Interest Rates lower from Brexit

Interest rates have moved lower since the Brexit vote at the end of June sent stocks crashing, the Pound Sterling down to lows versus the Dollar it hasn’t seen in decades, and all of the politician who led the Brexit campaign quit. But how much have interest rates actually moved since the Brexit vote?

I’ve kept up with interest rates daily since 2009. Since the Brexit vote toward the end of June, interest rates have only improved by 0.125-0.250%. Based on the number of “low interest rate” stories out there, you’d think interest rates would have dropped by at least a half point and have set new all time historic lows since the vote. Why all of the stories? I think it has to do with several factors:

• yields on treasury bonds have experienced some major change, but treasury bonds don’t impact interest rates. As discussed countless times on this blog (do a search for “MBS” or “mortgage backed security” in the search box at the top right of the main page of this blog), interest rates are impacted by the movement of mortgage backed security bonds. Those prices haven’t changed near as much as the treasury yields.
• the big move on interest rates was back in January of this year when interest rates dropped by over a half point from the start of the month until the end of the month. Interest rates have been about at this level for most of the year.
• why the “low rate” stories now? Well, in January, stories were focusing more on the Spring market, home sales increasing, new construction startups increasing, etc. By the time we approach July, the Spring Market is over, there is a natural lull in home sales (everyone goes on vacation in July), and something is needed to fill the 24-hour news cycle. The Brexit vote along with rates improving some since that vote provided the needed stories.
• since this is a normal “lull” period in the housing market, marketing efforts can now be turned to potential refinances.

Are interest rates low? Yes, absolutely.

Should one consider refinancing? Of course!

But don’t get swept away by it. You want to talk with an experienced mortgage loan officer who can give you the pros and cons of refinancing. For example, this morning I spoke with someone who wanted to refinance using a 15 year mortgage and pay discount points to get the rate into the 2’s. After running the numbers, his “break even” point on the monthly savings versus the closing costs for the new loan increased when he paid discount points to lower the rate! That wasn’t a typo… by paying discount points to get a lower rate, the amount of time needed to break even increased.

In the frenzy to secure a low rate, be sure to ask questions. Work with a mortgage loan officer who watches for trends and doesn’t hop onto the bandwagon of recent events. Someone who will discuss loan options with you instead of just quoting a rate and asking you if you are ready to get started. If the home you are looking to refinance is in the state of Georgia, contact me today. I can help you get going!

Besides… interest rates aren’t at their historic lows yet. That means there is still room for interest rates to improve.

 

Last year to use HARP

As posted on The Mortgage Blog in late 2014, interest rates are still around their lowest levels from 2014. That’s great news for home owners who are upside-down on their loans.

The Home Affordable Refinance Program, or HARP, is entering its final year (well, unless Congress extends the program again). HARP allows homeowners who are underwater to refinance into a lower rate. Combine a loan program for underwater homeowners with low rates, and it is a win for homeowners. How do you qualify for HARP?

If the home was purchased and securitized by Fannie Mae or Freddie Mac before June 1, 2009, AND the monthly mortgage payments have been paid on time for the past 12 months, you probably qualify for HARP. It doesn’t matter if you have a second mortgage or pay monthly mortgage insurance on your loan, you could still qualify for HARP.

You might be thinking… “I’m really underwater. I can’t qualify.” Just know homeowners can be way, WAY underwater. There is no limit.

Also, homeowners who did not have private mortgage insurance (known as PMI) on their loan initially can still refinance even without 20% equity in their home today. There would not be PMI on their new loan.

If you missed the historically low rates of 2012 and 2013, you may want to act quickly.  Rates are unlikely to return to those historic low levels, and they at the just about the lowest levels seen since May 2013.

To get started, contact me to talk about the pros and cons of HARP. Together, we can determine if you qualify for the HARP program.   It’s the best way to lower monthly payments when you owe more than your home is worth.  Don’t miss this opportunity!

Interest Rates at 2014 lows

“This year, interest rates are going to rise“… I know we’ve all heard that over the past several years, but 2014 was to be the year rates finally went up. Well, interest rates have improved and were at their lowest point of the year (so far) on Wednesday. Why is this the case?

