criteria would be used – no appraisal requirement, no income verification, no asset documents, LTV limits, etc.

Homeowners would get the option of refinancing into a 30-year fixed or a 15-year fixed.

But only first mortgages can be refinanced, so any second mortgages would need to be resubordinated.

Why It Works

Fannie and Freddie would get higher guarantee fees for implementing the plan, and loan servicers would receive the right to originate/service the mortgages without being responsible for “reps and warranties” violations of past servicers.

Banks and mortgage lenders would be able to refinance the mortgages quickly and cheaply thanks to the lack of underwriting requirements.

Private mortgage insurers could continue to insure the mortgages, and with lower monthly payments the mortgages would be deemed safer.

Roughly 25 million homeowners would benefit from the program in the form of lower monthly mortgage payments, with estimated annual savings of $2,800 per homeowner, or $70 billion in aggregate reduced housing costs.

These lower mortgage payments would also serve to stabilize the housing market and reduce the risk of future defaults.

It could also motivate homeowners on the brink to stay current in order to participate, unlike many loan modification programs that only serve those who fall behind on payments.

This could effectively push home prices higher, easing home equity concerns for those “on the fence” about staying or going.

Additionally, taxpayers would stand to benefit because Fannie and Freddie would reduce their losses and lower mortgage payments would mean reduced mortgage interest deductions.

The only “loser” would be mortgage bondholders, which the economists argue have already benefited tremendously from government actions taken during the mortgage crisis.

Additionally, thanks to current roadblocks, the relatively slow rate of refinancing allowed these bondholders to benefit more than they would have historically.

So there you have it. A possible mass refinance program with very few constraints. Even ineligible borrowers would “benefit” indirectly if the housing market improved as a result.

Not that I’m sold on it.  There are still a ton of question marks, namely those who can’t afford even a reduced housing payment, those already in foreclosure, the excess housing inventory, the impact of future mortgage rates, etc, etc.

Regardless, it’s clear housing policy will play a major role in the upcoming election.

(photo: KE Design)

About the Author: Colin Robertson

Before creating this blog, Colin worked as an account executive for a wholesale mortgage lender in Los Angeles. He has been writing passionately about mortgages for 15 years.


HARP Refinancing Takes Off Thanks to New Guidelines

Last updated on August 10th, 2013

As a result of recent enhancements, and perhaps ultra-low mortgage rates, the Home Affordable Refinance Program has actually made a meaningful impact.

Last month, there were a total of 98,885 HARP refinances recorded by the FHFA, which accounted for nearly 24% of all the Fannie Mae and Freddie Mac refis during August.

That’s a big chunk of the business, and represents nearly a quarter of the 400,000 total HARP refis originated in all of 2011.

Since January, 618,217 loans have been refinanced via HARP, bringing the all-time total to 1,640,068 (the program began in 2009).

A total of 1,292,932 HARP refis have been for loan-to-value ratios between 80 and 105 percent, and another 228,666 were for refis between 105-125%.

Helping the 125%

Last month, a total of 26,944 loans refinanced through the program had a loan-to-value north of 125%, which was one of the major program enhancements announced in late 2011 and implemented in 2012.

In fact, fewer borrowers (23,265) with LTV ratios between 105-125% refinanced through the program in August.

Simply put, the program is reaching the hardest-hit borrowers out there, many of whom you would assume are “too far gone” to benefit from such a program, let alone any program.

After all, if you’re underwater on the mortgage by more than 25%, it might be looked at as a losing endeavor, especially if it doesn’t involve any principal forgiveness.

But these numbers show there are believers out there, even in the darkest of times.

For all of 2012, 118,470 borrowers with LTV ratios greater than 125% have taken advantage of HARP 2.0.

And the overall numbers also appear to be picking up. Last month, 99,000 HARP refis were recorded, up slightly from 96,000 in July.

Assuming the numbers held up in September, we’d be looking at quarterly figures around 300,000.

That would be significantly higher than the 243,000 refis in the second quarter, and well above the 180,000 executed in the first quarter of 2012.

Additionally, the last two months’ totals have also surpassed the quarterly numbers seen in the last three quarters of 2011.

Nearly 20% of HARP Borrowers Choose Shorter Terms

Somewhat amazingly, 18 percent of borrowers with LTV ratios above 105% chose to refinance into shorter-term mortgages, such as 15- and 20-year fixed loans.

The rest went with the traditional 30-year fixed. This compares to just 10% in 2011.

