Mortgage Rate News

Lending rates are falling right now, and this is good news. Indeed, today’s Election Day is bringing all sorts of good news to the people of the United States. There are indications that banks are starting to lend to each other again, and that could mean that at some point they’ll start lending to the rest of us. CNN Money reports on the drop in lending rates:

A number of U.S. programs aimed at easing funding concerns for banks and encouraging lending between financial institutions have also helped lower Libor rates. Such initiatives include lowering interest rates, injecting capital into banks and providing insurance on all non-interest bearing accounts.

As rates fell, two key indicators of risk sentiment showed that confidence in the market was improving, but credit still remains tight.

Credit remains tight; credit cards set to cause next leg of crisis

Despite some optimism over the falling lending rates, things may not turn out rosy. The next leg of the financial crisis is expected to be credit cards. Companies are seeing an increase in credit card defaults, and that could lead to a whole new round of problems for the credit market — and for consumers looking to use credit to ease cash flow in these tough economic times.

And, unfortunately, the short-term lending rates do not have much impact on long-term rates, like mortgage loans. So mortgage interest rates are still somewhat high, comparatively speaking. And the tighter credit requirements, combined with home values that are still low, are not helping those trying to get second home mortgage loans.

Election Day: Get out and vote

While the next president’s effects on the economy — and even on the housing market — will be limited, whether we have John McCain or Barack Obama will make some difference in the policies that are enacted. Today is your chance to get out and vote for the person that you think will best be able to handle this crisis and get us back on track.

Today, there is a reasonable amount of mortgage market news — and it’s still before noon. The biggest items of interest for some are the following:

1. Mortgage interest rates are spiking.
2. The FDIC and the Treasury are unveiling a plan to stymie foreclosures.

Mortgage interest rates head higher

While yesterday’s Fed rate cut is likely to help adjustable rate mortgages and home equity lines of credit, it is not very favorablet o fixed rate mortgages. Indeed, as CNN Money reports, mortgage interest rates are following Treasury bond yields higher:

“Long-term mortgage rates followed long-term Treasury bond yields higher this week, pushing fixed-rate mortgages up to levels of two weeks ago,” said Frank Nothaft, Freddie Mac (FRE, Fortune 500) vice president and chief economist.

Last week, mortgage interest rates were sitting at around 6.06%. Now they have spiked rather dramatically to 6.46%. This time last year, they were at 6.26%. It appears that everything that has to do with money and finance is volatile right now, and in a state of flux. And that includes mortgage interest rats.

New plan to stop foreclosures

So far, everything the government has tried to stymie increasing numbers of foreclosures has fallen a bit short. So the FDIC and the Treasury are adding to the efforts with a new plan. Rather than simply attacking toxic assets, the government now plans to try and fix the problem at the source: Mortgagest hat are likely to slip into foreclosure. The idea is for the government to guarantee restructured loans, reports BloggingStocks:

The plan, which could place as many as three million homeowners in affordable mortgages, would require lenders to restructure mortgages based on the borrower’s ability to repay. In exchange, banks / lenders would receive a federal guarantee that the loan would be repaid; program guarantees are estimated at $500 billion.

An interesting idea. However, there are likely to be some homeowners who will not be able to repay no matter what — unless the new terms include a very long mortgage term of between 40 and 60 years. I wonder if that is what is had in mind. If the borrower can’t repay in 30, offer him or her a 60 year modified mortgage so that payments can be made.

Tags: mortgage interest rates, mortgage rates, mortgage market, mortgage market news,
interest rates, Fed rate cut, home equity lines of credit

Many people waiting for mortgage rates to drop right now. Indeed, many people think that they should be heading lower soon, what with banks starting — albeit cautiously — to lend to each other again. Additionally, Ben Bernanke is supporting efforts for a second economic stimulus package and hinting that Fed rates may be cut again. While the Fed rates do not have a lot of impact on a first home mortgage, a second home mortgage is definitely affected by Fed rates. So, whether people are looking to refinance or to get a first home mortgage, there is some tendency to wait for either:

1. Mortgage rates to head lower.
2. The market to hit bottom.

At this point, waiting could lead to problems. Here is what The Mortgage Reports says about how things are likely to get in the coming months:

Starting 60 days from now, qualifying for a conforming mortgage will require more home equity than at any time since 2003.

Now, there are a lot of people sitting around right now, waiting for mortgage rates to fall before buying or refinancing their home.

I’d offer a more prudent idea: Just get on with it already.

The reference here is to the latest round of mortgage lending guidelines issued by Fannie Mae. These new guidelines are going to limit the amount of money you can get on a refinance: Primary residence “cash out” to 85% loan-to-value and 75% loan-to-value for secondary residences. And you better have a 25% equity position if you want to refinance an investment property.

On top of that, down payment requirements are getting tighter. The down payment thing has been happening across the board with many mortgage lenders. 5% and 10% are becoming the norm, and some mortgage lenders are requiring 20%. While Fannie Mae is the only lender tightening these refinance guidelines officially, it probably won’t be long until other mortgage lenders follow suit. Fannie has long been a trend setter in the mortgage world, and this is probably not such a different situation.

This means that, if you are looking into a refinance — or even a first home mortgage — now is probably the time to do what you can. Because it’s about to get tougher.

Tags: refinance, home mortgage, home mortgage loan, Ben Bernanke,
second home mortgage, first home mortgage, mortgage lenders