Posts Tagged ‘mortgage’

P.M.I Days are back

Thursday, June 10th, 2010

With the housing market sliding down, people losing their jobs as well as credit ratings, it was a bit difficult to get private mortgage insurance last year. This led people to flock at the Federal Housing Administration.

They had no other option. PMI was not an easy task, and lenders were not offering mortgages to borrowers with down payments below 20 percent, except for those who had insurance. At that crucial time, FHA was the only body willing to back borrowers with credit scores below 680 or down payments under 5 percent. However, some mortgage companies today have loosened their standards and are willing to insure borrowers with down payments as low as 5 percent.

P.M.I Days are back

Although the PMI availability improves, premiums haven’t slid down from their ‘year 2008’ level. They remain at a comparative higher level. Today, a loan of $500,000 requires a borrower to pay $258.33 every month, which is 0.62 percent. Before 2008, the rate would have been 0.52 percent that makes $216.66 per month.

Coming to the conclusion – No doubt FHAs are popular among borrowers these days, but PMIs have certain beneficial characteristics as well. Individuals going for PMI directly save $11,250 on a $500,000 loan, which they would have been paying for the one-time FHA fee of 2.25 percent.

Many mortgage companies have already eased their PMI policy, how long will it take other market players to revise their policies too? Is it enough to improve the housing market or to pull down the premium rates to the ‘year 2008’ level?

Reference Link: http://www.nytimes.com/2010/05/30/realestate/30mort.html?scp=4&sq=mortgage&st=cse

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Posted in FHA Loans, Mortgage Industry, Mortgage Loan Applications, housing market, interest rates | 56 Comments »

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 »

Mortgage Loan Applications – ‘Accelerating’ Tips

Monday, May 24th, 2010

Heres  a short story:

Mortgage Loan Applications – ‘Accelerating’ TipsNancy works at the financial district in San Francisco. About a month ago, she was spending most of her time in the ‘Dream-House Hunt’. A perfect house, with lower interest rates and a good mortgage loan was what she was looking for.

However, the mission was ‘partially’ accomplished when she found a perfect house, well-furnished and closer to her workplace. Next, she submitted the mortgage loan application and then waited….waited…& waited. The next week, interest rates marked a spike. Another week – another peak. Now she is maxed out, another point would mean a significant increase in the monthly payment. In the end, she finds out the interest rate has gone up again.

Not only Nancy, there are lot more out there who have the same story. Why does this loan application take so long? How can we speed it up?

First of all, start to shop for a home loan instead of a home first. Getting approved for a mortgage loan before you find a home will accomplish two things: you’ll be locked on to an interest rate, which will save you from this ‘waiting-game’ mentioned above. This is also termed as ‘lock n shop’, only a small number of lenders, such as Choicefinance, Lendingtree and MFG Mortgage Rates, provide this option. Besides this, if the sellers sees that you are pre-approved, they’ll take you as a ‘serious’ buyer.

Next, make things easier for the mortgage company by providing them all the information that you know they’ll need – organized and easy-to-read. This will save them repeated calls, asking you for paperwork again and again.

Lastly, try to bug your mortgage lender to check for ‘order-status’. Mortgage lenders have thousands of applications to process, and it’s really important to make sure that yours doesn’t sit on the bottom of the stack.

Here my question is: what other ways can be used to speed up mortgage loan applications? If you have a case of your own, feel free to share it.

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Posted in Mortgage Industry, Mortgage Loan Applications, housing market | 34 Comments »

Principal Reduction Programs – Banks say ‘NO’

Monday, April 19th, 2010

The Housing Market slump in the United States is turning out to be more critical. It has left around seven million households on the verge of foreclosures. A large number of Individuals walled by loans, credit card payments & debts etc. are turning a deaf ear towards mortgage, especially when the housing prices are unfavorable. Individuals are focusing more to improve their credit ratings by paying off credit card payments.

The US government, since its inception, has tried all means to harness it.  Buying mortgage securities, lowering interest rates, setting new standards and making policies, however, the outcomes are not so satisfying.

The idea of reducing loan principals last month was another step to save the besieged homeowners. However, Banks do not look so happy with this decision. According to them, the tool would not work as it is designed to. Principal reduction on one hand could reward households for consuming more than they could afford. While, on the other hand, the cost of reducing principal will be built into future loans, resulting in less access to credit and higher costs for consumers. It might punish future homeowners by raising the cost of borrowing. These latest foreclosure prevention measures might encounter some resistance among banks, ultimately rendering them less effective than hoped.

The justifications given by banks cannot be overlooked; somehow it is unfair to benefit the current borrowers by putting a burden on the future homeowners. What do you say – how can the government tackle this problem of principal reduction in such a way that it is beneficial to banks and to mortgage borrowers at the same time? In addition, how principal reductions in equity based home loans benefit homeowners, as these loans are widely used for domestic purposes rather than paying for housing?

Reference Link: http://www.nytimes.com/2010/04/14/business/14mortgage.html?scp=4&sq=mortgage&st=cse

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Posted in Mortgage Industry, housing market | 50 Comments »

Bankruptcies High Tide

Monday, April 12th, 2010

Small businesses make up a large share of the whole economy, not only in the US but in all parts of the world. However, these businesses are the most affected by the recent global recession. People who were getting good returns from their businesses are now turning towards courts with bankruptcy petitions. There were 158,141 U.S. bankruptcy petitions filed last month — a 35% increase over February’s figure, according to data compiled by Automated Access to Court Records (AACER). This was a 19% increase over the number in October 2009, the last record-high month.

