By Vicki Needham - 05/09/12 02:55 PM EDT
Housing and Urban Development Secretary Shaun Donovan said Tuesday that he expects refinancing to continue picking up pace, especially when fees are dramatically cut next month for FHA refinancing.
Several Senate Democrats have proposals that shore up weaknesses in the Home Affordable Refinance Program (HARP), making it easier for a broader range of borrowers to rework their loans into lower rates and help them rebuild equity.
On Tuesday, Bank of America announced that it mailed 200,000 letters to potential homeowners for mortgage principal forgiveness as part of an agreement worked out between the banks, 49 attorneys general and the federal government.
The bank estimates average monthly savings of 30 percent on mortgage payments of customers who qualify for this program.
"To the extent principal reduction and other modification tools help us turn mortgages headed for possible foreclosure into long-term performing loans, it will be positive for homeowners, mortgage investors and communities," said Ron Sturzenegger, Legacy Asset Servicing executive.
Bank of America began making principal reduction offers in March, concentrating on homeowners who were already in the modification review process.
So far, about 5,000 trial modification offers have been mailed, providing a potential total of more than $700 million in forgiven principal, the bank said.
The refinance share of mortgage activity decreased to 72.1 percent of total applications from 72.6 percent the previous week, the lowest refinance share since April 6.
The government purchase share decreased over the week from 37 percent to 35.8 of all purchase applications, the lowest government purchase share since March 27, 2009.
Mortgages rates are hovering at or below historic lows, a reason why top White House officials and lawmakers are pressing for passage of legislation now, before they begin creeping upward.
The average contract interest rate for 30-year fixed-rate mortgages with loan balances of $417,500 or less decreased to 4.01 percent from 4.05 percent, the lowest rate recorded in the history of the survey.
For mortgages with balances greater than $417,500, the rate decreased to 4.29 percent from 4.32.
The average contract interest rate for 30-year fixed-rate mortgages backed by the Federal Housing Administration increased slightly to 3.81 percent from 3.80 percent.
The rate for 15-year fixed-rate mortgages decreased to 3.29 percent from 3.31 percent, the lowest 15-year rate in the survey's history.