Archive for Underwater mortgage refinancing
Millions of homeowners took out home equity loans or credit lines over the last decade and many of these borrowers find themselves stuck with an adjustable rate or rate they are not comfortable with. Many borrowers have attempted to refinance equity loans to no avail. Second mortgage loan programs and underwriting guidelines have tightened considerably in the last few years. Home equity lenders are asking for borrowers to have more equity and higher credit scores. Since the housing crisis erupted, many homeowners have lost their equity thus being turned down by lenders in their efforts to refinance.
Refinance applications in the United States declined last week for the 6th consecutive week. Many economists attribute it to rising refinance rates and tighter lending requirements for refinancing. According to the Mortgage Bankers Association, refinance loan applications fell by 10% for the week ended March 25.
Clearly declining home values are hindering many borrowers for qualifying because they do not have sufficient home equity according to 2012 refinance guidelines. Foreclosures are also bringing the home values down and making the lenders more tentative in respect to loosening lending restrictions. Underwater mortgage refinancing is challenging as most borrowers do not meet the Home Affordable Refinance Program that was designed to help borrowers who have negative equity to get another chance at refinancing. The HARP refinance was recently blessed with aggressive guidelines that removed all “loan to value” restrictions. HUD’s decision to raise the insurance rates for FHA programs is only adding fuel to the fire as many borrowers are finding out that lower rates don’t always equate to lower monthly payments. Many consumers consider FHA to be a sub-prime loan, because they approve applicants with credit scores as low as 500.
Will Refinance Rates Continue to Rise?
Rising mortgage refinance rates continue to be a concern for borrowers who were unable to refinance last year when rates fell to record lows. Last week, the average 30-year fixed rate loan rose to 4.92 % from 4.80 %. Closing costs on refinance mortgages have also increased and privately this worries many loan companies fighting for market-share. The average 15-year fixed rate loan rose to 4.16 % from 4.02 %. MBA also revealed that the percentage of applicants seeking fixed mortgage refinancing dropped to 64.3 from 66.4 %.