Dubbed HARP 2.0, the refinance program is an expansion of HARP – Home Affordable Refinance Program – that was unveiled in 2009, according to Dan Green, a loan officer with Waterstone Mortgage in Cincinnati and the author of the nationally recognized mortgage blog, TheMortgageReports.com.

In order to be eligible for the HARP refinance program, homeowners must meet three pre-qualifications: home loan must be paid on-time for the prior six months and at least 11 of the most recent 12 months; mortgage must have been sold to Freddie Mac or Fannie Mae before June 1, 2009; and the homeowner may not have used the HARP program before (only one HARP refinance is allowed per mortgage).

“If they feel like they’re under water or have called a lender in the last year or two and have been told, ‘Sorry, I can’t do anything because you owe more than the house is worth,’ they need to check again,” he said.

“They could possibly qualify and save $100 to $200 a month without any out-of-pocket expense. In most cases, they get to skip a whole month’s mortgage payment and refund all of their current escrows (taxes and insurance).”

Kaplan explained how the original program was intended to help some 9 million homeowners, but ended up helping less than 100,000 homeowners because of an appraisal cap.

“The defining characteristic of the newly expanded HARP program is the allowance of an unlimited loan-to-value ratio,” Green expanded. “No matter how underwater you are, you can still apply.”

Kaplan added, “If you qualify, you’re going to win.”

He stressed the importance of getting paperwork in order now.

“A lot of people are going to find out about this … you need to get on it before it clogs up the pipeline,” he said, adding that the loan can be closed in two to three weeks.

Kaplan also stressed the effect such a program could have on the economy.

“How many households could use an extra couple hundred dollars in their budget, which in turn is going to be get put back in the economy?” he asked.

Some have speculated that such a program for mortgage rates may be a mistake and likened it to lax loans available before to the burst of the housing bubble.

“Yes, it is very similar to what we did before; however, there is a major difference. This is only (available) to people who have not missed a mortgage payment,” Kaplan says. “If they can make a mortgage payment at $900, they can make it at $700.”

He described these homeowners as “people who have exhibited an ability to repay their mortgage loans.”

Additionally, they’re not being approved for more than the loan amount.

Federal officials say they will revamp the Home Affordable Refinance Program by eliminating some appraisals and loosening underwriting requirements, making it easier for seriously "underwater" homeowners to get out of burdensome mortgages.

The revisions are likely to help tens of thousands of South Florida homeowners who so far have been shut out of any government relief, Fort Lauderdale mortgage broker Ryan Paton said.

The government is doing away with a cap that prevented borrowers whose mortgages exceed 125 percent of the value of their homes from being eligible for the program. Other changes include reduced risk for lenders and lower fees for borrowers.

People who otherwise may have been tempted to walk away from their homes will be able to qualify for some of the lowest mortgage rates on record and possibly pay off their homes faster.

"I think this is huge," said Paton, president of Capitol Lending Group.

Nearly half of all single family homes with a mortgage in Palm Beach, Broward and Miami-Dade counties are worth less than what's owed, according to third-quarter data from real estate website Zillow.com.

Underwater borrowers bought or refinanced at or near the peak of the housing boom in 2005 and then watched as prices plummeted. Homeowners who are underwater may not be able to break even in a sale for a decade or more. As a result, many of these homeowners are likely to fall into foreclosure.

The government unveiled the refinance program in 2009, saying it would help 5 million homeowners. So far, fewer than a million homeowners have been able to take advantage, but the government says it hopes the changes will double that number.

Lender participation in the refinance program is voluntary. Reluctance by banks to refinance mortgages is one reason the original program fell short.

David Hoy of Coral Springs stands to benefit from the changes. The 45-year-old software engineer said he has excellent credit but was too far underwater on the four-bedroom home he bought in 2004 to qualify based the original terms of the program.

Hoy said he's been frustrated that until now federal aid has gone mostly to people in the direst of circumstances and excluded those homeowners "who did everything right."

"Here I was being responsible, but the government was bailing out people who were not responsible," Hoy said. "I wasn't too thrilled about that."

Mrs. Astor was known as a great philanthropist and was a major donor to the New York arts scene. Her final years were marked by Alzheimer’s disease and a scandal around her son, Anthony D. Marshall and her attorney Francis X. Morrisey, both of whom have been convicted of grand larceny in the way they handled her estate. Mr. Marshall, now 86, is out on bail awaiting appeal of his conviction. The judge sentenced him to no less than 1 to 3 years in jail, a pretty long sentence at that age. It was great fodder for the New York Daily News and the New York Post while it was all unfolding.

