Mortgage Rate News

As subprime mortgage loans continue to go bad (and investors and others continue to lose money) many mortgage lenders are seeing pressure from many directions. Not only are subprime writedowns affecting them in terms of profits and share prices, but investors in loans wrapped up in securities — and those bought outright as investments — are starting to make demands as well.

As the home mortgage loan market continues to struggle, investors want lenders to buy back their loans. Mortgage News Daily reports on the demands investors are making on mortgage lenders:

Investors, including Freddie Mac and Fannie Mae, are taking a long look at loans they have purchased from lenders over the last few years and the contracts that govern those purchases and are trying to force banks and mortgage companies to buy back growing numbers of troubled loans.

Many loan sales are governed by provisions that require lenders to take back loans that default unusually fast or contained mistakes or fraud.

This whole mess is based on badly-advised loans given to people who — in large measure — had no business getting the loans in the first place. There is plenty of blame to go around: Society with its “instant gratification” fixation, lenders and brokers eager to make money off loans with higher interest rates, borrowers who looked for ways to get what they really couldn’t afford, investors not actually checking to see if they were making good decisions, de-regulation that allowed the government to turn a blind eye to what was going on.

And, unfortunately, there is no”quick fix” to the mortgage market crisis. Instead, things are going to have to work through the system. And hopefully everyone will learn from this and make better decisions in the future.

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It’s been an interesting day for mortgage market news. As we are all aware things are getting worse in terms of Alt-A loans and also for subprime mortgage loans. But just knowing this information doesn’t really put a human face on the issues that are afflicting the mortgage market. Consider two items that appeared in my news reader this morning: a HELOC bankruptcy and military foreclosures.

HELOC bankruptcy

When it comes to home equity lines of credit, rules (especially with regard to bankruptcy) are a little different from what you have with a first home mortgage loan. So when National City tried to foreclose on a HELOC, and the borrower filed for Chapter 7 bankruptcy, the lender thought that it would recover most of its money. Not so much.

The judge decided that even though the borrower lied about income (this was for a stated income HELOC), the guidelines National City had didn’t provide for due diligence in making sure that the borrower really did have adequate income. Hmmm…You mean mortgage lenders have to be responsible, too? Well played!

Military foreclosures

This next bit of info just really annoyed me. Some of the highest rates of foreclosure in the country can be found in communities with a lot of military service men and women. This is not right. The constant tours and crappy pay make it difficult for military personnel to keep up on their home mortgage loan payments.

Sure, their homes can’t be foreclosed on while they are on active duty, and sure they have 90 days when they get back. But it doesn’t seem sufficient. You get back from your second (or third) tour of duty in Iraq, only to discover that you have to fix your financial situation in three months. Most of us can’t do that and we haven’t see the hell of war.

Seems to me like our brave military men and women deserve something a little more substantial.

Starting today, Banks.com is offering mortgage interest rates and quotes from around the country. It is possible to compare mortgage interest rates in your state, and from different lenders. This is a great tool that can help you better shop for the best home mortgage loan for you.

Why mortgage interest rates matter

Interest is money you pay for the privilege of borrowing money. You pay a fee to the lender in order to borrow the money. Your interest rate is expressed as a yearly percentage of the principal. The higher your interest rate, the more you pay in interest charges. To illustrate with a simple example:

You borrow $10,000 for a year at a rate of 7%. Your total repayment is $10,000 + (0.07 x 10,000 = $700) = $10,700. If you have an interest rate of 9.5% on that same loan, your repayment total is higher: $10,000 + (0.095 x 10,000 =$950) = $10,950. The difference in one year, for a 2.5 point difference, is $250.

You can imagine what a difference mortgage interest rates make, since they are spread out over 30 years. In the simplest terms, that’s like a savings of $7,500 for our example (if you paid interest on $10,000 each year for 30 years). With a house, mortgage interest rates can mean savings of tens of thousands of dollars over the life of the home loan.

Comparing mortgage interest rates

The rates listed at rates.banks.com are the best rates — what you could get with the best credit. But they do provide a useful ballpark comparison for mortgage lenders in your area. It gives you something to go on. When you actually talk to a home loan representative, make sure that you let him or her know your most current credit scores, and how much income you have. This will help in terms of narrowing down what sort of mortgage interest rates you can get.

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