Mortgage Rate News

Back in 2003, a rule was put into place. This rule stated that foreclosures could not be resold without a 90 day waiting period if the buyer was going to use government backed loans for purchase. The whole point was to reduce the number of property flipping schemes that charged buyers too much for foreclosures.

All that is about to change. For a year, at least.

The Bush Administration has approved a suspension of that rule in order to facilitate the faster sale of foreclosures and other properties that are in distress This is mainly because foreclosures continue to rise, adding to the number of homes on the market — many of which won’t be sold. CNN Money reports on the reasoning behind the suspension of the house flipping rule:

“A glut of foreclosed and abandoned homes harms neighborhoods, frustrates homebuyers and delays a community’s recovery,” FHA commissioner Brian Montgomery said in a prepared statement.

This is a significant gain for house flipping experts, who have found it difficult to operate in the current market. With home values dropping, house flipping has been hard. And with foreclosures increasing, no doubt experienced flippers have been lamenting the fact that the five year old rule prevents them from profiting from the glut in home supply.

Now that has been remedied. For one year, house flipping can once again be the subject of real estate investment seminars and “pay a small fee to learn how to make a bundle in the real estate market” get rich quick schemes. And true house flipping professionals can make tidy profits as they are allowed to go after buyers who get FHA loans and use other government back home mortgage loan programs.

But it also means that it is time for “buyer beware.” With the rule suspension, house flipping of foreclosures will increase — and so will the scams and the overcharging.

Tags: foreclosures, real estate investment, home mortgage loan, home mortgage blog,
house flipping, FHA loans, Bush Administration

One of the issues that led to the housing market crisis was the fact that mortgage insurers went ahead and approved underwriting for risky home loans. Now, finally, those shenanigans are catching up with the mortgage insurers. Some of these mortgage insurers are being downgraded, reports MarketWatch:

Fitch lowered Mortgage Guaranty Insurance Corp.’s insurer financial strength to A+ from AA and MGIC Investment’s long-term issuer rating to BBB+ from A. The ratings will remain on rating watch negative, indicating that further downgrades may be in the offing. Fitch also cut PMI Mortgage Insurance’s rating to A+ from AA and PMI Group’s long-term issuer rating to BBB+ from A. The outlook on PMI and PMI Mortgage Insurance is negative.

Mortgage insurers are merely the latest in a long line of those who figured that the risky subprime mortgage boom would continue to provide a source of wealth. Unfortunately, such risk is unsustainable in the long run, and eventually it was bound to crash.

Other problems in the economy

And the housing market crisis may not be over yet. Other problems, including those indicated by this morning’s release of unemployment data, could accelerate the foreclosures. After all, increasing pressure on the job market could mean fewer people able to make their mortgage payments — even if they could originally afford their home loans.

Indeed, as the recent news of Ed McMahon proves, the housing market crisis can strike anyone, and at anytime. The current pressures on the economy — including a rebound in oil prices — are leading to a high rate of inflation, as well as a decrease in the availability of jobs. Combined, these factors are likely to continue to lead to foreclosures.

The issues of inventory on the housing market are also leading to creative solutions. Consider this, from a builder in California. It’s a buy one house, get a second house free offer:

Tags: home loans, foreclosures, home mortgage loan, mortgage loan blog,
mortgage lenders, mortgage payments, oil prices

Ben Bernanke isn’t in Barcelona, but he delivered remarks to an international monetary conference being held there. This morning, amidst concerns about the latest bank sector issues and how they will continue to affect the US economy and the mortgage market, Bernanke continued his policy of making upbeat comments designed to inspire confidence in the market.

Bernanke insisted that the economy is likely to turnaround in the second half of the year. He also addressed such concerns as inflation, interest rates, the US dollar and the stock market. Bernanke also mentioned that the housing market slump could continue to put hurdles in the way of the economy, reports the Associated Press:

Until the slumping housing market and falling home prices show “clearer signs of stabilization,” there will continue to be threats to the economic growth getting back to full throttle, he said. Moreover, recent increases in oil prices pose “additional downside risks to growth,” he said.

Bernanke did imply that housing prices are starting to stabilize, and that we could be nearer the end of the current downward trend. He credited the recent interest rate cuts with loosening the money supply and providing a catalyst for growth. However, he did indicate that further rate cuts are unlikely. All of this could mean that mortgage lenders start loosening up a bit with their requirements, but it really might be better if they remained tough.

The remarks did provide a boost to the US dollar on the FX market, as well as facilitate a bump in a stock market struggling to recover from yesterday’s banking sector shenanigans. However, it remains to be seen whether or not these changes will promote long-term economic stability. Additionally, we will have to wait and see with regard to whether or not this helps the mortgage market.

What do you think about the economy? Do you think the housing market and the mortgage market crisis is coming to an end?

Tags: housing market, mortgage market, home mortgage loan, mortgage loan blog,
Ben Bernanke, interest rate cuts, mortgage lenders