Mortgage Rate News

One of the questions that many are asking right now is this one: When will the housing market bottom?

With the foreclosure rate still rising, and with new homeowners upside down on their mortgages, it is no surprise that people are rather worried that the housing market still hasn’t found a bottom yet. Quite recently, thought, Alan Greenspan offered his own view of when the housing bottom will be reached.

Er, sort of.

While he was quite clear about the problems faced by Fannie Mae and Freddie Mac (”Bad”), he showed a little more of the customary Greenspan-speak when talking about the housing market bottom, reports Market Pipeline:

“Home prices in the U.S. are likely to start to stabilize or touch bottom sometime in the first half of 2009,” he said in an interview. Tracing a jagged curve with his finger on a tabletop to underscore the difficulty in pinpointing the precise trough, he cautioned that even at a bottom, “prices could continue to drift lower through 2009 and beyond.”

So, the housing market bottom could be reached in early 2009. Or later.

Thanks for clearing that up.

In the end, though, when the housing bottom is reached is something that most people aren’t overly concerned with. They are more worried about things like making mortgage payments and how they are going to deal with the fact that inflation continues to rise. Forget “core” inflation. It’s the food and energy prices inflation that affect most Americans on an everyday basis. And food inflation, especially, is running away at a rather rapid pace.

In the end, if you can stay in your home, that is probably the best option. The housing market will eventually recover (although you are unlikely to score big like so many did during the last housing boom), and home prices will start to rise again. If you can ride things out for the next five to seven years, you will probably be okay.

But that isn’t much comfort for those whose ARMs are resetting — and who can’t get a refinance.

Tags: upside down mortgages, housing market, home mortgage loan, housing bottom,
Alan Greenspan, mortgage loan blog, core inflation

You have probably heard of cash out home equity loans. In these arrangements, you take a home equity loan out on your home for more than you owe on the home. For example: you owe $130,000, and you get a home equity loan for $150,000. You pocket the difference of $20,000 in cash.

However, home equity loans are getting hard to come by. With home values dropping and mortgage lenders tightening their standards, it is no surprise that getting cash out home equity loans is becoming more difficult.

But, you ask, how will the banks make the money on interest?

A good question. Enter the cash back mortgage.

Basically, you put a “down payment” on your home, and then, at closing, you get your “down payment” back. Granted, this is a home mortgage trend mostly seen in Canada, where there is a crackdown on $0 down mortgages and other lending practices that got the U.S. into the mortgage market mess. But one never knows where the next home mortgage trend in the U.S. will come from.

Here is what Million Dollar Journey points out about the cash back mortgage:

For the “privilege” of keeping the $10,000 down payment in the home buyers pocket, the higher interest rate will cost an extra $18,096.34 in 5 short years. It’s no wonder that banks are quick to offer this type of product, it’s cash back in their pockets. To put this in perspective, if the $10,000 cash back was invested, it would take an annual return of 23% (before tax) over 5 years to break even.

It would not surprise me if something similar started happening here in the U.S. I can see where mortgage lenders would find a good marketing hook: “You get a better interest rate for making a down payment, but you get that money back!”

Tags: home equity loans, home equity, home mortgage loan, home mortgage trend,
Canadian mortgage trend, mortgage lenders, home values

Over the past year, home mortgage loan defaults have been making their way through varying qualities of mortgage. First to go bust, racking up high numbers of foreclosures, were the subprime loans. Then, a few months ago, Alt-A loans started joining the ranks of mortgage loan defaults. Finally, though, the economy has caught up to those with prime mortgages. And now, reports LoanPerformance, prime mortgage loan defaults are on the rise.

Prime mortgages are those mortgages given to people with good credit and favorable debt to income ratios. They are home mortgage loans that have the best interest rates, and the borrowers that have been rated most likely to pay. Unfortunately, some of those who could afford their home mortgage loans can’t anymore. A rising unemployment rate, inflation and other issues have caught up with some borrowers, and prime mortgage loan defaults are on the rise.

And, of course, prime mortgage loan defaults will have their own effects on the recovery of the housing market. CNN Money reports on the influence that prime mortgage loan defaults are likely to have:

The failure of prime mortgages will also make it more difficult for new borrowers to find affordable loans - and that will slow sales even more. Lending standards have been tightening for months, but if prime loans start to look risky, lenders will be even more conservative about who gets a mortgage.

About 60% of the loan officers surveyed reported that they tightened lending standards for prime mortgages during the first three months of 2008, according to the April 2008 Senior Loan Officer Opinion Survey on Bank Lending Practices from the Federal Reserve, which is released quarterly.

So, with these high quality home mortgage loans causing problems, it appears that the mortgage market may not recover anytime soon. Lenders are wary of making new home mortgage loans, and are tightening standards, leading to a further increase in supply as more homes remain on the market due to a lack of qualified buyers.

Tags: Alt-A loans, mortgage defaults, home mortgage loans, subprime mortgages,
prime mortgages, prime mortgage loan defaults, mortgage loan blog