Other cities, especially Las Vegas, Tucson and Phoenix; and just about the whole state of Florida have seen dramatic price reductions on property over the years since the collapse of Lehman and the market for bundled mortgage packages that made John Paulson so rich. New York has tried to pretend it is a superior place immune to such discount prices. It seems that is no longer the case.

As you might expect, high end New York City apartments in condominiums and co-ops are largely purchased by Wall Streeters or foreigners seeking a safer haven for their cash than the banks in their own countries provide. Foreign buyers had another advantage until recently while the dollar was weak and their local currencies were strong giving them an added discount compared to local buyers.

What is ominous for high end New York real estate is the unrelenting thousands of lay-offs of Wall Street workers that seems once again to be picking up steam. Over the last month alone, many thousands of additional job cuts have been announced. Think MF Global which laid off 1200 in one fell swoop. Think Citigroup which just announced another 3000 will go. The list is long and growing by the day and includes Barclays, BNP Paribas, Credit Suisse, UBS, Bank of America’s Merrill Lynch and others. Goldman Sachs is cutting, too, and promoted a smaller number to its coveted Managing Director level this month than it has in a few years.

In addition to job cuts, reports abound in the press that 2011 bonuses will be about 20-30% lower this year than 2010 unless you are a trader and your bonus might be cut in half. Many in New York used to use huge bonuses to pay cash or largely cash for big New York apartments. You can’t do that if the bonuses are small or aren’t being paid.

Add to that the fact that the New York City Council has voted to increase assessments more than once in the last few years pushing taxes up dramatically. The Sunday New York Times recently ran an important story about the fact that many apartment buildings built with tax easements granted years ago to spur new construction are now finding those are running out. The Times gave several examples of buildings where an apartment owner will see the taxes on their unit triple and quadruple forcing buyers to demand lower prices when purchasing the property. The argument there is that you will have a lower mortgage on which to pay interest with a smaller purchase price.

In summary, real estate prices around the country have fallen about 30% since the financial collapse. As more world economies falter and Wall Street finds trading and banking volume down and pay packages with it, prices in New York are now starting to reflect these realities more fully. Five years ago buyers were afraid they wouldn’t be able to afford a place if they didn’t buy this week. Now nobody is in a rush as prices continue to erode. What’s the hurry if you are buying something that is going to decline in value? There just isn’t that much allure to owning a declining asset.

Joan E. Lappin CFA Gramercy Capital Management Corp.

Many people are reluctant to take the risk in this market. High unemployment, scant pay raises and heavy debt loads are deterring many would-be buyers.

Others can't qualify for the historically low rates. Banks are insisting on higher credit scores. And many want first-time buyers to put down 20 percent. Few people have that much cash or home equity to satisfy the requirement.

"Considering how far mortgage rates have fallen, we'd expect to see more people refinancing and buying," said Celia Chen, director of housing economics at Moody's Analytics. "It's still the lack of jobs and the difficult credit environment that's pushing most people away."

Total mortgage applications fell more than 4 percent this week from the previous week, according to the Mortgage Bankers Association. Refinancing applications declined more than 5 percent.

Mike Fratantoni, the group's vice president of research and economics, said potential borrowers "largely remained on the sidelines" and were "unimpressed" by the lowest rates in decades.

Mortgage rates have tumbled because they tend to track the yield on the 10-year Treasury note. The yield has fallen in recent weeks, largely because investors are worried about the U.S. economy and the debt crisis in Europe. So they have shifted their money out of stocks and into the relative safety of Treasurys.

And they could fall even further now that the Federal Reserve has started shuffling its investment portfolio to try to lower long-term rates.

A drop in mortgage rates could provide some help to the economy if more people could refinance. When people refinance at lower rates, they pay less interest on their loans and have more money to spend.

Consider a homeowner who owes $250,000 and is paying 5.09 percent on a 30-year fixed mortgage. That was the average rate being offered in January 2010. Refinancing the loan at 3.94 percent could save him or her more than $2,000 a year.

But many homeowners with good jobs and stable finances have already refinanced. Until recently, any rate below 5 percent was considered extraordinarily low. Just five years ago, the best rate for a 30-year fixed loan was around 6.5 percent; a decade ago, it was near 8 percent.

Most economists say rates would need to fall at least a full percentage point before it makes sense to refinance again. The reason is homeowners typically pay a few thousand dollars in closing costs when they refinance. And the low rates being offered don't include extra fees, known as points, which many borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount.

