Refinance Mortgages at Lowest Rates in Decades

Mortgage rates are near their lowest levels in decades, although they have risen slightly since hitting all time lows in mid-October. The rate on a 30-year fixed rate mortgage hit 4.19%, the lowest since 1951, according to the Federal Housing Administration. A small rise in rates has produced an increase in home refinances, which represents the largest share of the current mortgage market.

The Home Affordable Refinance Program is a key component of the Obama administration’s effort to help stabilize housing markets. The program has been extended for homeowners whose property has lost value as a result of the real estate crash. It’s targeted at millions of homeowners who owe more on their homes than current market values in an effort to halt the rising tide of mortgage holders who are walking away from their homes.

The Federal Housing Finance Agency, established by the Obama administration to develop guidance for the nation’s largest mortgage lenders, troubled Fannie Mae and Freddie Mac, has opened the door for homeowners to refinance mortgages that are upside down up to 125% of appraised value “to support and promote market stability,” according to acting agency administrator Ed DeMarco.”

“And to encourage lenders and other mortgage market participants to fully adopt the HARP program, including the implementation of the October 2009 expansion of loan-to-value ratios (LTVs) to 125%, FHFA is authorizing the extension of HARP until June 30, 2011,” said DeMarco.

Mortgage rates rose modestly for the first time in five weeks in late October, increasing slightly on a 30-year fixed rate mortgage, according to Freddie Mac. The 15-year fixed rate mortgage also increased. The refinancing share of the market has been at or around 80% for more than six months as home mortgage holders attempt to rein in the best interest rate on a mortgage before rates rise further.

The Federal Reserve Board of Governors is expected to keep their primary mortgage index rate low for an extended period of time. However, slight fluctuations in rates as little as a quarter point can make a huge difference in monthly mortgage payments. Many homes that are upside down or homeowners who owe more on their mortgage than current appraised values are able to refinance to a lower rate under the governments program.

mortgage calculator © Tight mortgage lending market conditions have hampered some mortgage holders from refinancing, but more aggressive lending practices are developing in some areas of the country as banks and mortgage lenders demonstrate moves towards increasing mortgage lending. FHFA refinance mortgages are offered through lenders, who sell their mortgages to Fannie Mae and Freddie Mac. Nearly nine out of ten mortgages are presently sold to the two government sponsored enterprises.

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