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Refinance News Headlines: FHA Backlash, Foreclosure Hope, Really Low Mortgage Rates

[Dec 2, 2009.]


It has been a heavy week for refinancing news, with three major themes emerging. By evaluating each of the following refinance trends, borrowers hoping to refinance can gain valuable insight into what's going on with lenders, borrowers, and everyone in between.

FHA Backlash and the Battle to Keep Home Prices High

Congressman Barney Frank of Massachussetts, normally a self-professed champion of the "little people," favors raising the mortgage limits for FHA home loans. With the FHA already experiencing extremely tough financial straits, it would seem a strange time to expose the federal agency to more risk.

But Congressman Frank and those who support raising the FHA mortgage limits see reward in that risk.

Reward in the form of home prices in pricey areas staying high, or at least not falling dramatically.

Jumbo mortgages have begun defaulting at high rates, and this has whole affluent neighborhoods worried. Homes are typically valued by area, rather than individually.

When those appraisals don't come in as planned, those jumbo mortgage refinances become difficult if not impossible, especially for those homeowners who bought their homes between 2004 and 2007.

If the FHA starts buying these bigger loans, though, these bigger loans become easier to get. For borrowers looking to refinance jumbo mortgages, the entry of the FHA into the market would be a great thing.

For the FHA itself, and for the U.S. taxpayer, the wisdom of this move is more suspect.

Foreclosure Filings Fall in October

On the upside, foreclosure filings for October came in at a 3 percent decline versus September. Although still 18 percent higher than October of 2008, any news that the foreclosure epidemic is abating must be counted as fantastic news for anyone looking to refinance a mortgage of any size.

As noted above, the fact that a foreclosed home down the block firesales for 50 percent of the value of other homes in the neighborhood can kill refinance possibilities by ruining loan-to-value ratios, a primary tool used by mortgage lenders to evaluate the risk of making a home loan.

Really Low Mortgage Rates Go Even Lower

Even more good news for refinance hopefuls: mortgage rates are unbelievably low right now...for those who can qualify. Mortgage interest rates dropped another tenth of a point this week, with the average for a 30 year fixed mortgage now standing at 4.89 percent.

Mortgage brokers who can navigate the muddy waters of today's mortgage market are worth their weight in gold in this environment. They're hard to locate, however, because they're extremely busy.

Not always closing deals--that's still no cinch--but definitely trying hard.


About Author:

Andrew Freiburghouse is a writer and businessman. He has worked as a magazine reporter, tax preparer, screenwriter, copywriter, and loan officer. He graduated from Santa Clara University in 1999 with a B.A. in English. Andrew was born and raised in the City of Los Angeles.

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