The average fee for the 30-year and 15-year rose to 0.8. The average fees for both the five-year and one-year adjustable-rate loans were 0.6 and 0.5, respectively.

To calculate average mortgage rates, Freddie Mac surveys lenders across the country Monday through Wednesday of each week.

The average rate on a five-year adjustable-rate mortgage fell to 2.96 percent. The average for the one-year adjustable-rate mortgage ticked up to 2.95 percent.

Many people are reluctant to take the risk in this market. High unemployment, scant pay raises and heavy debt loads are deterring many would-be buyers.

Others can't qualify for the historically low rates. Banks are insisting on higher credit scores. And many want first-time buyers to put down 20 percent. Few people have that much cash or home equity to satisfy the requirement.

"Considering how far mortgage rates have fallen, we'd expect to see more people refinancing and buying," said Celia Chen, director of housing economics at Moody's Analytics. "It's still the lack of jobs and the difficult credit environment that's pushing most people away."

Total mortgage applications fell more than 4 percent this week from the previous week, according to the Mortgage Bankers Association. Refinancing applications declined more than 5 percent.

Mike Fratantoni, the group's vice president of research and economics, said potential borrowers "largely remained on the sidelines" and were "unimpressed" by the lowest rates in decades.

Mortgage rates have tumbled because they tend to track the yield on the 10-year Treasury note. The yield has fallen in recent weeks, largely because investors are worried about the U.S. economy and the debt crisis in Europe. So they have shifted their money out of stocks and into the relative safety of Treasurys.

And they could fall even further now that the Federal Reserve has started shuffling its investment portfolio to try to lower long-term rates.

A drop in mortgage rates could provide some help to the economy if more people could refinance. When people refinance at lower rates, they pay less interest on their loans and have more money to spend.

Consider a homeowner who owes $250,000 and is paying 5.09 percent on a 30-year fixed mortgage. That was the average rate being offered in January 2010. Refinancing the loan at 3.94 percent could save him or her more than $2,000 a year.

But many homeowners with good jobs and stable finances have already refinanced. Until recently, any rate below 5 percent was considered extraordinarily low. Just five years ago, the best rate for a 30-year fixed loan was around 6.5 percent; a decade ago, it was near 8 percent.

Most economists say rates would need to fall at least a full percentage point before it makes sense to refinance again. The reason is homeowners typically pay a few thousand dollars in closing costs when they refinance. And the low rates being offered don't include extra fees, known as points, which many borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount.

The average fee for the 30-year and 15-year rose to 0.8. The average fees for both the five-year and one-year adjustable-rate loans were 0.6 and 0.5, respectively.

To calculate average mortgage rates, Freddie Mac surveys lenders across the country Monday through Wednesday of each week.

The average rate on a five-year adjustable-rate mortgage fell to 2.96 percent. The average for the one-year adjustable-rate mortgage ticked up to 2.95 percent. Bergen County NJ Real Estate

The average on a 30-year fixed mortgage fell to 4.01 percent from 4.09 percent this week, Freddie Mac said Thursday. That's the lowest rate since the mortgage buyer began keeping records in 1971. The last time long-term rates were lower was in 1951, when most long-term home loans lasted just 20 or 25 years.

The average on a 15-year fixed mortgage, a popular refinancing option, ticked down to 3.28 percent. Economists say that's the lowest rate ever for the loan.

Rates on mortgages could fall further after the Federal Reserve announced last week that it would take further action to try to lower long-term rates.

Still, low rates have so far done little to boost home sales or refinancing. Many would-be buyers or homeowners don't have enough cash or home equity to get a new loan.

High unemployment, scant wage gains and debt loads represent a heavy burden for many people. Others can't qualify. Banks are insisting on higher credit scores and 20 percent down payments for first-time buyers.

This year is shaping up to be among the worst for sales of previously occupied homes in 14 years. Few are buying, even though the average rate on the 30-year fixed mortgage has fallen to around 4 percent.

A drop in mortgage rates could provide some help to the economy if more people could refinance. When people refinance at lower rates, they pay less interest on their loans and have more money to spend.

Consider a homeowner who owes $250,000 and is paying 5.09 percent on a 30-year fixed mortgage. That was the average rate being offered in January 2010. Refinancing the loan at 4.01 percent could save him or her roughly $2,000 a year.

