Recent News about the Home Affordable Refinance Program

On October 24, 2011 the Federal Housing Finance Administration, with Fannie Mae and Freddie Mac, announced changes to the Home Affordable Refinance Program (HARP) to make it easier for certain homeowners to refinance their home mortgages and take advantage of historically low interest rates currently available.

Specifically, HARP is designed to allow qualified borrowers to refinance without the cost of Mortgage Insurance EVEN IF the market value of their property has fallen to the point that they currently have little or no equity in their property (but only if the borrower is not currently paying for MI).

Q:           Who is eligible for HARP?

A:            Only borrowers whose existing mortgage was sold to Fannie Mae or Freddie Mac prior to June 1,             2009.  And, borrowers must be current on their mortgage payments with no late payment in the     past 6 months and no more than one late payment in the past 12 months.

Q:           How do I know if my mortgage is owned by Fannie Mae or Freddie Mac:

A:            For Fannie Mae, go to:  www.FannieMae.com/loanlookup/ or call 800-7FANNIE.

                For Freddie Mac, go to:  ww3.FreddieMac.com/corporate/ or call 800-FREDDIE.

Q:           When are the changes effective?

A:            Fannie and Freddie will provide additional information to lenders by November 15. We don’t yet             know the timetable for implementing the changes, but CapCenter will move as quickly as                possible after this information is available.

Q:           Does a borrower have to refinance through their current loan servicer?

A:            No, a borrower may choose a different lender.  CapCenter is able to help borrowers whose loans            are owned by Fannie Mae.

Q:           May I increase my loan amount to get some extra cash?              

A:            No, this only applies to borrowers who are interested in refinancing only their outstanding          balance.

Q:           Should I wait to refinance until these changes are implemented?

A:            Given the historically low rates currently available, we generally suggest that borrowers do not                 wait, but we would be glad to discuss your specific situation with you.

Please check back with us on November 15 for additional information.

1.  Lower your monthly mortgage payment

With rates back down to historic lows, thousands of borrower are lowering their monthly payments by refinancing to a lower interest rate.  And, with zero closing costs from CapCenter, you immediately realize the benefit of the lower monthly payment.

2. Consolidate your debt

Low mortgage rates make it a “no brainer” to pay off higher interest rate debt such as credit cards.

3.  Switch to a fixed rate product

Protect yourself from higher future interest rates by locking in a low fixed rate for the life of your loan.

With CapCenter’s zero closing cost loans, even a small rate difference can lead to substantial savings every month and over the life of your home loan.  Our process is so efficient and easy – we’ll do the work and you enjoy the savings!

FHA loans are quite popular these days, especially for new home purchases.  The 3.5% down payment is extremely attractive to first time home buyers and others seeking a low down payment loan.  FHA loans also allow a non occupant co-borrower (such as a parent) to co-sign on the loan. 

We are often asked how long the Mortgage Insurance must stay on an FHA loan, and the answer, as explained below, depends on the loan term. 

This is an excerpt from the FHA website (http://www.fha.com/fha_requirements_mortgage_insurance.cfm):

Mortgage insurance is a policy that protects lenders against losses that result from defaults on home mortgages. FHA requirements include mortgage insurance primarily for borrowers making a down payment of less than 20 percent.

New FHA Annual Mortgage Insurance Premium
President Obama signed a bill in August of 2010 giving HUD the flexibility to increase Annual Mortgage Insurance Premiums. According to Mortgagee Letter 11-10, the increase in Annual Mortgage Insurance Premiums is effective for all case numbers dated on or after April 18th 2011.

HUD is implementing a 25 basis point increase in the annual premium for terms of greater than 15 years and equal to or less than 15 years. On loans with greater than 15 year terms, the new amount depends on the down payment. If the down payment is equal to or greater than 5%, the new Annual Premium is 110 basis points (bps). If the down payment is less than 5%, the new Annual Premium is 115 basis points (bps).

On loans equal to or less than 15 year terms, the new amount depends on the down payment. If the down payment is equal to or greater than 10%, the new Annual Premium is 25 basis points (bps). If the down payment is less than 10%, the new Annual Premium is 50 basis points (bps).

Upfront Mortgage Insurance Premium
Effective for loans on or after October 4th, 2010, for FHA regular purchases and refinance products, the Upfront Mortgage Insurance Premium is 1.00%, which decreased from 1.5%. This amount remains unchanged.

FHA’s monthly mortgage insurance payments will be automatically terminated when these conditions occur:

• For mortgages with terms 15 years and less and with Loan to Value ratios 90 percent and greater, annual premiums will be canceled when the Loan to Value ratio reaches 78 percent regardless of the amount of time the mortgagor has paid the premiums.
• For mortgages with terms more than 15 years, the annual mortgage insurance premiums will be canceled when the Loan to Value ratio reaches 78 percent, provided the mortgagor has paid the annual premium for at least 5 years.

