Lending Cafe

Beginning during his State of the Union Address, President Barack Obama has publicly pleaded with the Federal Housing Finance Agency (FHFA) to allow some of the more than 11 million underwater homeowners to reduce their mortgage principal balances.

In the absence of a decision on this initiative being handed down from FHFA's director, Obama has repeatedly endorsed further efforts to present Americans with an easier path toward a mortgage refinance.

Long after the initial finger-pointing regarding the bursting of the housing bubble stopped, many critics have now directed their vitriol toward the institution of homeownership itself, which they say is no longer as major a component of the American Dream as it once was.

Some of these critics have statistics on their side - such as the April Gallup study that found homeownership had fallen more than 10 percentage points since its peak in 2006 - but there are other studies that suggest the housing market finally sits on a long-awaited cusp of recovery.

The Home Affordable Refinance Program (HARP) exists specifically to aid homeowners who have negative equity in their properties, although some have found that they do not qualify for the initiative. These underwater borrowers do have other options, though, should they insist upon a mortgage refinance.

A number of housing stakeholders, including lawmakers, news contributors and President Obama himself, have called on the Federal Housing Finance Agency (FHFA) to provide more aid to underwater borrowers, many of whom are struggling to meet their monthly mortgage obligations and are quickly approaching foreclosure. On May 14, The Huffington Post's Preeti Vissa called on FHFA director Edward DeMarco to institute a much-discussed principal reduction program for underwater borrowers.

Fannie Mae's April 2012 National Housing Survey is the latest in a series of reports that suggest marked improvement to the real estate market will occur this year.

"After flat-lining at depressed levels for over a year, a growing share of consumers indicate that it is a good time to sell, suggesting rising optimism for the housing market," Fannie Mae vice president and chief economist Doug Duncan said. "Overall, consumer views of housing market conditions have become more supportive of home purchases and sustained healthy hiring is required to help realize these improved expectations."

For the last week, consumers have heard from a variety of housing experts, including those mentioned by Lending Cafe, that home values will complete their descent this year before finally rebounding as the year winds down. As homebuyers scramble to take advantage of these low prices, there are initial indications that values may already be climbing.

CoreLogic released a report May 8 that found housing prices increased by 0.6 percent in March, which represents the first rise in values since last July.

After months of appeals from Democratic legislators and President Obama, two senators have stepped forward to sponsor a bill that would alter the Home Affordable Refinance Program (HARP) and help underwater homeowners lower their monthly payments.

"Significant changes have been made to HARP to improve access, but additional changes can be made to increase participation and improve its effectiveness," Department of Housing and Urban Development (HUD) Secretary Shaun Donovan said in a statement supporting HARP reform proposed by senators Robert Menendez and Barbara Boxer. "That's something I hope we can all work on, with speed, and get this done."

If there is a silver lining to the housing crisis of the last few years, the fact that new homeowners are better able to make purchases should be it. While purchasing power is down, so too are mortgage rates and property values, which may both start to rise this year. Until that time, homeowners still have time to purchase a home or conduct a mortgage refinance.

Mortgage and lending expert Lewis Ranieri, who boasts an incomparable level of clout in the housing industry, made headlines earlier this week when he gave a speech at conference hosted by the Mortgage Bankers Association (MBA), boldly declaring that the real estate market would reach new lows this year before steadily increasing in the second part of the year.

The National Association of Home Builders (NAHB) has determined that 100 markets in 34 states have exhibited growth in the last month, which is about even with the figures observed in the month prior. Industry observers are optimistic that improvement is occurring, even if it is just in isolated areas for now.

"Many of these [improving markets] are relatively small markets in terms of their population and building volume, which is why their improvement is barely registering on the national scale as of yet," NAHB chief economist David Crowe said in a statement. "Moreover, we are seeing some shifting of markets on and off the list primarily due to small seasonal house price changes in areas that have had flat, stable prices rather than a boom-and-bust cycle."

Many of the consumers who were eager to refinance as soon as mortgage interest rates fell below 4 percent are likely stunned that now - many months afterwards - they continue to plummet and set new records seemingly every week. As a result, what looked like an impossible-to-pass-up bargain at the time may now appear to represent significant overpayment. So, why not conduct a mortgage refinance again?

Homeowners simply need to make an individual determination on their own as to whether refinancing can be justified by the costs. Every time refinancing occurs, homeowners must have enough capital to put money into their homes and to pay any additional processing or closing costs. There is also the matter of paperwork, which many homeowners are simply not interested in filling out again.

Most consumers are probably aware that the costs of buying a home have plunged to depths only dreamed of during the housing boom of the mid-2000s. Some may even know that owning a home has surpassed renting in affordability. But, many may not be aware that, according to some metrics, homeownership is cheaper than ever.

Back in March of this year, the National Association of Realtors (NAR) announced that its National Housing Affordability Index has reached heights never seen before. The index registered a 206.1 rating, which means that the average American family had two times the purchasing power necessary to afford an average home. This is the first time the index has climbed this high and NAR officials expect it will remain near that level throughout 2012.