Posts Tagged ‘government mortgage plan’

Bright days for Refinance – Seekers

Monday, May 31st, 2010

Bright days for Refinance - SeekersThe European debt crisis and the turbulent stock markets are turning out to be a ‘helping-hand’ for the American families looking for a refinance. Mortgage rates are edging to a record low. The average 30-year fixed-rate loan sank to 4.78 percent this week, the lowest this year and barely above the record of 4.71 percent set in December, last year.

Individuals looking for a refinance are queuing up in large numbers at mortgage lenders, all seeking a low rate for their refinance. Applications to refinance poured this week, reaching the highest in seven months. However, many of the refinance-seekers are holding back for even lower rates, but the only way to know the bottom is when it’s missed.

Some Analysts predict that this window of opportunity may close soon. Investors, due to uncertain environment and declining stock markets, had pounced on government securities. But, once they grow more confident about the stock market it wouldn’t take long to move out of bonds and back into stocks, which will automatically make the mortgage expensive.

Coming to the conclusion – Even though the mortgage is cheap these days, people are not opting for borrows to buy new homes. The number of loans being drawn to buy homes remained at its lowest in more than 13 years. First reason: the special tax credit for homebuyers expired last month. Another reason: after a large number of borrowers fell into defaults and foreclosures, banks needed borrowers to pay a down payment of around 3.5 percent and also to maintain a good credit rating.

The mortgage rates were to rise when the government ended the security-buying program, instead they fell because of fears that Greece would default on its debt. But, it is clear that the mortgage rates would go up once the investors start investing in stock markets, but how long would it take? Will the housing market get back on the ‘good old’ track?

Reference:

http://www.washingtonpost.com/wp-dyn/content/article/2010/05/27/AR2010052702002.html?hpid=sec-business

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Posted in Mortgage Industry, Mortgage Loan Applications, Mortgage Refinance, housing market | 82 Comments »

Interest Rate Remedy – ‘with Side Effects’

Monday, April 5th, 2010

The drop in housing prices extends to the fourth month. After a five-month run-up in home prices starting last spring, prices have now fallen for four consecutive months – according to the S&P/Case-Shiller Home Price Index of 20 cities, a gauge of market values. In January, prices were down 0.4%, compared with December and have fallen 0.7% from a year earlier.

The government, in order to stabilize the decaying housing market, spent more than a trillion dollars buying assets and investing in mortgages securities. Whereas, the near-zero interest rate was also expected to push the housing market upwards. However, both gave out unsatisfactory results. Moreover, recent news of the government winding up its buying activities will create an adverse effect on the industry. However, there are no updates concerning a rise in interest rates.

Lower interest rates predict good progress for the economy as a whole, especially for borrowers who always hope for ‘inexpensive’ money. On the other hand, these low rates are terrible for savers, especially for retirees who want to convert their lifetime savings into lifetime income. It takes a surprisingly large amount of money to generate even a modest amount of recurring income.

People planning their retirement era are unwilling to invest in such annuities, so what do they do then? They make pensions. It gives them a fixed benefit regardless of changing interest rates, making it more valuable than the annuities.

The other side of the picture – no doubt pensions have a fixed yield, but the changing interest rate stimulates the inflation level, which in turn influences purchasing power and an individual’s average income. Low interest rates means more investments which in turn means more production and consequent demand for production. An increase of 0.79% (January 2010 – 2.63% and November 2009 – 1.84%) in inflation is clearly evident of this fact.

The conclusion – lower interest rates favor borrowers and the housing market as a whole. On the contrary, savings based earners are not getting much out of their investments. What do you suggest, what should such individuals do at this stage?  How can the government stabilize the housing market along with increasing interest rates? Is there any other tool, apart from buying assets and mortgage securities?

Reference Links:

http://inflationdata.com/inflation/Inflation_Rate/CurrentInflation.asp

http://www.tradingeconomics.com/Economics/Inflation-CPI.aspx?Symbol=USD\

http://money.cnn.com/2010/03/30/real_estate/January_Case_Shiller/index.htm

http://money.cnn.com/2010/03/30/markets/thebuzz/index.htm

http://money.cnn.com/2010/03/29/news/economy/interest_rates.fortune/index.htm

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Posted in Mortgage Industry, housing market | 6 Comments »

Government Mortgage Plan Benefits to a Handful

Tuesday, March 2nd, 2010

Government Mortgage Plan Benefits to a HandfulThe government’s mortgage relief plan, announced by President Barrack Obama a year ago, has helped only about 12 percent of the borrowers. Since its initiation, around 1 million homeowners started the process, but only 116,000 completed the application process and had their loan payments reduced permanently. More than 61,000 applications were rejected, either because the homeowners failed to make payments or didn’t return the necessary paperwork.

Figures clearly demonstrate its performance – a complete failure. However, treasury officials say the program is on track. They further said that the program is doing the job it was designed to do. Struggling families are receiving funds and the housing market is showing signs of stabilization.

Nearly one in every three homeowners with a mortgage owes more to the bank than their property is worth. Maybe the government could do more to encourage banks to cut borrowers’ principal balances on their primary loans. But such a move could set off a repercussion from critics who claim it is unfair to people who are still paying their mortgages on time.  How can the government alter its conditions to make this plan more beneficial to large number of borrowers? Please provide your views and ideas.

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Posted in Mortgage Industry, Press Release | 2 Comments »