Some highlights from yesteday’s Federal Open Market Committee meeting: 

• “ Information received since the March meeting indicates that the economic recovery is proceeding at a moderate pace and overall conditions in the labor market are gradually improving.” 
• More importantly to those in the market for a mortgage (either to purchase a home or to refinance), the Committee decided to maintain its existing policy of reinvesting principal payments from its securities holdings and will complete purchases of $600 billion of longer-term Treasury securities by the end of the quarter. 
• The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continue to anticipate that economic conditions…are likely to warrant exceptionally low levels for the federal funds rate for an extended period.

As CapCenter evaluated the impact of these statements on the bond market, we determined that as of Thursday morning, April 28, we could could lower our rates just a tad.  This is great news for those who are in the process of refinancing or purchasing or selling a home.  Historically low rates are still available — but they won’t be around forever!

Many people are asking about private mortgage insurance due to concerns about the current market value of their homes.  Here are some important facts for you to know:

• If you put less than 20% down on a home loan, your lender will require Private Mortgage Insurance (PMI).  PMI protects the lender if you default on the loan.
• The Homeowners Protection Act of 1998 establishes rules for automatic termination and borrower-requested cancellation of PMI.
  • PMI must be terminated automatically when you reach 22% equity in your home based on the original property value IF your mortgage payments are current.
  • You may request the cancellation of PMI when you reach 20% equity in your home if your payments are current.
  • Borrowers must be told at closing and reminded once a year about PMI termination and cancellation.
• For many borrowers, PMI is tax deductible through 2011.  Here’s how it works:
  • Borrowers with adjusted gross incomes up to $100,000 may be able to deduct 100% of their 2011 premiums.
  • Deductions are phased out in 10% increments for borr0wers with adjusted gross incomes between $100,001 and $109,000.*

With rates STILL at (almost) historic lows, it might make sense to refinance even if PMI is required on your new loan.  Remember - it doesn’t stay on the loan for the entire loan term, but a lower interest rate will benefit you over the life of the entire loan.  Check with a CapCenter Loan Consultant to learn more.

* Borrowers should consult their tax advisers for applicability of this deduction to their specific circumstances.

CapCenter recently launched a new phase of our advertising campaign in which we use “real CapCenter customers” to help tell our story of great rates, zero closing costs, and tremendous service.  Early results reinforce the perspective that “people believe people.”  For more on this topic….keep reading…. 

This article has been copied (with permission) from Fred Moore’s blog.  Fred is the founder and CEO of Big River Advertising in Richmond, VA.

There’s a New #1.Posted on January 11, 2011 by Fred Moore

No, it is not Auburn University.

From my perspective, there is a new #1 in the category of most influential and significant marketing articles in the last fifteen years.

The winner – “Branding in the Digital Age. You’re spending your money in all the wrong places,”  By Daniel C. Edelman.  You can find it in the December, 2010 edition of the Harvard Business Review.

This replaces my previous #1 which dates all the way back to September, 1996.  The classic “Building your company’s vision” by James Collins and Jerry Porras.

This article (later to become the foundation for the book “Built to Last” and the sequel “Good to Great”)  was critical in analyzing organizations that “get it” and those that “fake it.”

From our perspective at Big River, this “get it” question was a fundamental examination that had to happen prior to any great and effective marketing strategies.  (This article is also in the Harvard Business Review and no, I am not a salesperson for this publication)

But it’s a new day.  Things evolve.

If you want to seriously make your marketing and communications dollars work harder now– read this December, 2010 article.

It is fundamentally enlightening into why things, from a marketing perspective, are working (or not working) today versus several years ago.

The article concisely demonstrates the change in how, in today’s world, decisions are made and why different communication tactics (social media, smart web sites, transparent access to information) are critical components in helping this process along.  And, it enlightens the reader why other marketing tactics are less effective today.

One slight refinement I would make to my Harvard breathren (if I may be so bold) – they keep referring to the “consumer” decision journey.  It is broader than consumers.  This is how people make decisions today.  Business to business decisions.  Whether to become part of an organization decision.  All kinds of decisions.

It’s not just for ‘consumers’ anymore.

A critcal point in the article is the line: “the single most powerful impetus to buy is someone else’s advocacy.”

Wow, that sounds a heck of a lot like our “people believe people” mantra here at Big River. 

Listen for CapCenter’s customer testimonials on a variety of  Virginia radio stations and cable tv stations.

As rates start to rise, many borrowers are considering an Adjustable Rate Mortgage.  Though these types of loans lost favor in 2008-2009, they are making a comeback and could be the right choice for borrowers who plan to move in the next 5 to 7 years.

