Refinance Programs Finally Helping Some Homeowners

Now that there are two significant refinance programs finally available to help some homeowners, it is hoped that the foreclosure and default rates will begin to decline or at least slow down.

The two expanded programs, made officially available this year, are HARP 2.0 and the FHA streamline refinance. Both programs are only for borrowers who have existing mortgages that were sold or insured prior to June 1, 2009. HARP 2.0, which has no loan to value limits, became available mid March for underwater borrowers that have conforming loans with Fannie Mae or Freddie Mac. The FHA streamline is for existing FHA mortgages and offers reduced upfront and annual mortgage insurance premiums. Mortgage applications for both these programs continue to be high, although in reality, could be higher. Getting knowledge out to borrowers about availability is one thing, finding lenders to assist is another problem for many. While some of the biggest lenders have their own overlays in place making it difficult for many borrowers, there are many other lenders that are easier to deal with.

Recent housing reports have been mixed, but showing some improvement. On Monday, The Commerce Department stated that new home sales increased 7.6% in May from April and is the best since April, 2010. S&P/Case-Shiller reported that the decline in home prices was at the lowest since November, 2010. Builder business is picking up as new home sales increased to their highest level in two years according to the U.S. Census Bureau and the U.S. Department of Housing and Urban Development with May's figure 7.6% higher than April and approximately 20% higher than a year ago. They also reported that building permits for privately owned residential construction also jumped in May by 7.9%. On the down side, existing home sales decreased in May by 1.5% according to the National Association of Realtors.

With HARP 2.0 and a cheaper FHA streamline refinance available, many successfully refinanced homeowners will remain in their homes until at least the housing market turns around. Had these enhanced programs been available sooner, just maybe the overwhelming shadow inventory out there would not exist. According to CoreLogic, a leading provider of information, analytics and business services, as of April, 2012 the current residential shadow inventory fell to 1.5 million units, a four month supply, which is a 14.8% decrease from April, 2011. Although down, this still remains a large amount of distressed homes that, at any time, may be ready to hit the market. While these distressed homes make it difficult for existing homeowners to sell as they bring down the price of surrounding neighborhood homes, they are also keeping current mortgages underwater.

It is quite possible that these refinance programs will make a significant impact on future shadow inventory as more borrowers learn about the solutions available to them. Unfortunately, many have tried and been turned down by lenders who have their own restrictions in place or only will accommodate their own customers. However, borrowers need to know that being denied by a lender does not necessarily mean that they are not qualified. There are online resources where multiple lenders are available and will assist borrowers to obtain these programs. There is a better chance at success when a variety of lenders are available in one place eager and willing to assist borrowers obtain one of these programs or even a different mortgage refinance that will better suit them.

FreeRateUpdate.com surveys more than two dozen wholesale and direct lenders' rate sheets to determine the most accurate mortgage rates available to well qualified consumers at a standard 0.7 to 1% point origination fee.