Mortgage Rate News

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There has been a lot of focus lately on the fact that the first time home buyer tax credit has been extended, and and expanded to include some who have not bought a home yet. However, in all of this interest over buying a home, it is also important to consider refinancing. There are a number of advantages associated with refinancing. Dale Siegel, a mortgage expert, offers some advantages of refinancing in her recent book, The New Rules for Mortgages:

1. Lower mortgage interest rate: If you can get an interest rate of a point lower, it can be worth your while to refinance. You’ll pay less in interest, and less overall.
2. Shorten your mortgage term: If you are interested in shortening the amount of time you have to pay a mortgage, you can refinance to a lower term, such as a 10, 15, or 20 year loan. Just be sure you can afford the higher payments.
3. Reduce monthly payment: You can actually reduce your mortgage payment by refinancing to a longer term. This way, you spread out your payment, and lower how much you owe each month. However, you will pay more overall.
4. Consolidate debt: In some cases you can use a cash-out refinance to consolidate debt and make it easier to pay down. Just make sure that you understand the implications, and that you change your debt habits so that you aren’t just getting in deeper.
5. Use the equity in your home: Refinancing can help you access your home equity for use on home improvement projects, or to pay other expenses.
6. Pay down principle: You can also use a refinance as a chance to pay down some of the principle on your home, reducing how much you pay in the long run in terms of interest, and increasing your home equity.

It is important to carefully consider the costs associated with refinancing, and make sure that the benefits outweigh the costs.

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Freddie Mac saw a 3rd quarter loss of $5 billion as foreclosures continue to cause problems and the economic climate makes things difficult for individuals. Freddie Mac also expects, at some point, to request more funds from the U.S. Treasury. HousingWire reports on the state of the housing market and the mortgage market:

“We continued to see some positive housing market developments, including higher volumes of home sales and modest increases in house prices in certain areas of the country,” said CEO Charles Haldeman. “However, we believe that factors like high unemployment, excess inventory and rising foreclosures will continue to impede a full recovery for some time and put further downward pressure on house prices. We expect to request additional funds from Treasury as this prolonged deterioration of market conditions continues to negatively impact our financial results.”

Guaranty programs continue to see government support as the Obama Administration moves to help guaranty loans and provide insurance so that people can refinance their homes or get loan modification. However, it may not be enough. Foreclosure continue to mount, and these programs are still largely voluntary on the part of mortgage lenders. Additionally, loans need to be serviced by Fannie or Freddie in order for borrowers  to take advantage of many of the programs.

In the end, there is still a long way to go. Freddie Mac is likely to see more quarters of loss. Fannie Mae is also expected to continue to struggle. Fannie is also looking into more help from the Treasury Department’s senior preferred stock purchase program. It will be a long road ahead, but with Congress extending the first time home buyer credit, and other programs continuing, it is likely that the government will attempt to support the housing market for quite some time. The only question is whether or not the housing market will be able to survive without government help down the road.

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A controversy is brewing over the recent rule changes to the way appraisers are paid, and how they do their jobs. In order to help beat back mortgage fraud, appraisers could no longer be paid by the mortgage lenders and brokers that were trying to get approvals for loans. While forcing independence on appraisers could curtail mortgage fraud and control ballooning home prices in the future, there are also some consequences that have not been foreseen. For those looking to sell a home or refinance, it is often surprising to find out that home values are dropping.

ajc.com offers a look at how things are playing out in some areas, thanks to the new appraisal rules:

The code was intended to make home appraisals more reliable by making appraisers independent of mortgage brokers and real estate agents. Banks and appraisal management companies now assign jobs and forward fees to the appraisers, rather than the people who earn commissions on home or loan sales.

The aim: to reduce the pressure on appraisers to produce the sort of inflated home values that helped justify ever-bigger home prices and mortgage loans in once white-hot markets like metro Atlanta.

Instead, say critics like Alexander, who is president of the Georgia Association of Mortgage Brokers, the change has resulted in many faulty value estimates. Appraisers, who are generally earning lower fees in the new system, are often rushing through assignments and sometimes traveling far from their local territories to do valuations.

Unfortunately, lower fees mean that in some cases appraisers are not interested in doing thorough work. Another problem is that of appraisers from different areas. One way that you can get a closer appraisal to the going market value is to make sure that your appraiser is familiar with your real estate market, and that he or she will understand the nuances of the neighborhood and choose truly comparable homes to base the appraisal on.