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Mortgage refinancing: an essential step toward real estate recovery

December 24th, 2008

On Monday, I wrote about last week’s figures from the Mortgage Bankers Association. It looked, I said, as if current record rates were boosting loan applications, which were 37.3 percent up on the same week last year.

However, I went on to say that more than three-quarters of all applications had come from those seeking to refinance existing mortgages, and that that might not be such good news.

I haven’t changed my mind. In an ideal world—or even just in a healthy market—there would be a whole lot more people wanting new mortgages, and many fewer wanting to re-engineer their existing ones.

But we already know that the market is not healthy. In fact, it is just the opposite. And, like any invalid, it has to take baby steps before it starts thinking of running anywhere.

Refinancing is just such a baby step. People have to rediscover their confidence before they start trading up or entering the real estate market. And that means an extended period of stability along with much lower repossession, and hardship rates.

We’re getting there. But it’s going to take a while.

In the meantime, I hope you have a very happy holiday.

Mortgages: Fed Throws in the Kitchen Sink

December 19th, 2008

There was a very good article about the US economy in general–and mortgages in particular–in the Times this morning. No, not the New York Times or the Los Angeles Times. It was in the original Times, which was first published in 1785 in London, England. Maybe you need to view things from across the Atlantic to get some perspective on our current financial plight.

Anyway, I urge you to read the piece. It’s all about the Fed’s latest policy of ‘quantitative easing’. Never heard of it? Me neither, up until very recently. But bankers do tend to use dry language, even to describe their most radical initiatives.

And quantitative easing is sure radical. It is the printing of vast amounts of money to buy up long-term debt-mortgage securities and government bonds. And if there’s a grain of truth in Milton Friedman’s monetarist theories, that can only mean inflation.

Perhaps we could use a dose of inflation to kick-start the mortgage and real estate markets. Maybe the alternative, stagflation, is even worse. The Times isn’t so sure. It says:

Quantitative easing is, in essence, what you do as a central bank when you have run out of things to do to avert catastrophe. It is that moment in the horror movie when you are backed up into the kitchen by the intruder and you start pulling out the kitchen sink as your last weapon.

Mortgage Opportunities from Record Rate Cut

December 16th, 2008

Late yesterday (Tuesday) afternoon, the Federal Reserve slashed its target for the overnight federal funds rate to a range of 0 to 0.25 percent. That may sound like meaningless gobbledygook, but it’s not. It’s an all-time record low. Read the rest of this entry »

First the good news, then the bad news.

December 11th, 2008

We’re all happy to learn from Freddie Mac that this week’s rates for 30-year FRMs (fixed rate mortgages) are at their lowest since March 2004. They’re now averaging 5.47 percent, down from last week’s 5.53 percent. This time last year, they were at 6.11 percent.

But there are two pieces of bad news. Read the rest of this entry »

Jump in Mortgage Rates Overshadows Rebound In Application Activity

June 12th, 2008

A sharp jump in mortgage rates was the week’s most significant development.

Read the rest of this entry »

Conflicting Data on Home Sales Highlights Mixed Week for Mortgage News

May 29th, 2008

Recently-released data on home sales sent mixed signals to prospective buyers:

While conflicting signals on housing might give home buyers reason to pause, two other developments might spur them to action:

Read the rest of this entry »

Low Mortgage Rates Threatened by Inflation Signals

April 17th, 2008

Mortgage news overall continued to spell opportunity for potential home buyers, but there are also signs that favorable mortgage rates might not last:

The combination of low mortgage rates and falling home prices is great for today’s home buyers, but the inflation signals are a reminder that these conditions may not last. 

Read the rest of this entry »

Backward and Forward

March 27th, 2008

30-year mortgage rates settled in below 6.0% for the second consecutive week, amid continued discussion of how much the economy would slow:

  • The latest GDP estimate indicated that the U.S. economy slowed to nearly a standstill in the final quarter of 2007.
  • Housing prices continued to slide, with year-over-year declines now reaching double digits.
  • Meanwhile, President George W. Bush reminded Americans that help may be on the way, in the form of tax rebate checks that are due to start arriving in May.

When considering what to make of all these reports, mortgage shoppers would do well to minimize discussions of the past and the future, and focus on the status of the here and now. In that light, there are concrete indications that this is a good time to act.

Read the rest of this entry »

Fixing the Mortgage Mess One Home at a Time

March 21st, 2008

Well-intentioned community agencies are hitting a brick wall as they try to re-work subprime and other mortgages threatened by foreclosure. Mortgage counseling programs are not getting much cooperation from mortgage lenders. Oops, make that mortgage holders. Gone are the days when you could buy a home and your local bank held the mortgage. Nowadays, mortgage loans are promptly packaged and sold to obscure entities that often have legal agreements preventing mortgage servicers from changing the terms of mortgages sold into the secondary market.

Is Wall Street the only street that matters when it comes to owning a home? Does the entire US economy have to tank before the broken mortgage industry is fixed?

Mortgage Industry Cash Infusion: Good News or Bad?

March 19th, 2008

Reducing capital requirements on lending giants Freddie Mac and Fannie Mae from 30% to 20% could provide an additional $200 billion to the ailing mortgage industry. These funds can be used for refinancing sub-prime loans and for making mortgage loans according to Freddie and Fannie’s recently increased loan limits.

On the surface, this is great news, as anything that boosts the depressed housing market could be good for the US economy. On the other hand, let’s proceed carefully and avoid taking on excessive risk. Responsible approval of mortgage applications is essential to cleaning up the meltdown mess and stabilizing the housing market