[30-year fixed vs. 15-year fixed]

In other words, borrowers really believe in their homes if they’re willing to make larger monthly mortgage payments while underwater.

And if they stick with it, they’ll build home equity a lot faster than those who stick with the traditional route.

Of course, one could argue that now is not the time to pay off your mortgage quicker, considering how low mortgage rates are at the moment.

But still, homeowners who do will help the housing market recover faster.

HARP refis were most popular in the sand states of Arizona, Florida, and Nevada, but well below average in high-priced California.

In Nevada, 66% of refis last month went through HARP. The numbers were similarly high in Arizona (50%) and Florida (54%).

In California, just 19% of total refinances were HARP loans.

Lastly, check out this nifty chart (included in the report) that looks at mortgage rates and the level of refinancing activity:

rates vs refi

Read more: Are consumers even interested in low mortgage rates anymore?

(photo: rfduck)

About the Author: Colin Robertson

Before creating this blog, Colin worked as an account executive for a wholesale mortgage lender in Los Angeles. He has been writing passionately about mortgages for 15 years.


Why Your Mortgage May Get More Expensive

Last Friday, the Federal Housing Finance Agency (FHFA) announced plans to increase guarantee fees (g-fees) on loans sold to Fannie Mae and Freddie Mac.

Banks and lenders pay Fannie and Freddie so-called “g-fees” in exchange for purchasing their loans and bundling them into mortgage-backed securities, which are then sold to investors on the secondary market.

The pair also assume the risk if the loans in the underlying securities default, which has certainly been an issue since the mortgage crisis reared its ugly head.

Since then, g-fees have inched higher and higher to account for risks not seen in years past when home price appreciation masked the impending danger.

Currently, it is estimated that Fannie and Freddie own or guarantee about 60 percent of residential mortgages, meaning there’s a good chance they own yours.

And their share has certainly increased even more as a result of the credit crunch, which pushed many private players out of the secondary market.

G-Fees Going Up 10 Basis Points

The FHFA has now directed Fannie and Freddie to raise g-fees on single-family mortgages by an average of 10 basis points (0.10%).

This comes on the heels of an increase back in April, which was implemented to fund the payroll tax cut extension.

The increases will be effective with commitments starting November 1, 2012 for loans sold for cash, and December 1, 2012 for loans exchanged for mortgage-backed securities (MBS).

The average g-fee charged by Fannie Mae and Freddie Mac increased to 28 basis points in 2011 from 26 basis points in 2010, according to a new annual report required by the Housing and Economic Recovery Act of 2008.

Why the Latest Increase?

FHFA Acting Director Edward J. DeMarco said the move is intended to lure more private capital into the mortgage market, which is largely government-supported at the moment.

He believes the increase will move the pair’s pricing closer to a level one would expect if mortgage credit risk were privately capitalized.

The hope is to get the government out of housing, or at least minimize its enormous role.

The big question is whether the higher fees will actually be felt by consumers. At the moment, mortgage rates are pretty much at their lowest levels ever.

And because the Fed keeps buying mortgage securities, rates have inched lower and lower.

So any increase related to the g-fees may actually be absorbed by the Fed. If rates do increase, one would expect something minimal, such as a rate of 3.625% instead of 3.5% on a 30-year fixed mortgage.

It’s not to say it’s an incidental increase, as that can equate to thousands over the life of the loan term, but all things considered, mortgage rates are already highly subsidized by the government.

Speaking of, the new fees are also intended to reduce cross-subsidies between higher-risk and lower-risk mortgages by increasing the fee more on loans with terms longer than 15 years.

Put simply, 15-year fixed mortgages are less likely to default, and thus should come with lower guarantee fees.

The move is also intended to make g-fees more uniform for both lenders who deliver large loan volumes and those that originate smaller volumes.

At the moment, the bulk of loans sold to Fannie and Freddie come from a small number of large lenders.

Mortgage Rates Based on State?

The FHFA also left a cliffhanger at the end of their press release, noting that it was developing risk-based pricing at the state level.

In other words, mortgages may be priced differently based on where they are originated.

So a New York mortgage may cost more than a California loan, or vice versa, depending on the costs.

For example, in states where foreclosure processes are more expensive, such as in judicial states, the g-fees may be higher.

But again, consumers may not even notice the difference in price because there are so many other factors that affect mortgage rates. Still, it’s a rather interesting development.

It looks as if the future of mortgage lending may mirror insurance pricing, which is very heavily data-driven, meaning more and more factors may eventually determine the interest rate you ultimately receive.

