Posted: January 16th, 2010 | Author: Joe | Filed under: Debt | Tags: Adjustable Rate Mortgages, ARMs, Economy, Mortgage Rates, Mortgages, news | 1 Comment »
A recent article from CNBC, More Homeowners Struggling As Option ARMs Reset Higher warns about thousands more homeowners are about to be squeezed out of their homes as option ARM mortgages reset to new, higher levels.
It’s been an often talked about danger on the horizon, but it appears that the horizon is now here:
“It’s going to kill off housing,” warns Patrick Pulatie, CEO of Loan Fraud Investigations, a predatory lending audit firm. “We have pretty close to 500,000 option ARM payments going higher in California over the next couple of years. The impact of the higher payments will be devastating for homeowners who are having trouble now making ends meet.”
Option ARM mortgages have actually been around since 1981 and may be a good idea for people who have fluctuating income. The problem came about in the last decade when people began to feel entitled to a new home, and banks were willing to lend them more money than was reasonable, often without proof that the borrower would be able to pay off the loan.
Well, now all those people who bought way too much house and who have been paying in the low hundreds per month for their interest only mortgage are about to bit hit with a hefty dose of reality when those rates reset and they suddenly have to make up for all that principle they didn’t pay down.
Some 88 percent of Option ARMs originated between 2004 and 2007 are going to adjust higher between now and 2012. Those option ARM borrowers could see their housing bills go up as much as 63 percent, according to Fitch ratings.
This is on the heels of near record bankruptcy filings for 2009. This next wave of bankruptcies and foreclosures is expected to increase the amount of houses for sale, thus prolonging the buyer’s market and keeping a lid on any growth in home values for the next few years at least.
And that’s all if the Federal Reserve leaves interest rates where they are (near zero). If the fed raises interest rates to fight future inflation, then the impact on these ARMs could be even worse, further hindering any housing recovery.
Ordinarily, the people with resetting ARMs would just refinance to a fixed rate mortgage, but that isn’t possible in many cases, because the houses are worth less today than they when the mortgage was signed.
What a mess!
Related Posts:
Posted: December 26th, 2009 | Author: Joe | Filed under: Economy | Tags: mortgage debt, Mortgage Rates, news | 1 Comment »
After mortgage rates dropped to record lowsa few weeks back, they really had little room to keep falling. It should come as no surprise then that we now see rates on the rise again. According to Bankrate.com’s national survey of lenders, the average 30 year fixed rate jumped 9 basis points up to 5.13%. That rate is still very low by historic standards, and still lower than they were a year ago at 5.43%. The average rate for a 15-year fixed rate mortgage also rose, though by only 6 basis points up to 4.53%.
The look ahead.
Analysts are hoping that 2009 will become the year that residential real estate bottomed and began to turn around. Recent rebounding home sales have helped to support that view, but things may turn for the worse again in 2010. Fiserv, the financial analysis firm, predicts that home prices will drop another 11.3% nationwide my the middle of 2010, and Moody’s Economy.com issue a forecasting expecting a 5-10% drop.
The problem.
Several factors are seen as contributing to the potential protraction of the housing slump into 2010. One factor is that as the real estate market begins to pick up, a new rush of homeowners who have been waiting to put their homes on the market will do so, thus creating even more supply for the limited demand. Another factor is the next wave of foreclosures, that will also drag prices downward. And finally, there is the double whammy of high unemployment and the expiration of the home buyer tax credit that will further weaken demand.
The trend.
The upward trend in mortgage rates is expected to continue through 2010 even despite the above negative factors in the real estate market. Most of the reasoning for this is that the Federal Reserve is expected to stop its purchase of mortgage backed securities, which has been credited with keeping mortgage rates lower than they would be otherwise.
Related Posts:
Posted: December 4th, 2009 | Author: Joe | Filed under: Economy | Tags: Mortgage Mess, Mortgage Rates, refinancing home mortgage | 1 Comment »
It seems like only a few weeks ago that mortgage rates were near all time lows, but now they’ve actually hit new lows. The new record low rate for a 30 year fixed mortgage is 4.71%. Much of the cause for this record drop is the historically sluggish housing market and government efforts to spur an increase in home buying.
For example, the Federal Reserve has released over $1 trillion into mortgage-backed securities in an effort to lower mortgage rates. It seems like those efforts are working, but that infusion of cash is set to end next spring. It’s unlikely that home sales will be sustainable if unemployment also remains a record levels, so we’ll have to see if the fed will try something new at that point or just leave well enough alone.
Even though rates have dropped, qualifying for a loan is tougher than it has been in a very long time. Still, if you have good credit and 20% for a down payment, you should be able to snag rates close to these for some time to come.
Other rates.
The average rate for a 15 year fixed mortgage is also at a record low 4.27%, down from 4.29% just a week ago.
5 year ARMs average about 4.19% and this is actually up from 4.18% last week. 1 year ARM rates also fell to 4.25%, so it’s interesting that 5 year ARMs were up, albeit a very small amount.
All of this rate dropping has led to increased mortgage applications and refinancing. The Mortgage Bankers Association reports that mortgage applications are up 2% from a week earlier, due to an increase of more than 4% in purchase applications, and a 2% increase in mortgage refinancing applications on existing loans.
source
Related Posts:
Posted: November 20th, 2009 | Author: Joe | Filed under: Economy | Tags: Debt, Financing, Mortgage Rates, Refinancing | 3 Comments »
“Interest rates on 30-year fixed-rate mortgage loans fell for the third consecutive week to the lowest since the week ending May 21, while 15-year fixed rates were the lowest since our records began in 1991,” said Frank Nothaft, Freddie Mac vice president and chief economist, in a news release.
Rates for 30 year fixed-rate mortgages fell to their lowest levels since May, according to a Freddie Mac report.
The average rate for a 30 year fixed-rate mortgage is now 4.83% (as of Nov. 19) which is a drop for last week’s already low 4.91%. To put this in perspective, the average a year ago was 6.04%.
The rate for 15 year fixed-rate mortgages also dropped. A year ago the average rate was 5.73%, and just last week it was 4.36%. As of Nov. 19, the average has fallen to 4.32%.
All of this has led to a major increase of mortgage refinancing:
more than 95% of prime borrowers who originally had an ARM selected a conventional fixed-rate mortgage in the third quarter of this year
This is good news, it means many who made the mistake of getting an ARM have realized how dangerous they are and have gotten out. It also means less ARMs to default when the rate would have reset.
Source
Related Posts:
What others are saying