But many homeowners with good jobs and stable finances have already refinanced over the past year as rates have fallen. The average rate on the 30-year loan fell to new lows in November, August and again this month.

Homeowners also typically pay a few thousand dollars in closing costs when they refinance. And the low rates being offered don't include extra fees, which many borrowers must pay to get the rates. Those fees are known as points; one point equals 1 percent of the loan amount.

The average fee for the 30-year held steady at 0.7; for the 15-year, it rose to 0.7. The average fee for both the five-year and one-year adjustable-rate loans was unchanged at 0.6 point.

To calculate average mortgage rates, Freddie Mac surveys lenders across the country Monday through Wednesday of each week.

The average rate on a five-year adjustable-rate mortgage was unchanged at 3.02 percent. The average for the one-year adjustable-rate mortgage ticked up to 2.83 percent.

Three housing agencies in Rockland, Westchester and Putnam are currently screening applicants for the federal program, which will provide more than $111.7 million to homeowners in New York state. The deadline to apply is 5 p.m. Friday.

To be eligible, you have to be at least 90 days behind on your mortgage payments and unemployed or under-employed due to the economy or a medical condition. Your mortgaged property must be your primary home and your current household income must be 15 percent less than it was in 2009 (in Rockland, the household income must be less than $122,400; in Westchester, it must be less than $126,000).

Those who qualify can receive up to $50,000 through the new Emergency Homeowners' Loan Program.

Three housing agencies in Rockland, Westchester and Putnam are currently screening applicants for the federal program, which will provide more than $111.7 million to homeowners in New York state. The deadline to apply is 5 p.m. Friday.

To be eligible, you have to be at least 90 days behind on your mortgage payments and unemployed or under-employed due to the economy or a medical condition. Your mortgaged property must be your primary home and your current household income must be 15 percent less than it was in 2009 (in Rockland, the household income must be less than $122,400; in Westchester, it must be less than $126,000).

Stephanie Rojas, housing director for the Rockland Housing Action Coalition in New City, meets with 10 people a week who are past due on their mortgage, mostly because they're jobless, were recently unemployed or have a serious illness.

The Emergency Homeowners' Loan Program is "designed to give them assistance for a period of time until they can get back on their feet," Rojas said.

"Some people may have gone back to work but now they have eight months of arrears that they have to deal with," Rojas added.

A few years ago, she said the clients she saw were dealing with fallout of sub-prime loans. Today, most of the clients she sees have long-term, fixed-rate loans.

"The big issue is people have good loans but they're unemployed," Rojas said.

Before banks can start foreclosure proceedings, they must send out a 90-day advance notice. The Rockland Housing Action Coalition receives 500 such notices a month for the county. In Westchester, that figure has averaged about 1,000 each month since last year.

Those interested in the Emergency Homeowners' Loan Program must fill out a 13-question pre-applicant screening worksheet.

Veronica Raphael, director of foreclosure prevention at Westchester Residential Opportunities in White Plains, warned people to watch out for con artists. There is no cost to apply for the program, she said, or to work with housing agencies, save for $12.75 they charge to obtain a credit report.

The program will essentially subsidize your mortgage payments, allowing you to pay just 31% of your income or $150, whichever is greater. EHLP will pay the balance. Homeowners can receive this help for up to 24 months, or until they run through the maximum EHLP loan amount of $50,000.

WRO has been designated by the United States Department of Housing and Urban Development to Pre Screen Applicants who have specific qualifications. WRO will review the documentation provided based on the guidelines and submit the package. Qualified homeowners will be awarded sometime in August or September.

The Deadline for applications is Friday, July 22. Click here to download the application.

For more information please, visit WRO website www.wroinc.org or give WRO a call at (914) 428-4507

Here are some examples of the worst mistakes homeowners make when refinancing.

Not Comparing the Real Rate - "Borrowers should shop around for a mortgage by comparing the APR (annual percentage rate) of each loan rather than the quoted interest rate," says Gregg Busch, vice president of First Savings Mortgage Corp. in McLean, Va. "You need to look at the true cost of the loan and compare it to your current APR to make sure you will really be saving one-half point or more on the new loan."

Busch points out that a lot of homeowners today find out that their home is worth less than they assumed when they have an appraisal.

"Fannie Mae and Freddie Mac have added fees on loans with a high loan-to-value, so borrowers need to re-evaluate the rate and fees before they decide to refinance," Busch says.

Borrowers who have little or no equity may qualify for a refinance under the government's Home Affordable Refinance Program, or HARP, available to those with a current mortgage owned or guaranteed by Fannie Mae or Freddie Mac.

