The wild stock market fluctuations and all-time record low interest rates for home mortgages, particularly 15-year loans, have sparked a new wave of refinance applications.

“Unprecedented volatility in the stock market amid additional signs that the economy has slowed led to further drops in mortgage rates, with the 15-year rate reaching a new low,” said Mike Fratantoni, vice president of research and economics for the Mortgage Bankers Association.

“Home purchase application activity has been falling, likely the result of potential homebuyers hesitant to purchase in this highly volatile and uncertain environment,” Fratantoni said. “Refinance application volume is increasing substantially, although there is substantial variation across the market.”

The refinance share of mortgage activity recently increased to 78.8 percent of total applications. That’s the highest refinance share since November 2010. The adjustable-rate mortgage, ARM, share of activity decreased to 5.8 percent from 6.1 percent of total applications.

At last report, the average contract interest rate for 30-year fixed-rate mortgages decreased to 4.32 percent, with points decreasing to 0.87, including the origination fee, for 80 percent loan-to-value, LTV, ratio loans.

“Amid substantial market turmoil, mortgage rates dropped to their lowest levels of the year, and refinance applications jumped more than 30 percent to their highest levels of the year,” said MBA’s Mike Fratantoni, “Over the past month, refinance application volume has increased by 63 percent. Refinance applications for jumbo loans increased by almost 75 percent.”

Q: Are there new loan limits for The Federal Housing Administration, FHA, mortgages?

A: Yes, lower FHA loan limits will become effective Oct. 1.

The FHA will implement new single-family loan limits on that date as specified by the Housing and Economic Recovery Act of 2008. As a result, FHA will reduce loan limits in the highest cost metropolitan areas of the country while limits will remain unchanged in most other parts of the nation.

These new loan limits were scheduled to take effect in January of 2009, but continuing strains in credit markets led Congress to delay implementation.

The result has been nearly three years of higher loan limits for some areas based on the Economic Stimulus Act of 2008.

Barring any new action by Congress, many affected areas will have lower FHA loan limits on Oct. 1. The current standard loan limit for areas where housing costs are relatively low will remain unchanged at $271,050 for one-unit properties. The new “ceiling” loan limit for higher cost areas will be reduced from $729,750 to $625,500 for one-unit properties.

The FHA estimates that only a fraction of borrowers living in the nation’s highest cost areas will be impacted by the new loan limits recently announced. For example, last year only three percent of FHA-insured borrowers lived in these high-cost areas.

Q: Are mortgage modification scams on the increase?

A: Yes, unfortunately. Homeowners who received foreclosure notices from their lender are increasingly plagued by scammers who promise to expedite a highly favorable modification of their mortgage, for an up-front fee, of course.

In many cases, the scammer does little or nothing to help the homeowner once they receive the fee.

Normally, homeowners seek loan modifications in hopes of forestalling foreclosure. However, according to a report on Bankrate.com, scam artists often use fake loan modification schemes to prey on unknowing borrowers.

“The real unfortunate aspect of the foreclosure rescue scams is that it makes an already stressful and tough situation more stressful and more difficult,” said Josh Fuhrman, director of counseling for the Homeownership Preservation Foundation.

According to the Federal Trade Commission, FTC, corrupt persons are targeting potential victims by scanning foreclosure notices on the Internet, public files and newspapers.

Ana Gonzalez Ribeiro writes on Bankrate.com, “These con artists advertise through TV and newspaper ads or on posters with attention-grabbing phrases, such as ‘“Stop foreclosure now!”’ or ‘“We guarantee to stop your foreclosure!”’

Best advice: Be skeptical, and never pay an up-front fee for such offers of help. Free and much more reliable counseling is available. Contact your regional office of the Department of Housing and Urban Development, HUD, for information.

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