Interest rates have certainly increased over the last couple of months. This is due to many different reasons. However, probably the most significant of these reasons is the Market’s fear of the Federal Reserve easing it’s Bond Buying program, currently at about $85,000,000,000 per month! The current policy was started as an effort to prop up an ailing economy. Some would argue that it has worked tremendously, while others would contend that it simply placed a Band Aid over a gaping wound that inevitably will get infected with continued bond purchasing.
It is my opinion that the US Economy simply cannot sustain continued money printing as is the current Fed Chairman’s policy. Eventually, there will be too much printed money with no real asset backing the currency. This causes a problem for the current Fannie Mae HARP and Freddie Mac Open Access programs. Both were designed to help homeowners who are under water with their current mortgage situation. The programs have been around for a little over 2 years now. Consumers have enjoyed interest rates in the low 4% range and most expected rated to stay low. However, with the recent fluctuation in the Bond market, we have seen interest rates on the HARP and Open Access programs soar into the low to mid 5% range.
Although most consumers are still at interest rates over 6%, the popular play is to wait for rates to come back down to a level where they once were. The unfortunate truth is that they’re probably not coming back down. Homeowners who are sitting on the fence may soon find themselves out of luck with respect to HARP and or Open Access. What most people fail to grasp is the fact that these Government programs are a gift. Never before in history has it been possible to refinance a piece of collateral that was not worth the amount of money that was owed on it. These programs were designed to help the Government ensure that these toxic assets (underwater mortgages) that were now their property would not default.
Millions of Americans have taken advantage of the programs, but there are still millions more still out there who need to and should refinance. If you have a Fannie Mae or Freddie Mac mortgage that bears an interest rate over 6%, it’s time to refinance. If you wait until rates come down, you will miss out on a once in a lifetime opportunity. The HARP Program and the Open Access Program will eventually go away. Consumers are lucky to still have access to these programs. When they originally came on the market, President Obama sang their praises, going as far as to say even non-Freddie Mac or Fannie Mae clients (non GSE loans) should get the same opportunity to refinance. Now, he talks more about how the Government should get rid of both Mortgage entities and, once again, privative the Mortgage Market. If you still can, REFINANCE TODAY.