Mortgage Rate News

Right now, with liquidity for mortgage lenders a problem, and with the economy promoting inflation, mortgage interest rates on their way up. This means that those wishing to buy a first home — and especially those looking for a second home mortgage — things are getting a little expensive.

Rising mortgage interest rates mean you pay more money

Whether it’s a new home mortgage loan or a second home mortgage, the higher the interest rate, the more you will pay over the life of the loan. (Even on a $200,000 home mortgage loan, the difference between last week’s mortgage rate and this week’s is more than $10,000 total in interest.) This is an issue especially for those looking into mortgage loan refinancing. Many are finding that when they go to refinance from an ARM or an interest only loan, the newer, higher rate is still somewhat difficult to pay.

However, if those looking for second home mortgage loans do not lock in interest rates now, there is a good chance that, come August, they could see an additional rise in interest rates. The longer they wait, the greater the chance that interest rates will get even higher on mortgage loan refinancing.

Difficulties with mortgage loan refinancing

Increased costs due to mortgage interest rates are not the only problem plaguing those looking for second home mortgage loans. Getting mortgage loan refinancing is increasingly difficult because home values in many areas are falling. These home values mean that many homeowners are already upside down on their home loans. SO, mortgage lenders are not willing to provide mortgage loan refinancing. And that does make sense. Why would you risk it?

So, the current situation offers an interesting bind. Mortgage loan refinancing is needed in order to forestall foreclosures, but some people are in a position that precludes them from getting that financing. And, even worse, some are in positions where they can’t even afford payments on new home loans — even if they could get them.

Tags: mortgage interest rates, home equity loan, home mortgage loan, home loans,
second home mortgage, mortgage lenders, mortgage loan refinancing

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.

Bank of America is expected to see some serious losses with regards to home equity loans. Why? Because second home mortgages are connected to home value, and that means that as home values fall, losses due to home equity loans rise. Bloomberg reports on the current state of Bank of America:

The bank expects losses to top 2.5 percent of its $118 billion in loans linked to home values, Liam McGee, president of the Charlotte, North Carolina-based company’s consumer and small business division, said at a conference in New York sponsored by UBS AG. The bank previously projected a loss rate of between 2 percent and 2.5 percent.

Bank of America, the nation’s largest credit-card issuer, is also seeing a “recent sharp increase” in spending on necessities by its credit-card customers. That has curbed retail, travel and entertainment purchases, McGee said. Economists and bankers have said the economy may be teetering near a recession as consumers struggle with job losses and gasoline prices topping $4 a gallon.

You can also see that problems may be arising in the area credit cards as well. As more people have to turn to credit cards to cover the necessities, there could be real problems ahead.

This presents a combination problem: Home equity is tapped out, and credit cards are moving toward being maxed out. This is a trend that is sweeping the nation. The question is this: How long until Americans as a whole move from managing their debt to actually drowning in it? And consider: with home equity loans getting harder to come by, it will make it difficult for Americans to use debt consolidation to get a handle on their credit card debt.

Tags: home equity loans, home equity, home mortgage loan, mortgage loan blog,
second home mortgages, debt consolidation, credit cards