First, most analysts thought 2014 would be the end of low rates because the Federal Reserve was exiting the bond-buying business. Over the past several years, the Federal Reserve implemented a Quantitative Easing program known as QE. The third round (QE3) began tapering off at the end of 2013. The Federal Reserve currently plans to end the QE program later this month. This was going to make rates jump into the 5’s.

The end of QE3 was the expected reason rates would rise, but it is typically unforeseen events that impact interest rates. We’ve seen several unexpected events in 2014:

• Global Economy – There were signs of the global economy slowing at the start of the year in emerging markets such as China, Brazil and India. As the year continued, the economic numbers got worse. China could be at the start of its own housing crisis.
• Ukraine – The volatility created by the Russian involvement in Ukraine caused sanctions to be levied against Russia pushing its economy to the brink of a recession. These events have also caused a slowing of the economy overall in the Eurozone.
• Middle East – Instability in the Middle East can cause nervousness in the markets. The rise of ISIS certainly qualifies as instability. When the markets get nervous, money usually flows out of stocks and into bonds. This helps mortgage rates.
• Ebola – As the Ebola crisis intensifies, there are worries of it impacting the global economy.

When events like this happen, investors seek a safer investment than a troubled stock market. Stocks have lost major ground over the past few weeks. The US Dollar, which was panned mightily over the past few years, is now the safest haven in the market. More bonds are being purchased, and interest rates have improved.

Interest rates are now back into the high 3’s for a 30 year fixed rate loan. If you missed out on your refinance chance, it is back. If the property is in Georgia, I can refinance you into a new low rate. Contact me today to take advantage of this drop in rates before it is gone.

The refinance boom is dead, but why?

As many in the industry know, refinances dwindled in 2014. Freddie Mac recently stated the “official” end to the refinance boom after the second quarter 2014. Freddie Mac goes on to say the purchase market has increased drastically this year, and the industry is now in its first dominated purchase market since 2008.

Realistically, Freddie Mac’s announcement is about a year behind. In early May 2013, interest rates began to rapidly climb. By the time the dust settled in mid June, rates had jumped over 1.25% from the low 3’s to the mid 4’s for a 30 year fixed rate loan. From the beginning of 2013 through the end of May 2013, refinances were over half of my business each month. Since June 2013 through August 2014, refinances only account for 20% of my business.

But why?!? Interest rates are still low. What many do not know is rates improved in 2014 and are currently lower than they were at the end of 2013. Also, some homeowners are still underwater in their homes. Don’t forget that HARP (Homes Affordable Refinance Program) still exists. Qualifying homeowners can refinance regardless of how far underwater they may be.

Rates are not as low as they have been now compared to early 2013. That doesn’t mean you should write off the possibility of refinancing altogether. If your home is in the state of Georgia, shoot me a quick email. We can talk about the pros and cons of refinancing by answering a few questions. You never know until you ask.

Tapering impacting interest rates

Yesterday, The Mortgage Blog focused on the Federal Reserve’s QE3 Tapering strategy. Today, let’s discuss how Tapering could impact the interest rate market.

Most analysts felt interest rates would rise as the Federal Reserve exited the bond buying business. A funny thing has happened so far in 2014… the market has slightly improved over the course of the month. This can be partly attributed to the Federal Reserve’s decision to not exit the bond market in one fell swoop. It is also because of current economic news in the world.

With the release of some stuttering US economic news, along with other key global economies showing signs of slowing down(China), these factors are leading to a global selloff of stocks in all of the world’s markets. All of the sudden, US Bonds are being viewed as a safe haven. Foreign investors are buying bonds at a faster rate than the Federal Reserve is exiting the market.

The Federal Reserve’s exit plan, so far, was well thought out and enacted at the right time. Interest rates have not increased, and bond markets are stable. What does this mean for those looking for a new mortgage?

The prevailing theory is interest rates would climb into the upper 4’s. Instead, rates have stayed in the low to mid 4’s. Use this opportunity to still take advantage of historically low interest rates. Whether buying a new home or refinancing an existing one, now is the time to get started. If the property is in the state of Georgia, I can help get the process underway.

HARP 3? Maybe!

When HARP was created by the government to refinance homes that were underwater, the goal was for seven million homeowners to use the program. Due to the guidelines, HARP got off to a slow start. Roughly two years after the program began, less than one million homeowners were able to take advantage of it. This caused the government to rework the guidelines, and HARP 2 was born.

