In today's market, consumers rarely choose the type of mortgage program they want. Instead, the right mortgage is usually found because it is the program that the consumer fits into. As housing continues to show some signs of hope, financing or refinancing a home is also showing some signs of change. While this is happening, GSE (Fannie Mae and Freddie Mac) mortgage business continues to increased.

HARP, the Home Affordable Refinance Program, has shown improvement in volume since the removal of loan to value caps, as well as, securitization for loans above 125% LTV that started June 1st. This has led more lenders to accept extremely underwater borrowers for the program. As home prices have increased, many homeowners are finding their LTV decreasing which is also making it easier to obtain HARP. Some may find that they are no longer eligible for HARP as home prices continue to rise. According to CoreLogic, home prices for August, including distressed properties, rose 4.6% from a year ago.

Conforming mortgages, also known as conventional loans, have been on the increase due to several factors. Low mortgage rates can help borrowers qualify for conforming mortgages with lower debt to income ratios. Higher loan to values are also becoming more acceptable as private mortgage insurance companies are beginning to come back to life. According to the Mortgage Insurance Companies of America, private mortgage insurance was used by more borrowers for mortgage refinances or home purchases during the month of August, 2012. MICO reported that PMI was used by 43,949 borrowers in August as compared with 39,192 in July.

While private mortgage insurance companies, who were hit hard during the housing crisis, are still in the process of making a comeback, things are looking better. Freddie Mac has proposed a deal with MGIC that would allow the mortgage insurer to write new business in the states where it still lacks waivers on capital requirements. While the deal and details are not yet final, this is positive news for MGIC and also borrowers who need mortgage insurance to secure a conventional loan when financing with less than a 20% down payment.

According to Ellie Mae, the FHA share of total mortgage originations went from 25% during May to 21% in August. For the same period, conforming mortgages increased from 65% to 70% with purchase loans increasing from 44% to 47%. Overall, FHA's purchase mortgage numbers have decreased; FHA loans went from 27.3% of all home purchase transactions in January to 25.9% in August. FHA loans do not use private mortgage insurance, but have their own mortgage insurance premiums, both upfront and annual. Due to this, FHA premiums are usually higher than private mortgage insurance used for conforming mortgages. FHA's premiums are only cheaper when eligible borrowers refinance an existing FHA loan (endorsed prior to June 1, 2009) with the FHA streamline refinance that offers reduced upfront and annual mortgage insurance premiums. This reduction will only be available through the end of 2013.

As more consumers are taking action to improve their credit in order to meet conventional mortgage guidelines, the GSEs should continue to see their portion of the business grow, both for purchase loans and mortgage refinances.

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.

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