Too Late To Refinance?

While many mortgage analysts believe that the refinance wave generated by historically low current mortgage rates had crested months ago, the Federal Housing Finance Agency (FHFA) nonetheless announced the Home Affordable Refinance Program (HARP) will be extended for an additional year to June 30, 2011. Fortunately, borrowers who may be eligible for Fannie Mae’s DU Refi Plus or Freddie Mac’s Relief Refinance Mortgage have been given a reprieve and can still benefit from today’s incredibly low current mortgage rates.

That said, it must also be noted that the Federal Reserve will complete its commitment to purchase $1.25 trillion in mortgage-backed securities by the end of March. It is no secret that this program has kept mortgage rates artificially low for more than a year. Mortgage analysts believe mortgage rates will begin to rise when the Federal Reserve completes its purchase by the end of the month. If refinances seem to be drying up now, it is unlikely the mortgage industry will witness a refinance revival if mortgage rates climb back to the 6% range.

With approximately 1 million homeowners eligible for the HARP program, it is estimated that roughly less than 120,000 homeowners have taken advantage of the program and the extraordinarily low current mortgage rates. The remaining 900,000 or so homeowners who were originally believed to be eligible for the HARP program are either underwater (owe more on their mortgage loan than their home is worth) or do not qualify for the HARP program based on stricter lender guidelines. Others simply have not completed the necessary paperwork. Additionally, some homeowners are so far underwater, even the support offered from HARP program eliminates their possibility of refinancing. Another major factor for borrowers failing to qualify for the HARP program is unemployment. Although recent unemployment figures have shown signs of improvement, there are still too many homeowners out of work.

Unfortunately, for a large number of homeowners, the prospect of refinancing remains out of the question. Although, for a significant amount of homeowners that do qualify, time is of the essence if mortgage rates do begin to rise.

Robert Hyder