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PRODUCT +/- Rate Last week
30 year fixed refi Graph Icon Arrow 4.09% 4.17%
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MMA and SAVINGS 0.58%
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Mortgage Rates Remain Low as Borrowers Clamor to Refinance

Written By:
December 07, 2011 at 12:42 PM

Mortgage loan rates hold steady as the market continues to be driven by European turmoil. 30 year fixed mortgages dropped to 4.18% down from 4.21% from the previous week, 15 year fixed loans inched down slightly from 3.58% to 3.53% and five year adjustable rate mortgages (ARMS) may produce variations between lenders but are averaging around 3.01%, up from 2.98%.

Toward the end of the week, Euro leaders will meet in Brussels in an attempt to resolve the European financial crisis, which may possibly sway U.S. mortgage loan rates to dip lower.

An anonymous high-ranking German official expressed pessimism about a resolution during the upcoming Friday summit. “We get the impression from many conversations in recent days that a lot of the protagonists still have not understood how serious the situation is.”

Problems stemming from a cluster of different cultures trying to resolve political and financial issues have stymied progress, which has had a kept U.S. mortgage rates low.

Rates Remain Low as Applications Jump

Low rates may have also influenced applications, as the number of mortgage refinance applications rose by 12.8% and refinance activity increased by 15.3%, according to the Mortgage Bankers Association.

MBA Vice President Michael Fratantoni said, "Coming out of the Thanksgiving holiday, applications increased significantly as mortgage rates dropped to their lowest levels in about two months.”

While purchase applications increased by 8.3% (the highest level since early August), most notably, refinance applications of an existing mortgage rose from 73.9% to 76%.

"In particular, refinance applications increased sharply, with some lenders seeing refinance volume double,” Fratantoni said. “Despite this surge, aggregate refinance activity is still below levels reported two weeks ago. Some lenders indicated they are beginning to see an increase in HARP loans, but that increase is still a small portion of the move this week."

HARP 2.0’s Influence on Refinances

Late last month officials from Obama’s Home Affordable Refinance Program (HARP) announced updates to the current program that will provide more opportunities for homeowners to refinance their underwater mortgage loan.

One of the most significant updates to HARP is the elimination of the cap that stopped homeowners who owed more than 125% of their property’s worth to refinance. Additionally, some previous credit history problems won’t hold the same weight as they did in the previous program, which opens the door to many underwater borrowers.

Fratantoni’s comments about the slight increase due to HARP were spot on as many borrowers report that some major lenders are still not accepting applications.

Bank of America announced last Wednesday that it wasn’t ready to begin taking applications for HARP as of yet. The banking giant currently holds approximately 20% of the country’s home loans.

According to Bank of America spokesman Terry Francisco, the bank is waiting for all the details before taking applications. "You don't want to accept applications until you're ready to do it," he said last week. "We're certainly working quite diligently on putting new procedures in place. It can be a very complex process." He adds that it may be a few more weeks before Bank of America will start accepting applications for HARP 2.0.

According to Corinne Russell, a spokeswoman for the Federal Housing Finance Agency, borrowers may need to shop around to determine which lenders are accepting applications immediately. In a Q&A sheet the FHFA released, "Some lenders may be able to accommodate mortgage applications under some of the enhancements by Dec. 1, while it could take other lenders additional time to incorporate the expanded program into their systems."

Jon Turla, president of the Florida Association of Mortgage Professionals said that he’s received several inquiries about HARP 2.0 and said, "There are lenders saying, 'Go ahead and take applications on Dec. 1,' but the problem is nobody has rolled anything out. It looks like it could be a wonderful program, but until things are concrete, it's hard to know what's going to happen."





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