Mortgage Rates Hit New Lows as President Obama Tries to Expand Refinancing

Mortgage rates hit new lows this week according to the Freddie Mac Weekly Mortgage survey.

• 30-year fixed-rate mortgage (FRM) averaged 3.87 percent with an average 0.8 point for the week ending February 2, 2012, down from last week when it averaged 3.98 percent. Last year at this time, the 30-year FRM averaged 4.81 percent.
• 15-year FRM this week averaged 3.14 percent with an average 0.8 point, down from last week when it averaged 3.24 percent. A year ago at this time, the 15-year FRM averaged 4.08 percent.
• 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.80 percent this week, with an average 0.7 point, down from last week when it averaged 2.85 percent. A year ago, the 5-year ARM averaged 3.69 percent.

Frank Nothaft, the Vice President and Chief Economist at Freddie Mac said the following:

"Most mortgage rates eased to all-time record lows this week as fourth quarter growth in the economy fell short of market projections. The Gross Domestic Product rose 2.8 percent in the final three months of 2011, below the market consensus forecast of 3.0 percent, while consumer spending in December was flat."

President Obama Sends New Refinance Plan to Congress

Low rates are great news for first-time homebuyers but they don't mean much if homeowners are stuck with an underwater mortgage and unable to refinance. President Obama on Wednesday forwarded a new plan to Congress that provides "responsible homeowners" with FHA backed mortgages even if the original mortgage is not guaranteed by Fannie Mae or Freddie Mac. In the past, mortgages needed to be guaranteed by one of these agencies to receive FHA refinancing assistance.

According to the White House, a borrower whose loan is NOT guaranteed by a GSE could receive FHA backing if the following criteria are met:

1) Current on your mortgage
2) Meet a minimum credit score (580)
3) Have a loan that is no larger than the current FHA conforming loan limits in your area (median home price $271,050 to the high of $729,750)
4) The home being refinanced is the owner-occupied principal residence

The Administration predicts that the average borrower would save $3,000 under the plan.

Don't Get Your Hopes Up

Let's set aside the question of whether it is wise for the government to take on even more exposure in the housing market via these FHA loans. The first question is whether the plan stands a chance of passing Congress, and the answer is - No. With the election year cycle in full swing and partisanship on the rise, there is almost no change Congress can come together to make this happen, even if they wanted to.