Mortgage Rate News

Last night, Barack Obama won an historic election for U.S. president. Of course, now the real work begins. While it is unlikely that everything Obama says he would like to do will be possible, there are some things that might get done. And some of them are likely to be in the area of fighting foreclosure.

President-elect Barack Obama and the foreclosure crisis

Obama has been offering his thoughts and ideas on fighting the foreclosure crisis for months now. As part of CNN Money’s look at what Obama wants to do, the highlights of Obama’s foreclosure prevention plan are explained.

• Direct refinancing of troubled homeowners to loans that will be insured by the Federal Housing Administration.
• If homeowners in danger of foreclosure are “acting in good faith,” financial institutions that want to participate in the Treasury program for troubled asset relief have to put a 90-day moratorium on the foreclosure. The idea is to give the homeowners time to find a solution.
• For homeowners who do not itemize their taxes, a 10% tax credit would be offered.
• Start a fund for victims of predatory loans, to the tune of $10 billion.
• Allow bankruptcy judges to adjust the principal on mortgages.

Some of these ideas, I think, are good ones. I like the idea of a moratorium, since those homeowners acting in good faith are likely to find some solution to the problem if they have a little more time (although in some cases, nothing will prevent foreclosure). I also like the idea of helping individual homeowners refinance, and the tax credit idea is a nice tough.

However, I am a little wary of the $10 billion fund. One would think that the other solutions would be enough. And for the bankruptcy judge thing, I’m entirely up in the air. Part of me thinks it’s a good idea, and the other part of me wants to offer a warning. It could be good for those who are legitimately in trouble, but sometimes judges get a little carried away.

What do you think of Obama’s efforts to fight foreclosure?

Tags: Barack Obama, Barack Obama plan, home mortgage loan, fight foreclosure,
president Barack Obama, mortgage principal, refinancing

One of the mortgage trends we saw earlier in the whole subprime lending mess was people making the conscious decision to simply walk away from their homes. Rather than try to save the home, some people, unable to make resetting mortgage payments, simply walked away. In some corners, the move was being seen as a smart financial move.

Now conventional wisdom is being turned on its head yet again: With mortgage lenders reluctant to help people who have been hitherto making their mortgage payments, the new trend may be to default on purpose. This was seen a little bit when the government announced its voluntary programs, but now that the Treasury department and the FDIC are contemplating more mandatory and generous measures, mortgage default on purpose may become more popular.

Setting up for mortgage payment default

One of the problems many homeowners are running into is how unwilling mortgage lenders are to help. Whether they are trying to get a short sale, or just trying to get loan modification, many of them are being told that mortgage lenders will not consider chaning things up unless payments have already been missed. In some cases mortgage lenders require that homeowners miss three months worth of payments before helping. You can see where this is leading, and why this is shortsighted on the part of mortgage lenders.

Homeowners who want to stay in their homes, but recognize ahead of time that they may have a problem, are trying to do what they can to avert foreclosure. But mortgage lenders, determined to go as long as possible to get whatever they can, are not being helpful. So what ends up happening instead is that some homeowners go into mortgage default on purpose so that they can have access to programs from the lender and from the government.

Instead of backing homeowners into a corner (and increasing the rate of foreclosure), mortgage lenders should be helping the people who come to them in good faith. They should be helping with loan modifications before payments are missed. This way, the homeowner keeps making payments, and the bank doesn’t have the expense and hassle of foreclosing on the home.

It seems like common sense.

Tags: mortgage default, mortgage trends, home mortgage loan, mortgage lenders,
foreclosure, homeowners, mortgage loan blog

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