Mortgage Rate News

As payments for option ARMs and subprime loan interest rates increase, and the foreclosure rate goes up, the government is wondering what it can do to help the situation. Fed Chair Ben Bernanke suggested that creative methods, such as shared-appreciation second mortgage loans, might be used to help the lending industry. Boston.com expands upon the theory behind the shared-appreciation second mortgage:

Another way is to make refinancing at lower interest rates more attractive for lenders by encouraging shared-appreciation mortgages. These mortgages, which are relatively rare in the United States but more common in the United Kingdom, offer lower interest rates in exchange for some of the upside potential on the house. For example, a lender might offer a 6 percent interest rate instead of an 8 percent rate, in exchange for 50 percent of the increase in the value of the house at the time of eventual sale.

While this may not seem very appealing to homeowners right now, it could be more appealing to those who could lose their homes altogether. And the other problem comes in as many realize that it might not be possible to refinance with a second mortgage unless new programs and options are introduced.

All home mortgage loans are more difficult to get now, and a second mortgage, which requires better credit in most cases, and a higher interest rate than a first mortgage, is especially vulnerable to the currency credit market crunch. This means that many people will not be able to refinance to a second mortgage from the atrocious first home mortgage loans they are in. And that means foreclosure, and further problems for the lending industry.

Tags: Fed Chair Ben Bernanke, second mortgage, home mortgage loans, shared-appreciation second mortgage,
mortgage loan blog, refiannce second mortgage