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The New Economy

Mortgage rates hit new lows. Will you benefit?

Mortgage rates declining means lower housing costs, but not for those who most need the help of lower mortgage rates.

By / August 19, 2010

A "detour" sign is posted at the main entrance to the Freddie Mac headquarters in this 2008 file photo in McLean, Via. Freddie Mac announced Thursday that mortgage rates reached a new low. But some of the people who could benefit the most won't be able to take advantage of lower mortgage rates.

Paul J. Richards/AFP/Newscom/File

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Mortgage rates this week reached a new low not seen in more than 50 years.

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The rate for a standard 30-year fixed-rate mortgage stood at 4.42 percent, down slightly from last week's 4.44 percent, according to mortgage-purchaser Freddie Mac. It marked the ninth week in a row that rates set or tied a new low, according to Amy Crews Cutts, Freddie Mac's deputy chief economist.

The rates for a 15-year fixed-rate mortgage also hit a new low: 3.90 percent, down from 3.92 percent a week ago.

Will you benefit? It depends on who you are.

If you're a homeowner with equity in your house, a job, and a good credit score, the odds are good that banks will look kindly on your loan application. (Before you sign, though, see this Monitor article for help in timing your refinance.)

Others who could benefit from lower mortgage rates can't refinance at today's low rates.

Are you a landlord? Banks may not be eager to lend.

Is your house worth less than the mortgage you're carrying? Sorry, banks are not interested in taking on the risk.

There may be help if, say, your loan has been purchased by Freddie Mac or its sister organization, Fannie Mae. (To find out if the agencies own your loan, call the bank that first handled the loan -- or look it up here online. If it is, you may be able to get refinancing through the federal government's Home Affordable Refinance Program, or HARP, even if you owe more than the house is worth. (Click here to check your eligibility.)

Also, the Federal Housing Administration offers streamlined refinancing to its borrowers, which promises at the very least less paperwork. Starting Sept. 7, it will also offer non-FHA borrowers a "short refinance option," basically an FHA loan at a lower rate if their bank will agree to write off 10 percent of the unpaid principal.

Of course, banks are very reluctant to do this.

That's why the main beneficiaries of this week's lower interest rates will be those in the strongest financial position – in essence, those who need the help the least.

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