More Changes to Make Refinancing Easier

Low refinance rates and recent changes to make refinancing possible for many homeowners is driving refinance applications higher. Since last October refinance applications have soared 50 percent. Millions of more homeowners are unable to take advantage of low rates because of barriers to refinancing; including the biggest barrier, owing more then their home is worth.

Just this past week President Obama called on Congress to make more changes to help homeowners who want to refinance. The President is asking to have a home appraisal be waived when refinancing. The cost of an appraisal isn't the most expensive cost when refinancing but often when an appraisal comes in lower than the loan amount or less than the required 20% equity the homeowner can't refinance.

The President is also asking to expand the refinance program that allows homeowners to refinance their loan even if they are underwater on their loan but are current on their payments. Right now only homeowners who have their mortgages backed by Fannie Mae or Freddie Mac can refinance if they are underwater on their loan and current on their payments.

All these changes would help homeowners who can save significant amounts of money by refinancing but can't because of owing more then their home is worth. Millions of homeowners are in this situation has home prices have declined as much as 50% in some areas of the country since the housing peak.

The last proposal Democrats will introduce would waive closing costs for refinancing for homeowners who apply their mortgage savings to their principal.

In March of this year the Federal Housing Administration announced price cuts to FHA’s Streamline Refinance Program. Starting June 11, 2012, the FHA will lower its Upfront Mortgage Insurance Premium (UFMIP) to just .01 percent and reduce its annual premium to .55 percent for certain FHA borrowers.

This significant reduction in mortgage insurance required for FHA loans can benefit millions of borrowers whose mortgages are currently insured by the FHA. To qualify for lower refinance insurance, borrowers must be current on their existing FHA-insured mortgages which were endorsed on or before May 31, 2009.

 
Author: Brian McKay
May 15th, 2012

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