"The beauty of the HARP program is that it does not require an appraisal, so if you suspect you are underwater on your loan, this could be a good option," says Busch. "Just make sure you compare the rate and fees to see if the new loan is worth the cost."

Choosing the Wrong Loan - Pickel says the first step when deciding to refinance is to establish a clear objective.

"If you think you may lose your job but you have one now, your focus should be to lower your overall payment regardless of the length of the loan," says Pickel. "If you want to be debt-free by a certain year, then you need to find a loan that meets that objective."

Pickel says that sometimes, even with a lower interest rate, you could end up making higher monthly payments because wrapping in the closing costs has increased the size of your mortgage.

Every borrower should look at the cost of refinancing along with the financial benefits before choosing a loan, Busch says. Some borrowers forget that refinancing into another 30-year mortgage can add years of payments, especially if they have been paying on the current loan for a long time.

"A 10/1 ARM (adjustable-rate mortgage) or a 10-year fixed-rate loan can sometimes be a better choice depending on the individual borrower's circumstances," Busch says.

Low rates haven't done much to spur home purchases and there's been no rush to refinance, a separate survey by the Mortgage Bankers Association showed.

Freddie Mac's survey showed rates on 30-year fixed-rate mortgages averaged 4.55 percent with an average 0.6 point for the week ending June 2, down from 4.6 percent last week and 4.79 percent a year ago.

Rates on 15-year fixed-rate mortgages averaged 3.74 percent with an average 0.7 point, down from 3.78 percent last week and 4.2 percent a year ago. Rates on 15-year mortgages hit an all-time low in records dating back to 1991 of 3.57 percent in November.

For 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) loans, rates averaged 3.41 percent with an average 0.6 point, unchanged from last week but down from 3.94 percent a year ago. The 5-year ARM hit a low in records dating to 2005 of 3.25 percent in November.

Rates on 1-year Treasury-indexed ARM loans averaged 3.13 percent with an average 0.6 point, up from 3.11 percent last week but down from 3.95 percent a year ago.

Looking back a week, the MBA's Weekly Mortgage Applications Survey showed demand for purchase loans was unchanged for the week ending May 27 compared to the week before after adjusting for seasonal factors. Demand for purchase loans was up 7.6 percent from the same time a year ago.

Demand for refinancings was down 5.7 percent from the previous week, but requests to refinance still accounted for 65.7 percent of all mortgage applications.

The last time mortgage rates were this low, refinance volume was more than 20 percent higher, said Mike Fratantoni, MBA's vice president of research and economics. Many borrowers probably can't qualify to refinance because they lack equity in their homes, he said.

In a May 18 forecast, Fratantoni's research team said they expect rates on 30-year fixed-rate mortgages to rise to an average of 5.5 percent during the final three months of this year, and continue a gradual rise to an average of 5.9 percent during the fourth quarter of 2012.

While lower rates often trigger applications for refinancing, purchase loan demand also picked up last week and was slightly stronger a year ago, a separate survey by the Mortgage Bankers Association showed.

Freddie Mac's survey showed rates on 30-year fixed-rate mortgage averaged 4.6 percent with an average 0.7 point for the week ending May 26, down from 4.61 percent last week and 4.84 percent a year ago.

Rates on 30-year fixed-rate mortgages hit an all-time low in Freddie Mac records dating to 1971 of 4.17 percent during the week ending Nov. 11, 2010, before climbing to a 2011 high of 5.05 percent in February.

Rates on 15-year fixed rate mortgages averaged 3.78 percent with an average 0.7 point, down from 3.8 percent last week and 4.21 percent a year ago. Rates on 15-year mortgages hit an all-time low in records dating back to 1991 of 3.57 percent in November.

For 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) loans, rates averaged 3.41 percent with an average 0.5 point, down from 3.48 percent last week and 3.97 percent a year ago. The 5-year ARM hit a low in records dating to 2005 of 3.25 percent in November.

Rates on 1-year Treasury-indexed ARM loans averaged 3.11 percent with an average 0.5 point, down from 3.15 percent last week and 3.95 percent a year ago.

Looking back a week, the MBA's weekly Mortgage Applications Survey showed applications for purchase loans climbed a seasonally adjusted 1.5 percent during the week ending May 20 compared to the week before. Purchase loan applications were up 3.1 percent from the same time a year ago.

Demand for refinancings was also up slightly, to the highest level since Dec. 10. Requests for refinancings accounted for 66.8 percent of all mortgage loan applications, the highest share since Jan. 28.

