Refinance Mortgage Applications to Rise as ARMs Reset Higher

As if we need another kick in the stomach during this trouble economic period, thousands of US homeowners are experiencing fresh payment shock on their home mortgages as adjustable rate mortgages reset higher. Unfortunately, this is leaving countless homeowners in a struggle to make ends meet at the end of each month.

Expect a rise in the number of refinance mortgage applications as the full wave of the current ARM resets hit across the country.

All of this is in face of declining home values throughout America, leaving many homeowners in an “underwater” mortgage scenario. This is where the value of the borrower’s home has decreased to a level that is below the principle balance of the mortgage on the house.

The actual number of ARMs due to reset this year is unclear, but analysts estimate that as many as 1.3 million borrowers took out $389 billion in option ARMs in 2004 and 2005 alone. Many of these home loans will be due to adjust this year.

Another worry is that the Fed will increase interest rates in the coming months in order to fend off inflation. These are the rates often tied to ARM indexes and could result in more payments being adjusted upward sooner.

Add the soon ending home buyer tax credit and this could pack another wallop to an already ailing housing market.

For those that can’t refinance out of their adjustable rate mortgage, they would be advised to try and work something out with their lender. The Obama administration has been increasing pressure on banks to help borrowers, but it's still up to the banks to decide if they will. We have heard this story too many times in the past couple of years, so don’t expect much help with government “subsidized” mortgage loan modifications.

Home foreclosures have steadied somewhat recently, could reach 4 million in the US in 2010 according to RealtyTrac. Let’s hope the numbers are wrong.

On the mortgage refinance rates front, the 10-Year treasury yield has backed off a bit over the past week, causing a slight dip to already attractive home loan interest rates.

If you are considering a home mortgage refinance now and need some help, have questions, or need some competitive refinance rate quotes, please check out the popular Refinance Tool Box. Just give a call at 888-850-9888 or fill out a Rate Quote Request online for professional assistance without the aggressive high-pressure sales tactics.

May the Mortgage Refinance Rates be with You!

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Whitehouse Unveils Home Mortgage Assistance Program

Well, the day has finally come for the government to unveil the details of its home assistance mortgage program, aimed at helping up to 9 million homeowners to stay in their homes and avoid foreclosure. Overall, it is targeted to provide subsidized payment to lenders and mortgage servicers in exchange for a modified home loan for borrowers that qualify for the plan.

One to four unit primary residence homes will qualify under the plan, but investment properties are excluded.

The Treasury will partner with lenders to reduce monthly mortgage payments to a 31% front end dti (new principle, interest, taxes and insurance payment divided by individual’s gross monthly income). There is no restriction on the back end dti (which includes PITI plus all other credit items), but those that come in at 55% or over will be required to work with a HUD approved counselor.

Loan servicers will receive an upfront incentive payment of $1,000, and an additional $1,000 yearly payment for three years, as long as the borrower stays with the modified loan program. Borrowers will receive a pay-for-performance success payment up to $1,000 for five years (as long as all monthly payments are made on time) that will go directly to reducing principal. Also, a one-time bonus incentive payment of $1,500 for lenders and $500 for servicers, will be paid for loan modifications done for borrowers that are current on their home mortgage. No modification charges or fees will be borne by the borrower.

Lenders will only be compensated when the front end dti of 31% is achieved. The Treasury will pay half of the difference between the monthly payment reduction from 38% dti to 31% dti.

Will this be enough incentive for lenders to modify loans for those that cannot, or are having difficulty making their monthly mortgage payments? The incentives will most likely help, but it will most likely come down to a case by case situation. The cost of added administrative duties, coupled with the current high fallout by borrowers that have already had their home loans modified, may be enough for many lenders to limit their participation in the program.

Only time will tell whether the program is successful, and hopefully we will have a more accurate picture of it’s impact in the coming months. Anything that will help people to stay in their homes and prevent further foreclosures will be a benefit for us all.

May the Mortgage Refinance Rates be with You!

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