More states may soon offer home loan refinancing programs similar to those already available from the federal government and at least nine states. The existing programs are limited in scope, but give some homeowners another option to avoid foreclosure.So far, Connecticut, Delaware, Maryland, Massachusetts, Michigan, New Jersey, New York, Ohio and Pennsylvania have set up refinancing programs, according to "Defaulting on the Dream: States Respond to America's Foreclosure Crisis," a study published by the Pew Center on the States, a research organization in Washington, D.C.Collectively, these states have committed at least $450 million to help homeowners refinance loans they couldn't afford or take out short-term emergency loans to tide themselves over during temporary financial difficulties.State refinancing programs typically:-- Weigh whether the homeowner's existing mortgage is or seems likely to become a financial hardship.-- Allow homeowners to refinance an interest-only or adjustable-rate mortgage, known as an ARM, into a 30-year fixed-rate mortgage.-- Require homeowner counseling, in part because the federal government has upped its grants for such programs.-- Require the homeowner to share any future financial gain on the sale of the home with the government agency through an equity-sharing or home value appreciation recapture requirement.-- Tend to be targeted toward people of modest means.-- Tend to be restricted to low- or moderately-priced homes.-- Tend to be predicated on the presumption that the homeowner has some ability to afford a new mortgage. State housing agencies exist to support affordable housing, but that doesn't necessarily mean their programs can or should rescue people in the most dire of circumstances, explains Garth Rieman, director of housing advocacy and strategic initiatives at the National Council of State Housing Agencies in Washington, D.C.Housing agencies are "very reliable lending partners and will probably give homeowners very good advice," Rieman says. "There is virtually no risk of any kind of predatory lending."A growing number of states are providing other tools to combat the foreclosure crisis, including prevention counseling services; loans for communities that have been hard hit, and forbearance or modification of mortgages serviced by the state housing agency, the Pew study says."The national foreclosure numbers continue to be driven by the hardest hit states continuing to get much worse. The increases in foreclosures in California and Florida overwhelmed improvements in states like Texas, Massachusetts and Maryland," Mortgage Bankers Association Chief Economist Jay Brinkmann said in a statement.So far, neither California nor Florida has introduced a home loan refinancing program specifically for homeowners who are facing foreclosure. But more states are expected to set up such programs due to the Housing and Economic Recovery Act of 2008, according to Rieman.The act adds an extra $11 billion to the national "bond cap," which refers to the total dollar-value of mortgage revenue bonds, or "MRBs," that housing agencies can issue each year. It also allows housing agencies to use MRBs for refinancing programs, which previously weren't a permissible activity for MRBs.The federal government authorizes housing agencies to issue MRBs, which are tax-exempt bonds, and uses the proceeds to finance local housing programs. Two examples of such programs are home mortgages for low- and moderate-income first-time homebuyers and construction of affordable rental housing."More states are now considering how they can use the new refinancing authority granted in the housing stimulus bill to provide refinancing through the MRB program," Rieman says.The increase in the bond cap will be divided among the states on a per capita basis, will be available for three years and can be used for any allowable housing purpose, not just refinancing, Rieman explains. That means states can choose whether to use their additional allocation for foreclosure-rescue loans or other purposes.X...X...XMortgage rates rose once again this week, with one notable exception. The average 30-year fixed-rate increased 9 basis points, to 6.41 percent. A basis point is one-hundredth of a percentage point. It is the third straight week that mortgage rates have increased.The average 15-year fixed -- a popular option for refinancing -- moved up 3 basis points, to 6.14 percent. The average jumbo 30-year fixed rose 7 basis points, to 7.65 percent.Meanwhile, the one-year adjustable rate mortgage broke the trend by falling 29 basis points, to 6.04 percent. The popular 5/1 ARM increased 11 basis points, to 6.49 percent.(Distributed by Scripps Howard News Service www.scrippsnews.com)
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