An ARM might also be your best option if you are planning to pay off your mortgage in the next 5 to 7 years or you expect your income to rise substantially allowing you to comfortably handle a higher payment in 5 to 7 years.

And, don’t forget, ARMs do have built in caps which limit future payment increases.

ARMs are more complex than fixed rate mortgages and it’s critical that you understand “what you’re getting into” if you are considering an ARM.  Be sure to take the time to fully understand the benefits and the risks of an adjustable rate mortgage vs. a traditional fixed rate.

Though rates have eased up slightly over the past 6 or 7 weeks, it’s still a great time to refinance — especially with CapCenter’s zero closing cost mortgage program.

One often hears that it’s not worth refinancing unless you can reduce your rate by “x” amount, but that conventional wisdom doesn’t apply if you’re not paying closing costs.  We often counsel our borrowers to go ahead and refinance, but continue to make the same payment as their previous loan.  This enables them to pay off their current mortgage more quickly – which saves them ton of money!!

Information received since the Federal Open Market Committee met in September confirms that the pace of recovery in output and employment continues to be slow. Household spending is increasing gradually, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software is rising, though less rapidly than earlier in the year, while investment in nonresidential structures continues to be weak. Employers remain reluctant to add to payrolls. Housing starts continue to be depressed. Longer-term inflation expectations have remained stable, but measures of underlying inflation have trended lower in recent quarters.
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. Currently, the unemployment rate is elevated, and measures of underlying inflation are somewhat low, relative to levels that the Committee judges to be consistent, over the longer run, with its dual mandate. Although the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability, progress toward its objectives has been disappointingly slow.

To promote a stronger pace of economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate, the Committee decided today to expand its holdings of securities. The Committee will maintain its existing policy of reinvesting principal payments from its securities holdings. In addition, the Committee intends to purchase a further $600 billion of longer-term Treasury securities by the end of the second quarter of 2011, a pace of about $75 billion per month. The Committee will regularly review the pace of its securities purchases and the overall size of the asset-purchase program in light of incoming information and will adjust the program as needed to best foster maximum employment and price stability.

The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels for the federal funds rate for an extended period.

The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to support the economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; James Bullard; Elizabeth A. Duke; Sandra Pianalto; Sarah Bloom Raskin; Eric S. Rosengren; Daniel K. Tarullo; Kevin M. Warsh; and Janet L. Yellen.

Voting against the policy was Thomas M. Hoenig. Mr. Hoenig believed the risks of additional securities purchases outweighed the benefits. Mr. Hoenig also was concerned that this continued high level of monetary accommodation increased the risks of future financial imbalances and, over time, would cause an increase in long-term inflation expectations that could destabilize the economy.

People are constantly making mistakes when it comes to home financing.  Whether it’s a refinance or a home purchase, there are certain precautions to take to make sure you end up with the best loan product for your situation.  It is similar to the instinctive process of finding a mate. 

It’s far too common for people to look at one rate, one term, and pull the trigger.  Shop around!  You don’t talk about kids and a white picket fence on a first date.  Why?  Because you do your research, and make sure she (or he) is the right one.  Sure, she might seem perfect.  But when you meet all eleven of her cats, you will most likely begin searching elsewhere.  Mortgages vary just as much as people, so be sure to look as many places as possible for the best rate/term package for you.

Be sure to check your credit score BEFORE you apply for a loan.  Have you ever walked into a first date without rehearsing at least a few of the inevitable questions? Of course not – because you want to seem eloquent.  You want to know yourself.  Before applying for a mortgage, you need to know where you stand and the products that will be made available to you.   Check out AnnualCreditReport.com for a free lesson in your credit history (and E-harmony.com for an expensive lesson in who you’re compatible with).

Another common error is falling in “love” with a house and signing up for payments you can’t afford.  Your monetary position dictates where you live, not vice versa.  We all want to date that tall blonde, but her infatuation with Italian leather and German sports cars limit those who actually can.  Having easily affordable house payments will keep you from worrying down the road (and, God forbid, foreclosing).  Getting a pre-approval letter from a lender like CapCenter will help you avoid this dating (and lending) pitfall.

Finally, be sure to get a written offer from your lender.  While you can be sure an offer from CapCenter is accurate and above board, you never want to be assaulted by a pack of nasty surprises at the closing table.  Like an air-tight prenuptial agreement, you want to know what‘s being promised is what you’re getting.    You should never be caught off guard by your mortgage lender, either.  

In sum, you know you won’t get seriously involved with someone without doing your due diligence.  Getting to know their personality.  Learning about their passions.  Analyzing their facebook account.  Whether it’s for a refinance or a home purchase, the same amount of care and precaution needs to go in to finding a mortgage.