In a May 18 forecast MBA economists said they expect rates on 30-year fixed-rate mortgages to rise to an average of 5.5 percent during the final three months of this year, and continue a gradual rise to an average of 5.9 percent during the fourth quarter of 2012.

In industry-speak, the fees are called “loan-level price adjustments” and new ones will go into effect April 1. The fees for conforming mortgages have been adjusted various times during the housing crisis, but this latest revision is an example of how even years into the housing downturn underwriting continues to tighten.

“It’s not so much that this is really tightening significantly, it’s that it’s getting tighter. It’s not getting easier,” said Cameron Findlay, chief economist for LendingTree, an online marketplace that connects consumers to lenders. “Consumers are looking for some relief, and what they’re getting is the opposite at this point. They’re getting ‘Sorry, there’s less that we can do for you than even a year ago.’”

“The majority price it into the rate,” said Rhonda Porter, a loan officer with Mortgage Master Service Corporation in Kent, Wash.

But the fees are anything but one-size-fits all: Fannie Mae releases a grid to lenders to explain the fees that individual loans are subject to for loans, based on a borrower’s credit score and loan-to-value.

In this latest iteration, a borrower wouldn’t be affected by a loan-level price adjustment if he or she had a FICO score above 740 and a loan-to-value of 75% or less, Findlay said. But a buyer with a standard 20% down payment (or 80% loan to value) and a 740 credit score could now face additional fees.

“It certainly says that even with a great credit score, they still see some risk in you,” he said.

An example of how the change could affect borrowers, in dollars: Before the new adjustment, someone with a 700 FICO score and a $160,000 mortgage to purchase a $200,000 home (80% loan-to-value), might have paid an additional $800 in these fees. Now, that cost would be doubled, meaning the loan’s risk-based pricing would equal $1,600, Findlay said.

Just a note: The fees don’t have an effect on loans insured by the Federal Housing Administration, which appeal to borrowers who need a low down payment loan, said Greg McBride, senior financial analyst for Bankrate.com. Also, not all lenders sell all mortgages to the secondary market, so not all loans are subjected to the fees — underscoring just how important it is to shop around and compare rates, he said.
Risk management

Why are the fees rising? Broadly, it’s because government-sponsored enterprises Fannie Mae and Freddie Mac FMCC +7.17% are doing what they feel is necessary to manage risk at a time in which they still remain in government conservatorship. That means, ultimately, taxpayers assume the risk for these mortgages, McBride said.

“There’s an initiative for Fannie Mae and Freddie Mac to make sure that they’re buying quality paper,” he said.

But McBride cautions people from getting too worked up about fee increases: “If you are a consumer and you’re trying to gauge which way mortgage rates are going to go, the big drivers are still macro events such as economic news, the outlook for inflation, or any nervousness in the financial markets,” he said. “Those are the real drivers of mortgage rates day-to-day, week-to-week and month-to-month.”

Mortgage rates rose at the end of 2010, as the economy showed signs of improvement and the markets feared an increase in inflation. The conforming 30-year fixed-rate mortgage averaged 4.74% for the week ending Jan. 20, according to Freddie Mac’s weekly survey. For comparison, the rate averaged 4.23% for the month of October.

And if the economy stays on track toward recovery, rates could be higher than 5.5% for the second half of the year, McBride said.
Need to know

Still, consumers should be aware of these fee increases and take them as a reminder of how important it is to have the best credit score possible when shopping for a mortgage. And for some, it might make sense to postpone obtaining a mortgage until they’ve improved their credit.

“What could happen is that the people who are, let’s say, at a 675 score might end up waiting a couple of months because the difference between a 675 and 680 is big,” said Les Berman, a senior mortgage advisor with First Cal, a lender based in Petaluma, Calif. To improve your credit, pay your bills on time, and clear up any mistakes on your credit reports, he said. Also, aim to keep credit card balances low.

Taking time to improve your score could help you lock in a less expensive mortgage and be well worth the effort in the long run. And you have time: Home prices aren’t going to race up any time soon, McBride said.

“So as a borrower, if you feel you need to take a little more time to increase your savings, pay down your debt and improve your credit score, you can feel safe in doing so,” he said. “Even if we see a slight increase in mortgage rates, that could be offset if you put yourself in a higher credit score band in the interim.”

Amy Hoak is a MarketWatch reporter based in Chicago.