A large number of individuals are turning towards the complete bankruptcy filing (chapter 7 filings), allowing courts to foreclose all their possessions along with their homes. However, chapter 13 filings are also available, which requires individuals to repay a substantial part of their debts and prevents banks from foreclosing their houses. This behavior clearly indicates that home-owners are just walking away from their mortgages, rather than attempting to cope up with their payments, especially in times where large number of individuals are unemployed and don’t foresee themselves having good earnings in the near future.

The statistics show that personal borrowings in the US have increased 10 times more than they were in 1960, allowing individuals to borrow relatively more than their returning capabilities. That is why people are ending up bankrupt.  My question here is: If people are not able to pay back, why lend them money in the first place? Why can’t financial institutions counsel their borrowers on borrowing patterns and best practices, keeping In view the conditions of the economy?

Reference Link: http://www.time.com/time/business/article/0,8599,1977728,00.html

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Posted in Mortgage Industry | 36 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 »

Changing the Debt Paying Calculus

Monday, March 29th, 2010

The first of every month is always a day of joy, salaries are credited to accounts and plans to spend it in the most constructive manner are always a hot topic. But the reality is; we never spend on what we always hope for, there are always credit card bills, mortgages and debts to pay-off.

Since long we have set out priorities. Mortgages always come first, next come credit card payments, and why not? A roof over one’s head is much more important than losing the ability to spend more than what is in your bank account.

At the present time, people, in a bad way, are paying their credit card standings before clearing off mortgage payments. The biggest reason for this awkward customers’ credit behavior is the falling housing prices, loan-modification programs and restricted credit. Nowadays, ‘property being the largest asset ‘ is just an extinct statement.  According to the February 2009 Halifax House Price Index, property prices have fallen by 17.7% over the last 12 months and about 20% of all homeowners owe more than their house is worth.

The loan modification program has also contributed towards this reshuffling of priorities. It allows people to hold back their houses even if they miss one or two payments. While on the other hand, banks are constantly tightening their credit policies. Low credit card limits, several penalties and fear of getting a card cancellation if behind on payments has created a see-saw situation, where ‘see’ is lenient and ‘saw’ is severe.

Some experts say that this trend change may lead to a circumstance where home loans may be put to one side while people will repair their credit to start again with a new mortgage plan. What is your say? What should come first; credit card payments or mortgages? Will the US housing market continue to decline? How can the Financial Institutions modify their policies to counter these threats and stabilize the housing market?

Reference Links:

http://www.time.com/time/business/article/0,8599,1969017,00.html

http://first-time-home-buyers.suite101.com/article.cfm/falling_house_prices_set_to_continue_until_2010

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Posted in Mortgage Industry, housing market | 9 Comments »

Housing Market – Fed lifts off the ‘helping hand’

Monday, March 22nd, 2010

The recent recession initiated in the US economy ignited a trickle-down effect on all economies of the world.  The Housing market, playing the most crucial role in US economy, turned out to be a key ingredient of the slump. Since then, the United States has thrown trillions of dollars to get the housing market out of intensive care. The Government has seized two mortgage finance giants, along with giving a tax break of more than $8,000 per housing unit in order to lure buyers.

More importantly, the Fed’s buying of more than a trillion dollars mortgage related assets drove down the borrowing costs, along with feeding the ‘almost-dead’ market with fresh capital. Mortgage rates were affordable, institutions stayed liquid and probably, it kept the depression at bay.

A recent meeting of Fed’s policy committee ended up with a decision of keeping interest rates near zero, spreading a smile on investors’ faces and causing stock markets to rise.

However, bad news also followed. The Federal Reserve is ready to wrap-up the mortgage-security buying program at the end of this month. It is expected that this $1.25 trillion buying program, once ended, would send a seismic wave far and wide because it paid out huge amounts of money that were later injected into stocks. Turning off this supply would reduce the already weakened buying power to a complete flat line.

No worries; The Fed’s said that it will carry on the buying program once they felt a downward tilt.  The question that arises here is: When? Are they going to wait for the housing market to decline further, or would another depression trigger the restart? What consequences will this buying turnoff entail?

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Posted in Mortgage Industry, Press Release | 6 Comments »

Subprime Lenders – ‘Still’ Alive

Monday, March 15th, 2010

Subprime Lenders – ‘Still’ AliveThe financial crunch gulped down a large number of companies, leaving many out of work and unable to pay debts. Many well known banks incurred large debts and huge liabilities, so large that even the Government was unable to give them a helping hand. Chances of getting a loan with a good credit standing plummeted down to somewhere near impossible, leaving no room for those who had their figures less than 650 at the Credit Ratings Scale.

It was assumed that companies issuing loans to people with debt problems would soon succumb to the crunch. But almost a year and a half has passed and this so-called subprime lending market is safe and sound. Reason for their survival – the discontinuation of subprime-lending by big banks.

With plenty of subprime lenders in the market, the mortgage industry is still facing problems with gaining strength. Mortgage brokers say it is still hard for individuals with bad credit to get home loans. The subprime home loan market peaked in 2005. That year, nearly $625 billion were handed out to borrowers with low credit scores, generally below 650, whereas, only $4 billion were supplied to home loans in the same manner in 2009.

As more and more banks are tightening their credit standards, the subprime lenders have not only accelerated their business growth, but have also raised interest rates, since borrowers with low credit ratings have fewer options. Is there no way out for people who have low credit standings?, Why can’t larger finance corporations opt for the same strategy as subprime lenders? Comments and opinions welcome.

Reference Link:  http://www.time.com/time/business/article/0,8599,1971237,00.html

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Posted in Mortgage Industry, Press Release | 2 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 »