Update: Five states have been singled out by the FHFA, including Connecticut, Florida, Illinois, New Jersey, and New York, thanks to their higher-than-average default-related costs.

So mortgages originated in these states could be imposed a 15 to 30 basis point upfront fee, charged to lenders, and likely passed on to the consumer.


Making the Argument for an Adjustable-Rate Mortgage

Last updated on February 2nd, 2018

It’s no secret that fixed-rate mortgages have dominated the mortgage market in recent years, mainly because they’re just so darn cheap.

They’ve been breaking records left and right thanks to the bleak economic outlook and the Fed’s continued buying of mortgage-backed securities.

But they aren’t the only types of home loans benefiting – unfashionable adjustable-rate mortgages are also super cheap, even those that feature a fixed portion for several years.

Initial Rates on ARMs Lowest in History


In fact, initial-period rates on ARMs are the lowest in Freddie Mac’s Annual Adjustable-Rate Mortgage (ARM) Survey, which is now in its 29th year.

By initial-period rate, Freddie means the teaser rates that mortgage lenders offer to borrowers for taking an ARM as opposed to a safer, more secure fixed mortgage.

You see, most ARMs are hybrids, meaning they’re fixed for some period of time before becoming adjustable for the rest of the loan term.

They’re all tied to some mortgage index, whether it’s the LIBOR or the MTA, the latter being the Monthly Treasury Average, which covers 69% of ARMs nowadays.

The most common adjustable home loan is the 5/1 ARM, which is fixed for the first five years and annually adjustable for the remaining 25 years.

In early January, it averaged 2.75%, a 0.65% discount relative to the almighty 30-year fixed, which stood at 3.40%.

For a borrower with a $250,000 loan amount, the 5/1 ARM would result in monthly savings of nearly $90.

[Fixed Mortgage vs. ARM]

Of course, it would only offer such savings for the first 60 months, after which anything goes! Well, within the mortgage caps that limit how much ARMs can move…

But still, that $90 over five years would result in more than $5,000 in mortgage payment savings, which is surely nothing to scoff at.

Assuming the 5/1 ARM presented too much risk, a borrower could go with a 7/1 ARM, which is fixed for an entire seven years.

The initial rate on the 7/1 averaged 2.97% in January, which was still nearly a half a percentage point below the 30-year fixed.

It would provide even more breathing room for the borrower willing to “take a chance,” especially seeing that most homeowners move, refinance, or prepay around the 7-year mark.

Or if seven years isn’t enough, there’s always the 10/1 ARM, which as the name implies, is fixed for an entire decade before going rogue (adjustable).

The 10-year stood at 3.29% earlier this month, which was only an 11 basis point discount to the 3.40% average on the 30-year fixed.

Probably doesn’t make a whole lot of sense given the fact that you could still be in your home/mortgage after 10 years.

In any case, the initial rates on these two types of ARMs decreased by 0.32 and 0.57 percentage points, respectively, compared to last year.

Finding the Sweet Spot

If you really want to take a chance in this low mortgage rate environment and snub the 30-year fixed, you’ve got to do some homework to determine how long you’ll need the protection of the fixed-rate period.

Assuming five years is ample time to “flip” your property and move on, it could make sense to take a chance (Facebook founder Zuckerberg has an ARM).

But if you need more, the 7/1 ARM might be a good candidate as well. The 10/1 is so close to the 30-year that you’re kind of splitting hairs, and you probably don’t want to sit in bed every night counting down the days.

After all, time can fly when you don’t want it to…

For the record, there are also even shorter ARMs, such as the 3/1 and the one-year adjustable, which clearly don’t stay fixed for long. And seeing that their initial discounts aren’t too hot, they also don’t make much sense.

At the moment, ARMs are cheap, but there’s a reason I referred to them as “bad news” not too long ago.

They aren’t for the faint of heart, and with so much uncertainty ahead, the comfort of a very low fixed loan may just be worth the minimal extra cost.

During 2012, ARMs accounted for one-in-ten new purchase mortgages, per FHFA data. Freddie sees them grabbing a 12% market share in 2013.

(photo: Elvert Barnes)

About the Author: Colin Robertson

Before creating this blog, Colin worked as an account executive for a wholesale mortgage lender in Los Angeles. He has been writing passionately about mortgages for 15 years.


Pros & Cons of Investing in Real Estate

Investing in Real EstateInvesting in Real EstateAmong the many investment opportunities that are bound to come your way is real estate. Taking the leap to put your money into the world of commercial or residential property is, however, not an easy decision. To be successful, you need to weigh the benefits against the risks of the real estate market. To help you in this, let’s look at the pros and cons of investing in real estate.

