Mortgage Rate News

It’s been an interesting morning in terms of the mortgage market and the financial market. Two very interesting trends are emerging: increased mortgage fraud and increased crackdowns on banks.

Mortgage fraud on the rise

Mortgage fraud is actually on the rise. According to the Wall Street Journal, the year over year rate of mortgage fraud is up 42%. That’s right, after everything we’ve learned about lending practices in the last year, mortgage fraud is still alive and well — specifically the brand in which borrowers inflate their assets in order to qualify for a home mortgage loan. And some banks are still going along with it.

Of course, I can see the attraction. With tighter lending standards overall in the mortgage industry, and the difficulty of getting a bad credit home mortgage loan increasing, it isn’t hard to see why some are inflating their incomes. And with home mortgage loan borrowers harder to approve, it is understandable that mortgage lenders and loan officers are willing to let some of the documentation slide.

On the other hand, this increase in mortgage fraud may actually be proof that banks are starting to crackdown on fraud, and are now properly reporting instanced of mortgage fraud.

Bank crackdowns

Bank regulators are showing their concern for the health of the financial sector, specifically banks. With the ninth bank failing this year, regulators are increasing the number of banks they put on probation. The probationary status is meant as a catalyst to encourage banks to change their practices so that they can avoid failure. The idea is that if the banks do not comply, they will be faced with closure and be taken over by the FDIC — a costly process for the bank.

With all of the news coming out, it meant that it might be a while before the mortgage market gets back on track.

Tags: mortgage market, bank failures, home mortgage loan, FDIC,
mortgage lenders, mortgage fraud, banks probation

Existing home sales rose in July, boosting the annual rate by 3.1% over the June revised pace for existing home sales. However, this news was tempered by the fact that more homes are on the market — and that home prices continue to fall. The Wall Street Journal reports on the trend in existing home sales:

Falling prices are restraining sales, as would-be buyers wait for a better deal instead of signing on the dotted line. High inventories are driving down prices. Prices must fall further for inventories to recede. Analysts say inventories have a good distance to drop for a signal that price deflation is nearing an end.

Despite the sales increase, inventories of homes rose 3.9% at the end of July to a record-high 4.67 million available for sale, which represented an 11.2-month supply at the current sales pace. There was an 11.1-month supply at the end of June.

This means that even though existing home sales were up in July, there is still quite a ways to go before the market hits bottom. Indeed, homes are expected to be on the market for around a year before selling, at the pace that things are moving. This means that it is still very much a buyer’s market — if the buyers were buying.

Looking for a good deal on a home

If you are looking for a home, now may be a good time to consider buying. Home prices may fall further, but trying to time the market can be risky, and may backfire. If you have your finances in order, and a good credit score, you might be in a good place to make a deal. Here are some things to look for when you try to get a good deal on a home:

• Foreclosures (look for those in good shape, though).
• Homes that have been on the market for a while (sellers more willing to deal).
• Motivated sellers (who may need to move quickly, or who are trying to avoid foreclosure with something like a short sale).

Mortgage rates are reasonably low right now, and there are some great deals out there. If you are looking for a home, it may be the time to pounce.

Tags: existing home sales, home prices, home mortgage loan, mortgage rates,
mortgage loan blog, foreclosures, short sale

One of the retirement planning products that is gaining in popularity right now is the reverse mortgage. This product basically works in this way: You take out a second home mortgage loan that works the reverse of a regular loan in that the bank pays you. Your reverse mortgage does not need to be paid back until the home is sold, or until you move out.

While it can be helpful for many in terms of providing some needed cash flow, a reverse mortgage is also expensive (lots of high fees) — and it’s not for everyone.

Who should avoid the reverse mortgage when making retirement planning decisions?

There are some great points raised over at Saving to Invest regarding who should not get a reverse mortgage. Here are some guidelines that may help you decide that the reverse mortgage may not be the best retirement planning option for you:

• Younger spouse. The reverse mortgage cannot be taken out if one of the people on the title to the home is younger than 62. Taking the younger spouse off the title would mean that he or she would be displaced if there was not funding in place to pay off the mortgage loan.
• Poor health. With a reverse mortgage, it is important to realize that at least one of the borrowers must use the home as a residence. If the original borrowers are not in the home for 12 months, then the mortgage loan becomes due. If your health does not allow you to live at home, a reverse mortgage is not the best choice.
• Income too low. If you have a reverse mortgage, you still have to pay homeowners insurance, taxes on the property as well as maintenance and upkeep. If, even with the reverse mortgage, you are unable to do this, you may need to resort to other options.

Taking out a reverse mortgage is a big step, and a big financial decision. Make sure that you carefully consider all of your options before doing so.

Tags: reverse mortgage, mortgage loan, home mortgage loan, mortgage loan blog,
second mortgage, retirement planning, reverse mortgage retirement