Mortgage Rate News

Originally, the housing market crisis seemed limited to subprime loans and to those who made imprudent choices when buying homes. Now, though, the ripples are spreading. The housing market crisis has affected the credit market and brought down once untouchable Wall Street institutions. And today, with the announcement that Citi is planning to cut around 53,000 jobs, it is becoming evident that a vicious cycle is in place.

Unemployment and foreclosures

The subprime lending crisis has brought things to a point where the next homeowners to be affected are those who bought homes that they could afford. This is because with unemployment on the rise, it is obvious that more and more people are going to be finding it hard to make ends meet in the coming weeks and months. People are losing their jobs, and that means household budgets are about to be seriously tested. If you are in this camp, it is more important than ever to prepare for the future so that you can make your mortgage payments.

If you are worried about your job (or even if you are not), it is a good idea to do what you can now to prepare. The three most important things you can do right now are:

1. Adjust your spending to reduce unnecessary expenditures.
2. Save up some money in an emergency fund.
3. Try to pay down some of your debt.

And do it in that order. Follow a logical progression of steps to get your financial house as much in order as you can, as quickly as you can. You need to do what you can to adjust your personal finance situation to the times. If you act prudently now, you may be able to stave off problems later. And, more importantly, taking proper steps to protect yourself now can help you avoid foreclosure — even if you do lose your job.

With Alt-A loans heading into the same realm of foreclosure as the subprime loans before them, things are increasingly looking grim for mortgage lenders. Indeed, many people are deciding that trying to save their homes are too much trouble, and simply walking away. With all of these issues coming into play, it is no surprise that mortgage lenders are — somewhat reluctantly — starting to do what they can to keep people in their homes. And the process may be helped along by the government’s latest efforts at housing market rescue: streamlined mortgage loan modifications.

Are streamlined mortgage loan modifications the answer?

In order to try and make the process of mortgage loan modifications easier (and quicker) the government is introducing a “streamlined” process through Fannie Mae and Freddie Mac. The hope is that by creating a process that is relatively simple, as well as one that ensures that borrowers can make their mortgage payments, foreclosures can be averted.

The plan centers around efforts to change mortgage terms so that they result in lower payments. Calculated Risk points this out about the plan, however:

Note that this does not include principal reduction as a solution to create an affordable payment, and is limited to: “extending the term, reducing the interest rate, and forbearing interest”.

Obviously, the idea is more in line with assuring mortgage lenders that they will still make plenty of money. The idea — much like the proposed mortgage rate freeze late last year — is to make it possible for borrowers to keep paying lenders. One of the biggest features of this plan seems to be mortgage term extension. Refinancing a home that has 25 years left on the mortgage so that the borrower is going to be making for 40 years is actually very helpful to mortgage lenders. They recover the principal and — even if the mortgage interest rates are lowered — they get more money in interest payments.

Honestly, I’m not entirely sure why  mortgage lenders haven’t been doing this all along.

On this Veterans’ Day, as I ponder the many great men and women (some of them relatives and friends) who have given so much for this country, my thoughts inevitably turn to the fact that military foreclosures are on the rise. In my mind, this is inexcusable. Military personnel sacrifice so much for us, including health, life and relationships, and this is fast becoming an epidemic amongst those who serve their country.

This Veterans’ Day comes as many mortgage lenders (including Citi and JP Morgan) come to the realization that all these foreclosures and problems are going to hurt their bottom lines. As a result, many mortgage lenders are now offering rather generous terms for loan modification. This could provide the means to save many homeowners from foreclosure. But I wonder how many of those saved homeowners will be military personnel.

Programs for those who are facing foreclosure are the focus of many impassioned arguments that favor letting some people reap the consequences of poor decisions. But I think that many of us can agree that veterans should have access to preferred loan terms. Indeed, many military families fell victim to problems due to their deployment. After all, one doesn’t get paid very much while deployed — especially in the National Guard or in the Reserves. Another problem is that many veterans come back disabled or with mental health issues that prevent them from picking up at their old jobs. This, too, can put a home in jeopardy.

It is vital that members of the military have homes to return to. When it comes to mortgage loan modification, lenders and the government should make sure that veterans are the first in line to receive help.

So, today, consider our veterans. And remember to find a few and thank them for their service.

Happy Veterans’ Day.

Tags: mortgage loan modification, thank a veteran, home mortgage loan, mortgage loan blog,
mortgage lenders, loan modification, military foreclosures