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US FED: Rosengren Supports Expanded FHA Mortgage Lending
(0)Some FED officials such as Eric Rosengren are backing proposals to expand the scope of lending programs such as FHA in an attempt to stablize the housing market throughout the US:
‘Making these programs more accessible to borrowers and banks would help ensure that low and moderate income borrowers can obtain financing, which should help stabilize the market for lower-priced homes,’ Rosengren said in comments this evening before the Massachusetts Mortgage Bankers Association.
‘Since many banks have been raising their minimum credit score to qualify for mortgages, the FHA may be able to provide loans for borrowers whose credit history is not up to current thresholds, yet have the capacity to make payments,’ he added.
He also recommended that Fannie Mae and Freddie Mac work to provide a secondary market for mortgages that reflect the lower costs of funds in many credit markets. ‘Further exploration of the GSEs options for pricing and programs may result in additional support to the mortgage market,’ Rosengren said.
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Citigroup supports measure giving courts big say on mortgage reductions
(0)Citigroup has finally given in and backed a proposal aimed at letting bankruptcy court judges modify existing home mortgages:
For the first time since the housing crisis began, a major mortgage lender agreed Thursday that courts should be allowed to order reductions in the principal of “underwater” loans for some troubled borrowers, cracking what had been fierce and unified industry opposition.
The agreement struck between congressional Democrats and Citigroup Inc. would permit bankruptcy judges to change the terms of mortgages as part of court-ordered debt restructuring. Democrats hope to include the provision in the upcoming economic rescue legislation under negotiation between Congress and the incoming Obama administration.
It still remains to be seen whether measures like these have any real effect on preventing foreclosures, as many troubled borrowers simply go into default again on modified loans a few months later. Proposals such as this also run the real risk of causing lenders to raise their rates on other loans (or cut back on lending), when faced with the prospect of absorbing losses on loans it made in the past.
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Long Term Mortgage Rates Fall Again
(0)One bright spot in the dismal real estate news of late is that long term mortgage rates are finally dropping, and in some cases reaching historically low levels:
Long-term home-mortgage rates dropped again this week, with the 30-year fixed-rate mortgage hitting a fourth consecutive low in the history of Freddie Mac’s weekly survey.
The 30-year mortgage averaged 5.01% for the week ended Jan. 8, down from last week’s 5.10%. The mortgage averaged 5.87% a year ago.
The rate hasn’t been lower since Freddie Mac’s survey began in 1971. The survey covers conventional, conforming mortgages.
“Interest rates for 30-year fixed-rate mortgages fell for the 10th week … due in part to the Federal Reserve’s recent purchases of mortgage-backed securities issued by Freddie Mac, Fannie Mae and Ginnie Mae,” said Frank Nothaft, Freddie Mac chief economist.
Mortgage rates are now nearly 1.5 percentage points below their level in October.
Rates on 15-year fixed-rate mortgages also dropped, averaging 4.62% this week, down from 4.83% last week and 5.43% a year ago. The mortgage hasn’t been lower since June 13, 2003, when it averaged 4.60%.
Five-year Treasury-indexed hybrid adjustable-rate mortgages averaged 5.49%, down from 5.57% last week and 5.63% a year ago. And one-year Treasury-indexed ARMs were 4.95%, up from 4.85% last week but down from the 5.37% average of a year ago.
If you’re looking to buy a home or refinance an existing mortgage, it could be a great opportunity in coming months to lock in a rate that would have seemed unbelievable just a few months back.
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Five Year Mortgage Rate Freeze Plan Finalized
(0)It looks like the writing is on the wall, as far as the knee-jerk mortgage rate freeze plan becoming a reality. Some highlights include:
Another person familiar with the matter said the rate-freeze plan would apply to borrowers with loans made at the start of 2005 through July 30 of this year with rates that are scheduled to rise between Jan. 1, 2008, and July 31, 2010.
Paulson, who has been leading the effort to craft a plan, said on Monday that the program would only be available for owner-occupied homes — as a way to make sure that the break is not granted to real estate speculators.
The administration plan is designed to deal with the crisis by allowing subprime borrowers who are living in their homes and are current on their payments to avoid a costly reset for five years. The hope is that by that time the housing downturn will have stabilized, clearing out the glut of unsold homes and halting the steep slide in prices that is occurring in many parts of the country.
With sales and prices once again rising, the expectation is that homeowners will be able to renegotiate their current adjustable rate mortgages into a more affordable fixed-rate plan.
Call me cynical, but I can’t help but view plans like this as political posturing, plain and simple. There are always going to be exceptions to the rule, but I’d hazard a guess that at least 50% of the people facing foreclosure due to ARMs resetting are also up to their eyeballs in consumer debt, and that the possibility of foreclosure isn’t a result of predatory lending but of their own inability to avoid the lure of using credit to spend money they don’t have.
Giving someone who can’t balance their spending or don’t have enough common sense not to buy a house they can’t afford a five year reprieve isn’t going to accomplish much in the end. And putting any faith in the fact that prices will rebound and shoot upwards again, producing enough equity in their home to refinance with ease is, at the very least, wildly optimistic, if not out and out crazy talk.