Mortgage Update - Interest Rates, Loan Amounts and Debt Relief

The following is a round-up of recent news affecting mortgage interest rates and lending guidelines for 2015.

Mortgage interest rates have dropped dramatically to start off the new year. In some areas, 30 year fixed rate mortgages are available at 3.75% and 15 year fixed rate mortgages are as low as 3%. Falling oil prices and concerns over Europe's economy have driven the 10 year treasury rate below 2% and mortage interest rates have fallen accordingly.

Fannie Mae and Freddie Mac will now allow 3% down payments for conventional fixed rate loans. Both entities have specific guidelines for using this program. Check with your lender for the specific details and criteria required.

The conforming mortgage loan limit between regular mortgages and jumbo mortgages won't rise in 2015 (currently $417,000 & $625,500 for High Cost areas). Each year, the amounts may rise or fall depending on government guidelines for changes in home values. Note: the maximum amount for High Cost areas varies by location/county. Check with your lender for the maximum limit in your specific area.

The "annual premiums"  on FHA loans, an especially popular source of financing for first-time home buyers, have increased five times since 2010. They jumped from 0.55% of a loan's value to 1.35% in 2014. Those fees will drop to 0.85% towards the end of January.

Short Sales & Mortgage Insurance Debt Relief

Early in December both the Senate and House approved the extension of the Mortgage Forgiveness Debt Relief Act assisting homeowners who take short sales. The extension is only good for the calendar year 2014 - still leaving those homeowners in the process, or planning, a short sale for 2015 unsure of what course might be available to them. By not designating longer times, or identifying qualifying homeowners still suffering from underwater mortgages, both the Congress and Obama leave another entire group of America's homeowners out in the cold.

Although Congress attempted to extend the debt relief for two years, Obama objected due to provisions in the bill that provided permanent status for tax provisions to businesses, unfair in Obama's opinion to low and moderate income homeowners. We are still trying to determine how helping either businesses or homeowners affects one or the other, but there you have it.

Another benefit to the American homeowner is an extension to deduct their mortgage insurance premiums for VA, FHA, rural housing, and private mortgage insurance payments when purchasing, or refinancing their homes. It wasn't that long ago these deductions didn't exist to individuals with mortgages. This tax deduction is also only extended for one year. For mortgage insurance deductions, the last reported figures are that 3.6 million homeowners used it in 2009.

For homeowners utilizing a short sale, there were 27,800 granted by Fannie and Freddie in the first 8 months of 2014. Compared to 87,740 in 2013 and 125,232 in 2012, it's obvious that the supply of mortgages under water is decreasing. And, that's good for everyone, including the economy.

The legislation was originally passed in 2007 and the "forgiving" of the mortgage amount in the short sale was previously treated by the IRS as income to the homeowner/seller. The Act "forgave"  the outstanding amount is a non-taxable even.

The main issue where we fault the legislature and the president is simple, when you leave businesses hanging regarding their fiscal plans for the next year, although businesses obviously need much more lead time for response to future tax consequences (think Obamacare), and homeowners unsure what their issues are if they utilize a short sale, everyone is back to square one and no one benefits, nor does the US economy. Perhaps a Republican controlled Senate and House may now direct legislation so that both businesses and homeowners don't have to wait an entire year again to know their income tax situation. How can anyone plan to grow a business or sell a home when they don't know if the IRS will be hot on their heels demanding monies not required under previous circumstances to other homeowners or businesses that were in the exact situation just a few years ago? It might be a better idea to designate exactly when it will end, or specify the type of homeowner you must be, and stick to it. At least one group might be able to figure out what their options are.

Although our opinion is that you should do your best to honor those obligations you undertook, there are situations where a homeowner had no control over the circumstances forcing them into losing their home. It's also not our opinion as to whether that is honorable or not - refusing to pay a mortgage. However, we do know that homes are in short supply for those investors and buyers wanting to buy, and perhaps this last spasm in housing could be shortened by designating the proper legislation so those homeowners may properly plan a reasonable out to their present financial difficulties.

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