From January through June, 26% of homeowners who refinanced chose a 15-year fixed-rate mortgage, according to data from CoreLogic, a provider of financial, property and consumer information. During all of 2009, 18.5% of borrowers who refinanced opted for a 15-year term. About 9.4% did so in 2007.

Homeowners are doing the math and realizing that rates have fallen enough so the increase in payment between a new 15-year mortgage and their current loan is no longer unbearable for their budgets, said Bob Walters, chief economist at online lender Quicken Loans.

The average rate on a 15-year fixed-rate mortgage was 3.86% for the week ending Aug. 26, according to Freddie Mac's weekly survey of conforming mortgage rates.
A change in thinking

The financial situation of the people capable of refinancing today is a factor in the shift, Walters said. These people typically are homeowners with the best credit and the most equity -- and, therefore, most suited for a shorter-term loan.

But there might be some psychology at work. "We're seeing a different view on debt than maybe we've seen in the past," he said. Today, homeowners are saying, "I really want to pay this off. I'm going to bite the bullet and take the payment and work toward paying this down."

Also, the average rate on a 15-year fixed-rate mortgage is below 4% right now, and having a mortgage rate that starts with a "3" is attractive for people who can afford it, said Leif Thomsen, chief executive of Mortgage Master, a privately owned lender.

It also acts as somewhat of a forced savings account for homeowners, he said, given that the higher payments help pay down the principal at a quicker clip.

This is a huge shift in borrower thinking. "There was a drive a couple of years ago to take out the biggest mortgage that you could and use all of the money you would have otherwise had in the house and put it into stocks and bonds -- to think of your house and mortgage as part of your entire investment portfolio," said Amy Crews Cutts, deputy chief economist for Freddie Mac.

"That worked for people who do investment finance for a living and are good at managing accounts," she said. "But for the average person, debt is a drag on their psyche as well as their overall budget."

Many Americans have reverted to the goal of paying off their house and getting rid of their mortgage, Cutts said.
Doing the math

Refinancing into a shorter-term mortgage isn't a strategy for everyone, however. Choosing a shorter term usually means you'll get a better rate -- and you'll pay much less interest over the life of the loan -- but a shorter timeframe ramps up monthly mortgage payments.

For example, with a 4.5% interest rate on a 30-year fixed-rate mortgage of $200,000, you would have a monthly payment of $1,015, including principal and interest, Cutts said. The monthly payment jumps to about $1,480 with a 4% interest rate on a 15-year fixed-rate loan.

Of course, if the refinancing borrower's current 30-year loan has a higher rate, the difference between the monthly payments could be less. Still, you should count on some increase in monthly payments.

In general, Walters said, those who choose 15-year fixed-rate mortgages are older and have more equity and less debt than other folks. They also earn higher incomes and don't have some of the added expenses that younger homeowners typically do.

The new two-page form will eventually replace the Good Faith Estimate and Truth in Lending forms, which must be sent to consumers within three days of a home-loan application. Those two forms now total five pages and tend to be difficult to decipher.

The prototype forms also offer a “comparison” section to help guide buyers when they compare loan offers from different lenders. The CFPB is calling its project “Know Before You Owe,” and it’s asking consumers to comment on its current prototype forms. See the sample forms on the CFPB’s site.

“This project aims to provide consumers with up-front, easy-to-understand information that helps them compare different mortgage offers and find one that’s best for them,” said Elizabeth Warren, assistant to President Barack Obama and special adviser to the secretary of the Treasury on the CFPB, in a conference call. “The goal of this project is to make it easier for families to see the costs and risks up front. … It is always good for consumers to know the real costs of a mortgage.”

The CFPB will conduct tests, including interviews with consumers, lenders and mortgage brokers, in six cities nationwide. Warren added the agency will put the form through five rounds of evaluation and revision, eventually resulting in a single proposed form. The testing and evaluation process will likely continue through September.

On May 17, average home loan rates offered by LendingTree network lenders were 4.79% (5.03% APR) for 30-year fixed mortgages, 4.00% (4.39% APR) for 15-year fixed mortgages and 3.42% (3.62% APR) for 5/1 adjustable rate mortgages (ARM). Rates for 30-year fixed loans and 5/1 ARMs fell week over week, while 15-year fixed rates were flat.

On the same day, the lowest mortgage rates offered by lenders on the LendingTree network were 4.375 percent (4.51% APR) for a 30-year fixed mortgage, 3.5 percent (3.74% APR) for a 15-year fixed mortgage and 2.875 percent (3.17% APR) for a 5/1 ARM. Rates for all loan types declined one eighth of a percent.