By November 2012, HARP 2 was in full swing and the pace of refinancing tripled. Even still, the total number of homeowners able to use HARP is well below the goal of seven million. To help reach the goal, HARP 3 is being proposed. To be clear, nothing has passed Congress. That means HARP 3 doesn’t yet exist, but it is gaining traction.

Here are some of the potential changes to come with HARP 3:

1. Expand HARP to include all loans and not just those owned by Fannie Mae and Freddie Mac. This would include subprime, Alt-A, stated income/asset, and no doc loans.
2. Eliminate the cutoff date of May 31, 2009 and allow all qualifying homeowners to use HARP.
3. Allow homeowners to take advantage of HARP more than once. Homeowners who used HARP when it first came out got a rate in the mid to upper 4’s. As we all know, interest rates dropped into the 3’s, but homeowners who had already used HARP couldn’t take advantage of these historically low rates.
4. Allow high balance loans to use HARP.

As I said, nothing is imminent as the proposed changes have not been approved by Congress. We at least know some of the proposed changes. Once there are concrete details on HARP 3, The Mortgage Blog will certainly let you know.

HARP Extended

HARP 2 has officially been extended through 2015. Originally it was set to expire at the end of 2013, but no more!

I know what you may be thinking, “what is HARP?”

HARP is the refinance program created by the government to help homeowners who are underwater refinance their current home loan and take advantage of historically low interest rates. HARP is also known as Freddie Relief, DU Refi Plus, and more names, but it is all the same program.

How do you qualify? Assuming you are making your mortgage payments on time, it comes down to only two criteria:

1. Does Fannie Mae or Freddie Mac own your loan? You can find out by going here for Fannie Mae, or here for Freddie Mac.
2. If Fannie or Freddie has your loan, then was it securitized prior to June 1, 2009

If you can answer yes to both of those, you are most likely good to go. It doesn’t matter if you have PMI, a second mortgage, or anything like that. Those are obstacles that can be overcome. The one thing HARP cannot do is consolidate loans or allow you to take cash out. HARP is designed to refinance and lower the payment on your first mortgage.

If you are sitting out their with a mortgage you got prior to June 1, 2009 and haven’t refinanced yet, you should explore this possibility. You can get started today by completing a loan application and seeing if you qualify for HARP. It doesn’t matter if you owe more than your home is worth, you could still refinance into a lower rate.

New Years Resolution – Do HARP in 2013

The government’s Home Affordable Refinance Program, known as HARP, is slated to run through 2013. If you haven’t taken advantage of HARP yet, time is beginning to run out.

HARP began in early 2009 as a way to help homeowners underwater on their mortgage refinance into the historically low interest rates of the past couple of years. The goal was to refinance 7 million households. Since the number of homeowners qualifying to use HARP wasn’t quite hitting the target, it was revamped into HARP 2 back in late 2011. While the program was overhauled, the date for the program coming to an end wasn’t extended.

While there is talk of an extension and even a HARP 3 (to allow more homeowners to use it), for now it is all talk. To ensure you are able to use HARP, make it your new years resolution to refinance using HARP before the end of 2013.

What is HARP:

• You must have a conventional loan that is owned by Fannie Mae or Freddie Mac
• You needed to have got your loan prior to March 1, 2009 (for Fannie Mae’s version) or prior to June 1, 2009 (for Freddie’s version)
• Mortgage payments must have been made on time in the last year
• If you have a second mortgage OR pay monthly PMI on your mortgage, you most likely still qualify for HARP

Those are just the general guidelines. If you bought your home in mid 2009 or earlier, made payments on time, and have a conventional loan, it is worth checking out to see if you do qualify for HARP and can refinance into today’s historically low interest rates. If your home is in Georgia, I can help you get the ball rolling on the refinance. Contact me today to get started.

HARP 2.0 review

HARP 2.0 kicked into full gear during the spring. The revamped program has been around for roughly 5 months now. It is time to look back and see if it is working as it was originally advertised. Some of the changes included homeowners being able to refinance with any lender regardless of if they have PMI, a second mortgage, or if they are really, REALLY underwater on their mortgage.

Let’s look at each of those from my own client’s experiences and what has been commonly found true in the industry:

#1. Homeowners can refinance even if they are underwater on their mortgage and still not pay PMI if they do not currently pay PMI.

