Check out this link, http://www.fha.gov/about/fhasfact.cfm, for information on the newest announcement made by HUD to assist those buyers with conventional ARMS(Adjustable Rate Mortgages) that are due to adjust between now and March, 2008, one of the largest pool of ARM's that have ever been written and purchased by both Fannie Mae and Freddie MAC, the largest investors of conventional mortgages.
If you know anyone who might be in a subprime ARM, perhaps on a two year or three year fixed rate with adjustments coming soon, or perhaps someone coming off of a Fannie three or five year ARM, they need to look at this alternative to converting this to a FIXED rate product. Here are a few caveats and guidelines I use for my clients when considering refinancing to a Fixed Rate.
First, how long you plan on staying or keeping the home with the ARM is paramount to any sound analysis for refinancing a mortgage. So many high pressure sales people urge borrowers to refinance when they have no intention of staying in the home for more than a year or so. I usually recommend not refinancing unless you can recoup your costs within the time frame of putting your home on the market to sell or rent. Why? You would still be paying off the cost of doing the refinence after the house sells. That doesn't make sense at all.
Secondly, the refinancing costs should be recoverable in a short period of time. This is why I do not recommend paying points on a mortgage. In fact, if PMI is involved, this should be minimized or eliminated as part of the refinance package to save more money in the monthly payment. I usually recommend a refinance program that allows for elimination of the monthly PMI payment in my analysis.
Third, if you are making late payments as a result of the ARM already adjusting, and have very high margins and indexes, the FHASecure program may be right for you. This program, unlike many others, allows for late payments as a result of the large jump in payments. For many, this can be a large burden to the debt load of most family's budgets, and places them in possible foreclosure jeopardy.
Finally, after all refinancing options still show no benefit, look at other alternate sources for financing that allow you to reduce your monthly obligations and eliminate the potential risk of foreclosure. Borrowng funds from a 401-k to pay off short term debt might be one possibility, or establishin an equity line of credit to pay off high cost installment loans or credit cards another solution.
The FHASecure program is one of many that is being introduced to help mitigate the losses of homes and ruining of credit for many who are looking for help. Congress and the President are looking to introduce ven more Home ownership and maintenance programs, in conjunction with the Mortgage Bankers Association, that are founded on good lending principles and sound accounting for all.
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