Personal Finance

Nunziata: It’s a Great Time to Refinance Your Mortgage

Joe Nunziata|Co-CEO of FBC Mortgage, LLC and CNBC-YPO Chief Executive Network Member

According to eMarketer, an estimated 92.5 million adult Internet users will use online coupons in 2012 to save hundreds of dollars per year.

Yet nearly four million Fannie Mae and Freddie Mac borrowers could stand to save hundreds of dollars per month refinancing their home mortgages under new programs that were not available until just a few short years ago.

Many of these homeowners owe more on their mortgage than their homes are worth. Across the U.S., nearly 11 million homeowners are underwater or approximately 22% of all outstanding loans, according to CoreLogic, a mortgage information provider to the mortgage industry. Statistics show that nearly 2.4 million homeowners hold less than 5% equity in their homes.

Thanks to a relatively new program called HARP 2.0 (Home Affordable Refinance Program) many borrowers with current mortgages that are underwater can refinance to a lower rate. For example, a borrower with a $300,000 mortgage at 6.5% could save $463.95 per month or $5,567.40 per year switching to a 4% fixed rate. The HARP 2.0 loan has some requirements that must be met in order to qualify for the program. These requirements are: your mortgage must have been sold to Fannie Mae or Freddie Mac before June 1, 2009 and you must be current on your mortgage with no late payments in the most current six months and not more than one late payment in the past 12 months. If you meet these criteria, then it is worth contacting a local lender to see what your options are.

Some legislators would like to expand HARP’s reach and create a HARP 3.0. The Responsible Homeowner Refinancing Act of 2012 is being sponsored by Senators Barbara Boxer and Bob Menendez. This act would give the Department of Housing and Urban Development (HUD) the authority to extend streamlined refinancing to all loans insured by the GSEs (government-sponsored enterprises). This would cover all government backed loan products and meld them into HARP 2.0 guidance. Another proposal would enable refinancing for borrowers with non-government-backed mortgages. These borrowers would be eligible if they are employed with good credit and are up to date on their mortgage, but certain limits to the mortgage amount would apply. The Federal Housing Administration (FHA) would be in charge of administering the program.

Another piece of legislation would require GSEs to cover the average closing costs for refinanced loans with new terms under 20 years, saving homeowners an average of $3,000 on their closing costs. All of these programs reward borrowers for decreasing the term of their loan and refinancing from a 30 year mortgage to a 10, 15, or 20 year term.

One last option for a borrower who does not meet the criteria for a HARP loan is to contact their current loan servicer and request a loan modification. Often times when you contact your servicer, they say you are not eligible for a modification, but don’t give up. Request a supervisor to make sure that you have the opportunity to explore all options available to you.

Another area of savings often overlooked is your homeowners insurance. There is no better time to shop your insurance than when you are refinancing your home. We have seen some of our customers reduce their insurance costs by hundreds of dollars per month just by changing carriers. Other areas to look at are your deductible, the major systems of the home (electrical, roof, and plumbing), and your coverage amount. Just make sure that you remain in compliance with your lender’s minimum insurance requirements.

With the HARP product if you have private mortgage insurance, you must keep it in place when you refinance. However, if you are doing a non-HARP refinance and your loan-to-value ratio is 80% or less, you will be able to drop your private mortgage insurance on your Fannie Mae or Freddie Mac loan. FHA has also recently authorized a reduced mortgage insurance premium. The reduction took effect on June 11, 2012. FHA lowered its Upfront Mortgage Insurance Premium (UFMIP) to just .01 percent and reduced its annual premium to .55 percent for certain FHA borrowers.

With all of the programs available, rates at historic lows, and the real estate market starting to rebound, now is the time to take advantage of the opportunities available to lower your monthly debt before it’s too late.

Sal A. “Joe” Nunziata is currently the Chairman and Co-CEO of FBC Mortgage, LLC. Prior to co-founding FBC Mortgage, LLC, Mr. Nunziata was the SVP/ District Manager for First Horizon Home Loans, a New York Stock Exchange listed company, from October 2003 until November 2005. Mr. Nunziata is also a member of the Young Presidents’ Organization.

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