“Intereset rates are at record lows!” says the guy on the radio as I’m driving to work. He’s right you know, rates have dropped down to level we haven’t seen since the 50s and even then only for a short period of time. This is an unprecedented opportunity that only could happen once in a generation and, like the 50s, it won’t last long.
Why then, have so few people on the whole not taken advantage of 30 year fixed rates in the 3s? The big problems of course are jobs and home equity. High unemployment and disappearing equity have made it hard for people to take advantage of these rates.
There are programs designed to help of course. Fannie Mae and Freddie Mac both have loan programs under HARP that allow someone to renegotiate/refinance their loan if it is a Fannie/Freddie loan and it is in good standing AND the borrower qualifies based on credit and other qualifications. These loans have been considered a bust because the government expected up to three million of these loans to be done and instead got under 900,000.
There is another program that has been in exiistence for years that could be a huge help to millions of homeowners who have FHA loans. The program is called a streamline refinance and it allows borrowers to get new FHA loan at a lower rate to replace their current FHA loan with little or no qualifying. The problem is that over the last few months FHA’s monthly mortgage insurance premuim has more than doubled making it hard to save money by streamlining an FHA loan. Even if the rates drop significantly the increased cost of the mortgage insurance eats into the savings significantly and the loan then won’t qualify.
One little change is needed to help millions of people save money and it won’t cost anyone a dime. FHA simply needs to lower the cost for it’s mortgage insurance for streamline refis. Either lower it across the board or lower it back to the original rate at the time the borrower took out the loan. This would allow people, perhaps millions of them, to get a low rate and save on their monthly payments. This money will then flow back into the economy and spur some needed growth.
FHA would actually benefit from this change as well since there would be a huge increase in the numbers of FHA refis and the new upfront insurance premiums would pay the administrative costs while the monthly MI payments would stay the same on all of the loans refinanced. This is a real win-win.
We’ve all heard by now that the president is looking to expand refinancing options to more amaericans. Here is a way that it can heppen that is easy to change, doesn’t cost anything and frankly, isn’t some hair-brained, “let’s give everyone a loan so I can get re-elected” idea. Best of all, it’s a HUD program so the executive branch has complete and immediate control over any change as well.
