Home > Mortgages > Another Good Mortgage Refi Program Gets Its Wings Clipped?

Comments 0 Comments

Is another effort to help homeowners refinance into lower rate home loans about to get its wings clipped before it flies? It certainly appears that way.

On Monday, June 11, 2012 new, lower Mortgage Insurance Premium (MIP) rates went into effect for borrowers who refinance FHA loans originated before June 1, 2009. These rates have been increasing over the past few years, making it impossible for many borrowers to save money by refinancing, even at today’s very low rates. When President Obama unveiled his plan to cut these fees, he estimated that the typical American family who refinances under the new rates could save about $1,000 per year.

[Related Story: President Obama Pushes New Mortgage Payment Relief Plan]

Now less than a week later, mortgage heavyweight Wells Fargo has notified brokers and correspondents that on or after June 19th it will no longer accept FHA enhanced streamline refinance transactions unless Wells Fargo already services the loan.  Why is this important? Because Wells Fargo plays such a crucial role in the residential mortgage industry.  It originated 31% of all residential mortgages in the fourth quarter of 2011, and is “one of the top refinance mortgage producers in the country,” according to Guy Cecala, publisher of Inside Mortgage Finance. Many mortgage brokers and firms originate loans to be sold to, or underwritten by, them.

But that’s not all.

“Other lenders may mirror this announcement,” said Joe Kelly, president of ArcLoan.com, in an email to me this morning. “That means less than three days after this new program went into effect many eligible FHA homeowners may miss their chance to refinance under this great program.  So if you have an FHA mortgage from before May 2009 — and you are not serviced by Wells Fargo — you should act immediately and contact a trusted lender to lock you into this program.”

[Credit Score Tool: Get your free credit score and report card from Credit.com]

Check Your Credit For FreeWhile this doesn’t spell the end of the FHA program, it will mean frustration for some borrowers who hear about a new program that can save them money, but then can’t take advantage of it. It’s eerily similar to what has been happening with HARP 2, the program designed to help underwater homeowners refinance their loans. Most major lenders are limiting that program to loans they service, leaving borrowers whose loans aren’t serviced by them scrambling.

As a post in Mortgage Daily News points out: “The government does what it can to help borrowers…  But as we’ve all found out, many times the government can’t “make” an investor follow a program, and investors often add overlays or restrictions when their own risk position is compromised.”

“This affects approximately 60-70% of the eligible FHA homeowners who hold mortgages from before May, 2009,” says Kelly, who adds that while there are other lenders willing to do these loans at this time, “their rates and pricing are not as good as Wells, and (this) will likely cause some other investors to follow suit. We are not trying to ‘cry wolf’ or put false pressure on consumers to rush on a decision.  But it is strong motivation for people to act,” he adds.

Listen to a podcast with Joe Kelly where he describes the enhanced FHA Streamline Refinance program on Talk Credit Radio. Arcloan.com is a sponsor of Talk Credit Radio.

Listen online here; download the podcast; or listen on iTunes.

[Featured Products: Research and Compare Mortgage Rates at Credit.com]

Image: Mr. T in DC, via Flickr

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Credit.com receives compensation for the financial products and services advertised on this site if our users apply for and sign up for any of them.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team