Friday, December 19, 2008

How Much Can Oregon Families Save By Refinancing Out of a Subprime ARM Loan?

Typo Correction: Changed to read "Oregon has not adopted a bond refinancing program."

I have developed a new Excel workbook that illustrates potential savings for families that refinance from a current Oregon subprime ARM loan. Each worksheet shows an example of savings for one family and then for a select number of total families by month, year, and 30 year term of mortgage. IMPORTANT notes are included at the bottom of each worksheet.

There are two worksheets in the workbook:
  • 1st compares savings using Oregon bond rate vs current average subprime ARM rate for Oregon.[Oregon currently has not adopted a bond refinance program using the special $117 million in housing bonds allocated to Oregon by the summer 20O8 federal housing legislation, but is considering adopting such a program].
  • 2nd worksheet compares savings using current FHA Secure refinance rate for Oregon vs. current average subprime ARM rate for Oregon.

Using Current Interest Rate Differentials, Savings from Refinancing out of an Oregon Subprime ARM are Potentially Very Large :
  • Savings using FHA Secure are $3,158 a year, $3.158 Million a year for 1,000 families
  • Savings using Oregon Bond [if program was already available] would be $5,203 a year, $5.203 Million a year for 1,000 families.
[My earlier post with estimates of future Oregon subprime and ALT-A ARM loan resets is HERE.]

PDF of workbook with examples I used is HERE.
Excel workbook is HERE. I have not copy protected any cells, so you can change selections I made (I suggest you save the original someplace so you can get back to original if necessary; I.E.--if you screw it up!).

Additional notes:
1. I used actual average Oregon FHA Secure rates and Oregon Subprime average ARM interest rates as of October 2008.
2. I use the actual current Oregon bond rate as of today.
3. I do not play around with future ARM rates, just assume that current average subprime ARM rate would continue for life of loan.
4. Lead example in each spreadsheet uses the current interest rate difference. Each worksheet includes two other scenarios with rate differential reduced by 1/2% in each scenario

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