HARP Changes = Borrowers with Little to No Equity to Have More Options Soon
On Monday, Republicans and Democrats agreed to send a measure to vote that would increase the loan limits in certain high-cost areas for loans insured by the Federal Housing Administration. If passed by Congress, the limits were reduced back in September would be increased again to help provide more financing opportunity for areas where housing costs are higher on average.
Today’s big news in the mortgage market was the Federal Housing Finance Agency releasing details around the modification of HARP (Home Affordable Refinance Program), an initiative initially created to allow borrowers to refinance and lower payments despite falling home values. The expansion of this program will affect certain borrowers with Fannie Mae or Freddie Mac insured loans. This announcement will not affect borrowers until December, after lenders, servicers and mortgage insurance companies all digest the language and draft lending policies over the next few weeks. Not only will rates improve for certain borrowers, but other borrowers that weren’t eligible to refinance will have options going forward. It will be important to look for information here in the coming days and weeks.
Retail sales in October came in higher than expected this morning and the New York Manufacturing Index shows shipments growing. But this positive economic news was mostly offset by continued concern from the European sector. Investors continue to be concerned that EU nations will be unable to implement austerity measures and generate the capital needed to weather their debt crisis. French, Italian and Spanish bond yields continue to climb and some fear that Italy may be the next to seek talks around a bailout. Recession talks are common for the EU region, with Europe failing to exceed growth expectations in the third quarter. This has led the dollar to strengthen and US Treasury bonds continue as a source for more stable investment. Mortgage rates have maintained fairly consistent and aggressive levels, despite some relatively positive economic news over the past week. The concensus for economic growth in the coming quarters appears to be a modest 2.0 - 2.5% for the U.S. while Europe struggles to remain in positive territory (~0.5%).
As we continue through the remainder of the week, prices paid to wholesalers in October decreased by the most in four months, indicating slower inflation levels. Although this would normally point to a more negative outlook which would lower rates, some consider this more of a correction from higher prices seen as a result of the Japan Tsunami and higher energy prices earlier in the year. Look for the Consumer Price Index, Manufacturing and Housing Starts reports later in the week. Any modest improvements are somewhat expected. If signs point toward another U.S. economic stall, we can expect rates to fall slightly.