Robert Nusgart: Don’t try to time market on your refinance

Did you notice that mortgage rates once again are moving lower? Rates for a 30-year fixed is now easily below 4 percent, and adjustable rates for a five-year ARM are close to 3 percent.

So even if you refinanced a year ago, it is highly possible to refinance again and ask your lender to structure the loan in a manner that will still save you money without having to pay for all the closing costs again.

The biggest mistake that borrowers make is trying to play the timing game. There are thousands of loan officers who track mortgages on a daily basis and even subscribe to services that alert them to when the market is improving or deteriorating — a signal to either lock or float a rate. However, there’s a segment of borrowers not in the business who seem to think they have the voodoo that tells them just the way the market is going to go.

Good luck.

The one thing that I have learned over the years is that not even the most intelligent economist knows exactly what the markets are going to do. There are so many factors that will influence the market on a daily basis.

Right now, rates are trending downward. But that doesn’t mean that at any given hour, rates won’t spike upward, and when they spike … they spike. Those people in the secondary market who set the daily rates know that they can always trickle down a rate.

I typically tell borrowers this: “Who gets the lowest rate? The lucky one, of course. It’s the one who after talking with their loan officer on a day when rates are dropping decides to lock in and move forward and not delay a decision. And then that turns out to be the valley.”

So if you have the patience to go through another refinance and the numbers make sense, grab a better rate or shorter term and enjoy this time period, because one thing we all know is that it won’t last forever.

More HARP help on the way?

The Home Affordable Refinance Program, known as HARP, is now in its second version, and No. 3 may be on the horizon.

Recently, Housing and Urban Development Secretary Shawn Donovan testified before a hearing of the Senate Committee on Banking, Housing and Urban Affairs on the state of HARP 2.0 and on several bills that will be moving forward to expand it or remedy some of its flaws.

HARP was launched by the Obama administration several years ago to help underwater homeowners refinance their mortgages, if the mortgages were owned or secured by the two government agencies, Fannie Mae and Freddie Mac.

The goal was to help 5 million homeowners, but to date only 1.1 million have seen some relief.

This year, the program was retooled to allow borrowers to refinance regardless of their loan-to-value ratio, even though many lenders have overlays that stop at 105, 125 or 150 percent. Also, it softened Fannie’s and Freddie’s warrants and guarantees so that lenders wouldn’t live in fear of having to buy back a loan due to a mistake. In the hearing it was reported that four of the largest servicers are now processing applications from 750,000 homeowners, who stand to save an average of $2,500 per year on their mortgage payments.

Now there are four proposals being introduced by Sen. Robert Menendez, D-N.J., and supported by the administration that could expand the pool of those hoping to refinance.

One proposal would guarantee non-government-backed borrowers’ access to refinancing as long as they are current on their mortgage, meet a minimum credit score, have a loan within conforming limits ($417,000 or less) and are employed. It would also look to have lenders write down principal balances to further aid the underwater borrower. Although the program would be run through the FHA, it would be financed outside of FHA mortgage insurance fund.

Another proposal is geared to build equity. This legislation proposes that the average closing costs, about $3,000, be paid by Fannie or Freddie, if the borrowers agree to refinance into a loan with a term of 20 years or less.

The bottom line is that there are still millions of homeowners who need a pathway to be able to refinance a home that is underwater, so there is still much work that needs to be done — before interest rates start moving up.

Turning the corner

There seems to be much more energy this spring for the area’s housing market than in years past. And some of the numbers that are being released nationwide are supporting the feeling.

-The Pending Home Sales Index (PHSI), a forward-looking indicator based on contract signings, rose to 101.4 in March from 97.4 in February and is 12.8 percent above March 2011 when it was 89.9.

-First-quarter 2012 sales closings nationally were the highest first-quarter sales in five years.

-The PHSI in the Northeast slipped 0.8 percent to 78.2 in March but is 21.1 percent above March 2011.

-In the Midwest, the index declined 0.9 percent to 93.3 but is 16.9 percent higher than a year ago.

-Pending home sales in the South rose 5.9 percent to 114.1 in March and 10.6 percent above March 2011.

-In the West the index increased 8.7 percent in March to 108.0 and is 9.0 percent above a year ago.

So does this mean that housing is back? Hardly. But it does mean that more people are willing to enter into the housing market than a year ago and are having more confidence.

Robert Nusgart is a loan officer with Mortgage Master Inc. in Baltimore. He can be reached at 443-632-0858 or by email at [email protected]. Visit his website at www.RobertNusgart.com for the latest mortgage and financial news.