3 Trends in Mortgage Finance for Spring 2012 (and Beyond)

Experts say mortgage rates are likely to rise modestly while credit remains tight.

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The housing and mortgage markets have seen their fair share of ups and downs this year, making it difficult to predict what the next month holds in store much less the rest of the year.

Still there are a few themes experts say are likely to surface as the year goes on. Here's what to look out for in mortgage financing this spring:

Mortgage rates will rise (modestly). How low can they go? Not much further, experts say. Although rates dropped to a new all-time low last week, chances are rates are heading up in the near term, especially if the economy strengthens.

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"Rates have gone back to record lows—that's surprised a lot of people in the mortgage industry and we don't know how long that's going to last. Everyone is really surprised that it's lasted this long," says Polyana da Costa who covers mortgage finance for Bankrate.com. "There's a much higher risk for rates to go up than down."

The specter of rising rates is particularly harmful for buyers waiting on the sidelines for home prices to drop further, mostly because a slight further drop in home prices won't outweigh the cost of paying a higher interest rate over the long term.

"Even if home prices go down another 5 percent and rates increase substantially you have to do the math there," da Costa adds. "Is it worth getting a lower price but missing the lower [interest] rate now? [A higher interest rate] is going to hurt you more financially in the long term."

Cheaper, easier refis. With upwards of 11 million Americans underwater on their mortgages, the ability to refinance at today's rock-bottom rates has become a hot-button issue. Despite an alphabet soup of government programs—HARP, HAMP—designed to help struggling homeowners refinance and shave down their monthly payments, millions of homeowners don't qualify for the programs, leaving them to pay high interest rates while watching their home's value decline further.

[Read: More Refinance Help on Horizon for Fannie, Freddie Homeowners?]

"We're waiting to see what's going to happen with HARP [2.0]," da Costa says, noting that lender participation in the recently revamped refinancing program is voluntary. "But one good thing is that a lot of the large banks have embraced HARP 2.0 for their own customers."

"With the first version of HARP it was very difficult to get refinancing, now it's getting easier. It's still not where it should be," da Costa adds.

Those with FHA loans could also see some relief this summer when it comes to refinancing. Come June 11, borrowers refinancing through the FHA steamline program will get a break when it comes to insurance and annual mortgage fees.

"That should make a huge difference for people who have FHA loans," da Costa says.

Political pressure to support homeowners is also mounting. A recent Senate subcommittee hearing revisited the issues impeding homeowners' access to refinancing programs, underscoring that more than 17 million homeowners with government-backed loans still pay more than 5 percent interest on their mortgages. Meanwhile, average rates for 30-year fixed loans hit a new all-time low of 3.84 percent last week.

Tight (but not-as-tight) credit. Although most experts agree that credit conditions have eased somewhat over the past several months, it's still a challenge to get a mortgage these days.

Read: National Mortgage Settlement Monitor Joseph Smith Weighs in on Progress in Exclusive Interview.]

"It's not getting more difficult," da Costa says. "It's not getting any easier, but it's not getting more difficult, which is a big improvement from the past couple of years."

Would-be buyers still need excellent credit and loads of documentation to prove financial stability and ability to pay, which means Americans with less-than-perfect credit histories could face higher interest rates and downpayments.

Those who have small downpayments will likely have to take the FHA loan route, which requires only 3.5 percent down. But, loan and insurance fees are increasing on most government-backed loan programs, which means some Americans will have to pony up more cash if they want to buy a house this spring.

Meg Handley is a business reporter for U.S. News & World Report. You can reach her at mhandley@usnews.com and follow her on Twitter.