LendingTree.com offers free tools and services to help consumers make sense of the refinancing process. Homeowners can fill out one simple form at LendingTree.com and receive customized loan offers from multiple lenders. What's more, the unique Look Before You Lock tool allows borrowers to determine whether the rate they've been offered is comparable to offers received by consumers with similar loan profiles. In just a few quick steps, Look Before You Lock lets borrowers know whether the rate they've been offered is a good deal, or if they should continue looking.

The following housing market data shows a snapshot of the lowest mortgage rates for a 30-year fixed loan offered by lenders on the LendingTree network, as well as average loan-to-value ratios and negative equity by state.

Dodging the debris unleashed by a shattered housing market, RPM Mortgage powered to its most successful year in 2010 and is off to a robust start this year.

Walnut Creek-based RPM generated hundreds of millions of dollars more in mortgage business in 2010 and hired hundreds of new employees over the past two years, a track record that sparkles against the gloomy backdrop of the real estate sector.

The company's success has been fueled in great measure by its ability to meld its connections to Fannie Mae with a veteran sales force and low interest rates. By being able to sell loans directly to Fannie Mae, RPM has attracted experienced loan officers who can drum up more business.

In 2010, RPM generated $4.55 billion in loan production, up 12.9 percent from the $4.03 billion in loan production in 2009.

The pace is brisk so far in 2011. For the first three months of this year, RPM generated $804 million in loan production, said Elise Watkins, an RPM spokeswoman. That was up 11.4 percent from the $722 million produced in the January-March quarter of 2010.

In contrast, the country's largest home lender, San Francisco-based Wells Fargo, saw originations for residential loans fall 8.1 percent in 2010 compared with 2009, regulatory filings show. However, in the first quarter of 2011, Wells Fargo's originations for home loans rose 10.5 percent compared with the year-ago January-March period, the bank said.

The calamity in the mortgage sector that erased numerous realty companies also jolted RPM, some industry insiders say.

"RPM was hurt, CMG was hurt, we all were hurt," said Guy Schwartz, a branch manager with an RPM rival, San Ramon-based CMG Mortgage. "This downturn has affected everybody."

Still, RPM -- along with companies such as CMG -- remains standing amid the wreckage of the housing market.

"They are a survivor," Schwartz said. "That says something right there."

RPM officials agree that the housing debacle cut a wide swath.

"The meltdown had an effect on everyone involved in the mortgage business and the entire real estate business," said Joe Polizzi, a loan officer in RPM's Alamo office. "Volumes dropped and, as can be seen by national sales figures, there are still many areas of concern for the purchase market."

Companies now must battle for a share of a pie that has shrunk from the heyday of the housing bubble. That pie not only is smaller, the ingredients are considerably different.

During the market peak, about 70 percent of the mortgage market was for home purchases, while 30 percent was for refinancing. Now, the market consists of 40 percent home purchases and 60 percent refinancing. To meet the rising demand for loans, RPM has hired about 260 loan agents and employees over the past two years. That's a 65 percent jump in the workforce during that time.

RPM has parlayed its approach to sell loans it originates into a business model it can dangle in front of experienced loan officers, brokers and other employees who might want to come on board.

"We sell our loans to Fannie Mae and we retain the right to service them," Watkins said.

The loans are funded through RPM's in-house mortgage bank, then they are prepared so they can be shipped off to Fannie Mae.

RPM is able to offer customers an array of programs, including loan packages backed by Fannie Mae, the Department of Veterans Affairs and FHA, officially called the Federal Housing Administration. RPM also is a correspondent lender with Chase, Bank of America, U.S. Bank and GMAC.

Meanwhile, some external factors have bolstered RPM.

"It helped that interest rates got to 50-year lows last year," Hirt said.

RPM also thinks it has been able to concentrate much of its business with high-quality borrowers who managed to keep out of trouble during the housing slump.

"Our loan volume is a testament to many of our customers who have been fiscally conservative, and continue to be conservative," Polizzi said.

In early 2009, RPM had about 400 loan agents and employees and was operating 36 branches. It now has 660 agents and employees. RPM currently operates 47 branches, most of which are in California.

Despite the steady growth of recent years, RPM executives acknowledge that the pace will be tough to maintain indefinitely.

"RPM has grown every year since 2006," Hirt said. "Every year we have outdone the prior year. We will have a challenge to do that again this year."

Contact George Avalos at 925-977-8477