Pros of Investing in Real Estate

  • Stable Investment: Compared to other investments for example stocks, real estate is less volatile. This relative stability is due to the fact that properties move a lot slower and are always in demand. 
  • Income Potential: According to a House Index Price (HPI) report by the Federal Housing Finance Agency (FHFA), house prices continue to appreciate at an average annual rate of 3.3% since 1991. This goes to show the huge potential that comes with property investment. 
  • Positive Cash Flow: Once you are a rental property owner, you stand to earn a steady and passive income. The rent you collect pays off mortgage and property taxes and what is left becomes your income. In essence, you get other people to buy the property for you and pay you at the same time.
  • Tax Incentives: As a rental property owner you stand to claim a wide range of tax benefits. Among the deductibles that will increase your income include depreciation on repair works, inspection visits, utility bills that are included in the rent, property taxes, energy-use efficiency, and mortgage interest.
  • Leverage on Investment: Property offers stable security in the eyes of lenders. This means that you can leverage your holding for a lower down payment on subsequent real estate investments. Typically, you will only be required to put 20% down on a property with the rest being covered by a mortgage; this ease of property ownership makes high ROI a possibility.

Cons of Investing in Real Estate

  • Low Liquidity: Among the various investments that you can put your money into, real estate is considered the least liquid. Acquiring a property can take you less than a month but selling it could take years. If you find yourself in need of money quickly and selling is your only option, you may have to sell way below the market price.
  • High Cost of Entry: Real estate is expensive especially for first-time investors. You must pay at least a 20% down payment; this could mean taking a second mortgage or depleting much or all of your savings. Apart from the initial acquisition, you will have to pay for any repairs, upgrades, and replacements on the property.
  • Less Diversity: As earlier noted, real estate prices continue to increase every day, this means that entry into the industry will probably cost every penny that you can spare. That is the real definition of putting all your eggs in one basket; if a housing bust occurs you could find yourself facing foreclosure and possibly lose it all.
  • Greater Liability: Every single tenant and visitor in your property is a potential liability. From injuries due to faulty electric sockets to falls as a result of unstable railings, you may find yourself facing lawsuits and paying damages. With such great risks, a property which is not up to code will attract huge insurance premiums which can greatly cut into your rental income.
  • Management Woes: Owning property is a huge undertaking in terms of labor; you will have to deal with maintenance and any upgrades that may come up. This may require you to be your own handyman or employ help. Professional help will be less stressful but it will come at an extra cost.

The Take-Away

Real estate is a sound investment in that you can have huge returns on investment. You can leverage your property for further financing which will increase your holdings. At the same time, you can file for tax exemptions, which will increase your monthly earnings from rent. That said, being a property owner comes with its share of headaches; the initial investment will probably deplete all of your savings, you will be liable for any injuries that occur in your property and there is an off chance that you could lose considerably if a housing bust hits.


Chart: Housing Affordability Set to Fall Off a Cliff

Last updated on September 9th, 2013

The National Association of Realtors will always be the first ones to tell you that housing is either highly affordable, still affordable (!), or that buying a home remains a great move even if housing affordability is low.

After all, they represent real estate agents, or rather, Realtors®, whose livelihood depends on selling homes, lots of homes.

In other words, they gush optimism, regardless of which way the market is headed.

But they threw a chart up on one of their blogs last week that certainly didn’t do them any favors, even though they tried to paint it in a positive light.

This Is the Affordability Chart Before Mortgage Rates Surged


If you look at the chart above, you’ll see the NAR’s measure of housing affordability, which takes into account average mortgage rates and median home prices, assuming the buyer puts down 20% and has a 25% front-end debt-to-income ratio.

As you can see, housing affordability took a major dive in May as home prices reached their highest point since July 2008.

While that’s all good and well for existing homeowners, it means those looking for an opportunity to purchase a home are running out of time, assuming they want to buy for the investment aspect.

The scariest part of this chart, however, is that it relied on the FHFA’s mortgage rate data from May.

During the month of May, the FHFA said mortgage rates actually fell 0.15% from April. Unfortunately, most of us know that mortgage rates are nowhere close to May levels anymore.

And we all know they didn’t drop in June, not by a long shot.

In fact, mortgage rates are back up to levels last seen two years ago. So taken together, we’re looking at mortgage rates that are significantly higher, coupled with home prices that are back at 2008 levels (and still rising).

