I asked the mortgage banker at this big bank how to eliminate the FHA guarantee. The banker told me that I could not for another 24 months. At 60 months, I could eliminate the FHA guarantee and its cost, if the loan balance was 78% of the outstanding mortgage.

Their final response was that our current 4.5% mortgage rate was a very good rate even with the Freddie Mac rate at 3.67%. I said, not at 217 basis points above the 10-Year U.S. Treasury yield. I laughed and moved on.

New Wrinkles

In my preparation for this story Thursday, and with the Freddie Mac 30-Year fixed rate mortgage rate down to 3.56%, I called the banker again for a new quote. I asked if I qualified for the Freddie Mac rate, and of course the answer was no.

This banker told me that the Freddie Mac mortgage rate was only for purchases, not refinancings. To qualify you had to put 20% down, pay at least a point up front and have a credit score of 800 or better.

To make matters more frustrating the FHA refinancing rate was up to 4.25% from the 4% rate quoted on June 1. It was thus not economically feasible to refinance again.

To add to my frustration, I asked if I qualified for the FHA Home Affordable Modification. Not surprising, the answer was no again, as this program would only apply if my mortgage was owned by Fannie Mae or Freddie Mac.

As my experience shows it is next to impossible to get mortgage relief even with the 30-year fixed-rate mortgage at a record low 3.56%. As I was preparing there were two pieces in the mail touting that I was pre-qualified for the FHA Streamline program. One had a 3.50% rate, the other at 3.25%. When you read the fine print it said that the rate could be set higher after the closing. To the trash went this mail.

I have been suggesting that we need a simple mortgage modification program for all homeowners, funded by a Federal Reserve Facility that channeled funds to the FDIC for use by community banks to finance or re-finance mortgages at 100 basis points over the yield on the 10-year U.S. Treasury. With the yield on the 10-Year at 1.50% the 30-year fixed rate mortgage would be 2.50% with no strings attached.

If you are current on your current mortgage, you automatically qualify. At this rate, the woes of the housing market would end, and the economy would recover with many construction jobs created.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

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