Mortgage rates, new program expand refinance opportunitiesby Tim Manni
Mortgage rates may have nudged slightly higher last week, but an expanded refinance program announced last Monday is expected to increase refinance opportunities to many Americans.
President Obama announced plans to expand the government’s Home Affordable Refinance Program (HARP) last week in an effort to refinance borrowers no matter how deeply underwater they are. With just under 900,000 loans refinanced since HARP’s inception, the program has fallen woefully short of stated goals at a time when our economy needs every economic boost it can get.
Mortgage rates nudge upward
Don’t let headlines such as “Mortgage rates rise” scare you away from entering the market. Last week, mortgage rates on 30-year fixed-rates mortgages–including conforming, non-conforming and jumbos–increased by only three basis points (0.03 percent), finishing at a weekly combined average of 4.45 percent.
The overall average for 15-year fixed-rate mortgages (again, including conforming, non-conforming and jumbos) also increased by merely three basis points, finishing the week at 3.74 percent.
FHA-backed mortgages, a popular loan product among many homebuyers and refinancers in recent years, eased by three basis points, landing at an even 4 percent.
The overall average for 5/1 Hybrid ARMs saw an increase of a lone basis point, landing at 3.16 percent for the week.
New refi program means more opportunities
An expanded initiative to help underwater borrowers was revealed this week by the Obama Administration. HARP will soon be available for borrowers more deeply underwater, with fewer fees, less documentation and hopefully greater success.
Expanding the HARP program to encompass more borrowers may be a key element in boosting the economy. The program was originally expected to help millions of homeowners refinance, but poor implementation and incentives by stakeholders to participate produced an underwhelming response. To date, only about 75,000 of the nearly 900,000 HARP refinances were written to borrowers underwater by more than 5 percent.
Hard details of the expanded refinance program won’t be released until next month, so it is not yet clear how enthusiastic lenders will be about the program. Borrowers should be excited, especially since the program is expected to feature reduced closing costs, possibly fewer risk-based pricing adjustments (which together have made refinancing expensive and less valuable even when it was available to an underwater homeowner) and importantly require only proof of employment (and not verification of income strength) as a criteria for writing the loan.
Will HARP “part two” do the trick?
Will it work better than the original program?
While hard details won’t come for a few weeks yet, there are a few reasons why this expanded plan may have a greater chance at success. Well, that is, provided the following happens:
- Word gets out to those in need
- Lenders are prepared with additional employees, and a good “buzz” is created that successful refinances are actually happening
- Homeowners are not so soured on the mortgage process that even saving a hundred dollars (or more) a month isn’t a compelling enough reason to want to put themselves through the refinance ringer
Mortgage rates should remain firm
Thanks to the Fed’s current influence on the market, mortgage rates are probably lower than they would otherwise be. And given the fact that certain economic indicators are coming in more positive than expected, homebuyers and refinancers should be especially grateful.
Look for mortgage rates to remain firm this week. That said, mortgage rates still remain at historic lows. Combine low rates with an expanded refinance program and borrowers finally have a reason to be optimistic.
Keith Gumbinger contributed to this post.