The New HARP and Higher FHA Loan Limits
Mortgage lenders across the country have been talking about the new HARP loans and the higher FHA loan limits that were raised to help consumers that reside in high cost regions. CoreLogic released new data showing that seven out of ten homeowners are below 80% loan to value. That means that this group of consumers have less than 20% home equity in their property. CoreLogic also reported that these struggling group of homeowners have higher home loan interest rates and in many cased these consumers do not meet the current guidelines that lenders are requiring on refinance transactions. Obama recently signed off on extending the Home Affordable Refinance Program. This is a government sponsored refinance program for borrowers that have a mortgage owned by Fannie Mae or Freddie Mac. According to Nationwide, the HARP loan provides fixed rate refinancing for borrowers that meet the requirements on a 1st mortgage. The HARP: refinance does not allow borrowers to include a 2nd mortgage so many borrowers who have two liens on their house will not be eligible.
- Higher loan amounts will help consumers in high cost areas qualify for affordable FHA mortgages.
- There are nearly 22 million borrowers, or 45% of all borrowers, that have mortgages with an 80% or more loan-to-value ratio, and 69% of those mortgages have interest rates higher than 5%. Conversely, only 54 % of borrowers who have less than 80% loan-to-value have above-market interest rates. While above-market interest rates make home refinancing loans at today’s record low interest rates a cost-effective step for qualified homeowners, it can be more difficult for borrowers with above-average loan-to-value ratios to qualify for refinancing.
- The top five states combined have an average underwater mortgage ratio of 41.4%, while the remaining states have a combined average negative equity ratio of 17.6%.
Read the original article on underwater mortgages from Nationwide.