Mortgage rates remain low as HARP retools
Mortgage rates continued to hover near record lows this week, reflecting the efforts of the Federal Reserve to reduce long-term interest rates and the effects of a flood of cash fleeing the European debt crisis.
30 year fixed rate mortgage – 3 month trend
The benchmark 30-year fixed-rate mortgage fell 1 basis point this week, to 4.24 percent, according to the Bankrate.com national survey of large lenders. A basis point is one-hundredth of 1 percentage point. The mortgages in this week's survey had an average total of 0.36 discount and origination points. One year ago, the mortgage index was 4.62 percent; four weeks ago, it was 4.38 percent. In Bankrate's weekly rate survey, dating to 1985, the record low for the 30-year fixed is 4.21 percent, set Oct. 5, 2011.
The benchmark 15-year fixed-rate mortgage fell 3 basis points, to 3.47 percent. The benchmark 5/1 adjustable-rate mortgage rose 1 basis point, to 3.17 percent.
Weekly national mortgage survey
Results of Bankrate.com's Nov. 16, 2011, weekly national survey of large lenders and the effect on monthly payments for a $165,000 loan:
World events are conspiring to keep mortgage rates low for borrowers, says David Olson, president of Access Mortgage Research & Consulting in Columbia, Md.
"You've got the Federal Reserve trying to keep rates low, we've got a weak economy, and now we've got a flood of money coming from Europe escaping from the eurozone, which is collapsing," he says.
On top of those factors, the strong dollar and low inflation expectations are keeping rates in check, Olson says.
"The dollar is strengthening as the euro weakens. It's at $1.35 now; I was in Europe in June and it was $1.44," Olson says.
Olson expects those rates to remain low into the foreseeable future as investors seeking a safe haven in the United States acquire safety in American mortgage-backed securities.
HARP 2.0 eases refi requirements
Underwater homeowners looking to take advantage of low mortgage rates got a shot in the arm this week.
The revamp continues for the Home Affordable Refinance Program. Some call it HARP 2.0. Fannie Mae and Freddie Mac announced changes to help more underwater homeowners take advantage of the program, which so far hasn't had much effect on the foundering housing market.
"Overall, it stands to benefit a lot of people," says Jim Sahnger, a mortgage loan officer with FBC Mortgage in Jupiter, Fla. "Everyone's going to have their own opinion about whether it is or isn't enough, but I think it's going to be very helpful."
He says the changes will be particularly welcome in the states hardest hit by the housing crisis, where many homeowners owe much more than their homes are worth. That's because the cap on loan-to-value ratio, once set at 125 percent for 30-year mortgages and 105 percent for 15-year mortgages, has been removed. That cap had been a major roadblock for millions of underwater homeowners in troubled markets, Sahnger says.
Beleaguered homeowners will find it easier to afford those loans once they qualify, Sahnger says. Fannie and Freddie cut the maximum amount they will charge for loan-level price adjustments, the fees added to some HARP refis to compensate for risk. For loans with terms of 20 years or less, there will be no fees at all, and for 30-year mortgages, it may mean a lower surcharge of about 75 basis points, Sahnger says.
Lastly, borrowers who have gone through a bankruptcy or a foreclosure will no longer have to wait for a set period and re-establish credit to qualify for a HARP refinance.
"It really appears that they're trying to make (HARP) as beneficial and easy to qualify for as possible," Sahnger says. "You're certainly not going to be able to please everyone, but you're going to please a lot of people here."
While most of these changes are scheduled to take effect Dec. 1, with the fee change coming as of Jan. 3, the impact of the changes may not be felt until March in some cases, says Sahnger, because they require changes to Fannie Mae's underwriting software. Also, the new guidelines will only apply to refis of mortgages owned by Fannie Mae or Freddie Mac. Federal Housing Administration, or FHA, mortgages won't be eligible.
You can find out if Fannie Mae owns your mortgage using their Loan Lookup tool. Freddie Mac also has a lookup tool.