A Closer Look at Special Mortgage Programs

For several years, many things have been done to promote a healthy recovery in order to further improve economic growth in the U.S. and throughout global market. The Federal Reserve has implemented QE3 and the purchase of bonds in order to keep rates low. The Administration has put into place several mortgage programs that have helped homeowners save their homes through refinancing. These strategies have resulted in an improvement in the housing market. However, there is both good and not so good news when taking a closer look at special mortgage programs.

HARP Refinance

The Home Affordable Refinance Program is still available for homeowners that have loans that were sold to Fannie Mae or Freddie Mac prior to June 1, 2009. The success of this program can be measured by the over 2.4 million homeowners who have refinanced, according to FHFA. Most of these occurred after the rules were updated, loan to value and appraisals were eliminated and deeply underwater homeowners were given the chance to use the program. At this point, the HARP refinance program has been extended to the end of 2015.

The Administration wanted to further extend the HARP program to HARP 3 which would allow refinancing for everyone. As of this date, although this bill has been introduced, it has not be approved to move forward. It appears unlikely that this will become reality since home prices have improved and fewer homeowners are underwater.

FHA Mortgages

The FHA streamline refinance has been an easy program for existing FHA mortgage holders for many years. Since the program does not require any documentation or an appraisal, it is very favorable for underwater FHA homeowners. To make it even more affordable, the program was extended to offer reduced upfront and annual mortgage insurance premium fees for loans that were endorsed prior to June 1, 2009.

To this date, the FHA streamline has not been extended. In addition, qualifying guidelines are now stricter than in the past and insurance fees for new FHA mortgages have continued to rise making it more difficult for home buyers to attain homeownership. Further, new home buyers using FHA loans can no longer eliminate the FHA insurance fees when sufficient equity has been reached.

Standard Refinance

Millions of homeowners have used standard mortgage refinances while mortgage rates dropped to historical record lows.

However, many homeowners still have not been able to refinance because of tight lending restrictions. In addition, the recent increase in mortgage rates has led to a plunge in refinance applications. While the Federal Reserve has not actually done anything to make mortgage rates increase, investor speculation has created enough volatility for this to happen. "I emphasize that, because our asset purchases depend on economic and financial developments; they are by no means on a preset course," stated by Bernanke at his recent meeting with the House Financial Services Committee. Even with Fed reassurance over the past week, mortgage rates have not yet come back down to the historic lows that were in place earlier this year.

Jumbo Loans

Since jumbo loans are not sold or insured by the government, they do not fall under conforming loan rules and have not had advantage of any special loan programs. However, market conditions have been very pleasant for jumbo loan borrowers because mortgage rates for these loans have been exceptionally low adding to the affordability of higher priced homes.

The only special program available for jumbo loans is FHA which extended its loan limit to $729,750 depending on the location of the property. With the increase of FHA insurance fees, it is often cheaper for borrowers to use a traditional jumbo loan for financing as long as they can qualify.

Homeowners should take advantage of any mortgage programs that are available while it is still a good time to refinance at low mortgage rates. Of course, in a perfect world, everyone would be able to do so and reap the benefits.

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