Thomas Crate

Last April, president Obama launched a housing relief plan to help millions of homeowners. Since then, less than one percent of potential homeowners have used the plan to refinance. The government is making every effort to expand the reach of the program and encourage homeowners to refinance into more affordable mortgages. For homeowners considering refinancing, or looking to save their home from foreclosure, Obama's plan is still active, and may be able to help. The Story behind Housing Relief: The housing crisis of 2009 forced the government to take historic steps to help homeowners. When President Obama launched the Making Home Affordable (MHA) program last April, his goal was ambitious: Help millions of American homeowners by getting them more affordable mortgage payments. The plan, Obama said, would provide relief for 7-9 million homeowners. Since then, the plan has helped a fortunate few, who have known about it and taken advantage. John Jordan and his wife, for example, purchased a home in 2004, and due to declining property values were finding it difficult to refinance their home loan. With MHA, they were able to get a loan at a much lower rate. "We’re quite happy the program was there, or else we would not have been able to proceed with the refinancing," says Jordan, who purchased the home in 2004. However, most homeowners have failed to take advantage of the program. A recent report shows that although 9 million homeowners potentially qualify, only 85,000 homeowners have refinanced and taken advantage of the substantial benefits offered by the program. There are a number of reasons why the plan has come up short. One is lack of awareness. In order to spread the word about relief opportunities, the government launched a campaign highlighting the benefits or refinancing with MHA. Another problem lies with the banks. Although Obama's program encourages banks to refinance troubled loans, many banks initially delayed and stalled MHA refinance applications, due to tight credit markets. Since then, the credit markets have opened up and the banks have expedited their processes, making the refinance process much easier and smoother. Finally, under the rules initially outlined in the plan, if a homeowner owed more than 105% of the value of their house, they were ineligible to refinance under Obama's plan. Since then the government has increased the limits so that a homeowner who owes 80-125% of the value of their home is able to refinance under the plan. The new limit opens up refinancing opportunities to a huge class of homeowners previously ineligible. Rates Close to All-Time Lows: Experts expect the number of refinance applications to rise in the coming months. The main reason for the expected increase is that fixed mortgage rates have fallen to levels that are close to 30-year lows. For homeowners with rates locked in at much higher levels, Obama's plan offers a clear money saving opportunity. Furthermore, as the deadline for the plan for the plan draws near, more homeowners will be racing to submit their applications. According to Marve Stockert, executive director of IAMP, "this type of program may not come around again." Home Affordable Refinance expires on June 10, 2010 Although Obama's refinance plan probably won’t help the 7-9 million homeowners originally hoped for, the government is taking all steps to make sure that as many homeowners as possible get relief. Though MHA makes no guarantees, there’s no reason a decrease in your home value should prevent homeowners from refinancing in the current market. Article by Godwin Alexander

He is not a mortgage broker. But for a time, President Obama seemed to be playing one on television, urging Americans not to miss out on rock-bottom refinancing rates. "There are seven to nine million people across the country who right now could be taking advantage of lower mortgage rates," President Obama said, promising savings to average American families of $1,600 to $2,000 a year. "That is money in their pockets." The average rate on 30-year fixed mortgages was the lowest level since 1971, which the president used to bolster his argument for why refinancing is so important. Families will have more money to spend, which will help the economy. If that happens, the values of homes are likely to rise, which will begin rehabilitating the housing market.

Homes are on sale, sellers are motivated, and interest rates are at historic lows...but may not stay that way, which means it makes sense to get moving on that home purchase or refinance you've been contemplating. But if you or one of your clients is among the smart individuals who are going ahead and taking advantage of the low home loan rates to be had right now, there are a few things to be aware of.

With interest rates at record lows, all lenders in the US have recently seen a sharp increase in loan applications - right at the time that many lenders have cut headcount to save money in a challenging economy. This means that timeframes needed for underwriting, approvals and closing have become longer than normal. Some companies have chosen to actually raise rates just to slow down the volume to a manageable level.

Sound crazy? No crazier than when you go to buy that hot new vehicle...only to find that there is no price negotiation. In fact, you wind up lucky to just pay the sticker price, as the demand usually allows the Dealer to add a markup to the price. And you don't get the car right away; you have to wait on a list for your turn to come up.

Right now, home loans are like that hot new car - but with the timer ticking on interest rates locks, there are a few things you can do to protect yourself.

First, longer lock in time frames than might normally have been considered are a necessity, to ensure that the file has time to be processed, underwritten, approved and closed in time to protect the rate lock in this extremely volatile climate. And that longer, safer lock-in period may be a bit more costly - but it's money well spent. Overall, the mind set here should not be one of greed. Don't try to squeeze every last drop out of rates. If you are within a quarter percent of the lowest rates offered in the history of this country, you did very well. And rates always shoot up higher at a much faster pace than when then dip lower. So if the savings or opportunity make sense - grab it.

Next, responding quickly to requests for information or documentation is important - the faster the file is submitted and approved, the better off we are to keep that great interest rate protected.

Finally, be aware that it may be a smart idea to pay points to gain the best interest rate - and sometimes is even necessary in today's market. Giant mortgage buyers Fannie Mae and Freddie Mac have recently imposed more "risk-based pricing adjustments", meaning that even credit scores and loan to values which in the past would have been considered very low risk, may now be subject to mandated fees by Fannie and Freddie. And based on the way lenders have changed their rate sheets over time, there is now very little "premium pricing", which used to allow options for fees like these, points or other closing costs to be covered in return for a slightly higher interest rate.

Right now is still an excellent time to act, before the great low rates of today get away from us. But let's be smart - call me for information on how we can get started right away.