This is working out as planned. If a homeowner does not have PMI on their loan and qualify for HARP, then the refinance can take place and no PMI will be required for the new loan.

#2. Homeowners can refinance even if they DO have PMI on their current loan.

This is mostly true. Almost all of the PMI companies to allow for transfers of the current mortgage insurance policy to the new loan. Your loan officer will be able to determine who has your PMI and if they allow for PMI transfers.

#3. A homeowner can refinance even if they have a second mortgage.

This is probably mostly true as HARP 2 allows unlimited total loan to value. Since HARP 2 began, I have not had a subordination request denied by a second mortgage company. This isn’t to say NO ONE has had one denied. I’m sure someone, somewhere has still had a subordination request denied. From my experience, HARP 2 is working as advertised in this regard.

#4. A homeowner can refinance even if they are REALLY underwater on their mortgage.

Depending on what you read, this can be true or untrue. There have been reports of some homeowners still being denied, but there are now no limits on the loan to value. Homeowners that were previously denied for being too far underwater are able to refinance.

#5. A homeowner can refinance with any lender using HARP 2.0.

This one seems to be mostly no if the loan to values exceed 125%. If the loan to value is at or below 125%, then yes, in most cases many banks and mortgage brokers can do the refinance. However, when the loan to value moves over 125%, then fewer banks and brokers can actually do the refinance. For some reason, 125% seems to be the cutoff for the “any lender” aspect of HARP 2. If a homeowner falls into this category, then their current loan servicer is probably their only option.

For my own mortgage, I was in this same situation. My loan to value sits over the 125% level, and I was unable to do the HARP 2 refinance through the company I work for. I had to use my current loan servicer. The good news is, I was able to refinance my mortgage to a rate of 4.250%. The only downside was the interest rate. My rate was roughly 0.500% higher than the rate I could have got somewhere else. I didn’t have a choice as I needed the unlimited loan to value. A rate of 4.250% was better than not refinancing at all.

The moral of the story – HARP 2 has mostly accomplished what it set out to do. The only caveat being if one needs an unlimited loan to value refinance. Under that scenario, the options mostly seem to be limited to one’s current loan servicer.

How should a homeowner proceed? I would contact a loan officer with your preferred lender first. They should be able to review your situation and see what you might qualify for with HARP 2. If you do need an unlimited loan to value and your current loan servicer, then you can call and see what they can offer. The advantage of contacting your preferred lender first is you’ll know your options and the going interest rates that are available. That could help when negotiating with your servicer if they are you only option.

Whether it is your primary residence, a second home, or an investment property… if the home is located in the state of Georgia, I can help. Contact me today, and we can evaluate what you qualify for with HARP 2.

Accidental Landlord and HARP

“Accidental Landlord” is the term being thrown around to describe the scenario when a homeowner bought a new primary residence but was unable to sell their current primary residence. When this occurs, the former home they still own is converted into an investment property. Would these homes be eligible for HARP?

The short answer is – yes. If the homeowner qualifies for HARP (the major qualifying points of HARP include Fannie/Freddie holding the loan, got the loan prior to March 1, 2009, and current on the payments), then there is a good chance they can use HARP on this property.

What are some of the details a homeowner needs to know:

• The max loan to value (known as LTV) may not be unlimited when HARP 2 fully kicks in later this spring. The unlimited LTVs may only be for owner occupied homes and not investment properties. The max LTV on the “accidental landlord” properties may be limited to something like 125% or 105%. We won’t know for sure until HARP 2 is fully rolled out.
• While they are similar, Fannie Mae and Freddie Mac may handle this scenario differently from one another. First, find out who owns your mortgage. You can do this by using their online look up tools. To check Fannie Mae, use this link. For Freddie Mac, go here. Then we’ll need to check the individual guidelines for Fannie Mae and Freddie Mac to see how each handle the “accidental landlord” scenario.
• You also need to let your loan officer know if you pay private mortgage insurance (PMI), have Lender-Paid PMI (LPMI), have a second mortgage, or if the property is a condo. Any of these can change the course of how the loan is processed.

There are some hurdles to jump through if a homeowner became an “accidental landlord.” That said, there is the possibility of using HARP even if you converted your former residence to an investment property because you couldn’t sell it. If this describes your situation, and the property is in Georgia, contact me and we can explore the possibility of using HARP to refinance that property.