Put simply, this chart is going to look a lot worse when NAR releases their next update on housing affordability.

Of course, they’ll likely come up with a way to make it look less detrimental, perhaps by comparing monthly mortgage payments on a small loan amount. Oh wait, they did that already.

I’m not trying to be overly pessimistic here – mortgage rates are in fact still historically low, as I’ve pointed out several times lately. And home prices aren’t back to their peak levels.

But we aren’t as far off from that crazy time anymore, and who’s to say we should return to those prices anytime soon.

Things didn’t exactly pan out very well back then. And the economy doesn’t exactly look stellar enough to support those boom times at the moment.

Read more: Home buyers are more concerned with rising mortgage rates than home prices.

Below is an updated chart released on September 6th, 2013. As you can see, affordability dropped to about a five-year low, and the Realtors expect it to sink next month as well:

updated chart

There’s still some room before we get back to those really dark years in 2006 and 2007, but we appear to be heading in that same direction for now…

About the Author: Colin Robertson

Before creating this blog, Colin worked as an account executive for a wholesale mortgage lender in Los Angeles. He has been writing passionately about mortgages for 15 years.


HARP Refinance Program Extended Until 2015

As many had predicted, the popular Home Affordable Refinance Program (HARP) was extended today until December 31, 2015.

The program was set to expire at the end of the year, but apparently the FHFA isn’t satisfied with the more than two million homeowners who have already refinanced via HARP.

FHFA Acting Director Edward J. DeMarco said in a release that the program is being extended to reach more underwater homeowners so they can benefit from the lower mortgage rates currently on offer.

HARP Nationwide Campaign Coming Soon

While I don’t know if we’ll see HARP commercials on TV during the NBA playoffs, it is possible.

The FHFA plans to launch a nationwide campaign to inform homeowners about HARP, even though the program has been around for several years now.

For the record, I’ve never seen any advertisements about HARP specifically, though I have seen ads for Hope Now and other mortgage assistance programs.

And I’m sure there are scores of homeowners who are eligible for HARP, but either don’t realize it or think it’s all just a scam.

The aim of the campaign is to educate homeowners about the benefits of HARP in order to motivate them to take action. This will not only help them, but also the banks behind the loans and the economy at large.

21% of Refis Went Through HARP in January

HARP totals

The FHFA also released its latest Refinance Report on Monday, which revealed that HARP activity remains strong despite the program being four years old.

During the first month of the year, a total of 97,600 refinances were completed via HARP, accounting for roughly 21% of the 470,000 total refinances during the month.

Amazingly, HARP seems to be the only game in town in certain states. For example, 66% of all refi volume in Nevada went through HARP in January – the same was true for 56% of refis in Florida.

This is really the lone route for many homeowners in these states where home values plummeted after the housing crisis reared its ugly head, washing away all traces of home equity.

Last year, a total of 1,074,754 refinances were completed through HARP, and if January’s numbers are any indication, 2013 could be an even bigger year.

The total number of refis completed via HARP now stands at just over 2.2 million.

Additionally, many of the refis completed through HARP were for high loan-to-value (LTV) loans, those that tend to be most at risk of default.

In January, 47% of HARP refis were for LTV ratios above 105%, meaning those with no home equity could enjoy a lower mortgage rate thanks to the program.

And 25% of loans refinanced via HARP had LTV ratios greater than 125%, a godsend for the many deeply underwater homeowners out there.

Shorter Terms for HARP Borrowers

Finally, it should be noted that many HARP borrowers seem to intend to stay in their homes and weather the storm.

HARP term

In January, 18% of HARP refinances for underwater borrowers were for shorter loan terms, either 15-year fixed or 20-year fixed mortgages, as opposed to the traditional 30-year fixed.

This not only bodes well for the homeowners who elected to take the shorter terms, but also for the housing market as a whole.

Ideally, it will mean fewer foreclosures and a healthier group of homeowners, even if home prices falter over the next few years.

While this all sounds like good news, there will be those that are disappointed HARP hasn’t eased guidelines or allowed for things like “reHARPing.”

Additionally, HARP is only good for Fannie Mae and Freddie Mac borrowers – those with private-label mortgages are still out of luck.

However, a recent report from Fitch Ratings claimed that nearly half of all private-label mortgages have been modified.

So maybe most who need help are getting it, or are at least being offered assistance.

About the Author: Colin Robertson

Before creating this blog, Colin worked as an account executive for a wholesale mortgage lender in Los Angeles. He has been writing passionately about mortgages for 15 years.