Nationwide, one in every 92 households is in foreclosure with Nevada having the highest foreclosure rate! According to RealtyTrac, more than 1.2 million foreclosure fillings were reported in the U.S. last year. Foreclosures could rise as some 1.5 trillion in adjustable-rage mortgage get repriced this year. Couple that with declining home prices and increase property taxes and one can be whistling some sour notes.
Home prices fell in 17 out of 20 cities in November compared with October 2006 data according to a recent MacroMarkets and Standard and Poors report. Although home prices in some cities did rise, nation wide there is no sign of the downtrend in real estate prices slowing down.
Property tax rates continue to skyrocket in many areas because of weak-kneed elected officials not reigning in expenses or living within town budgets. Many municipalities are soft on curbing excesses or cutting budgets. Rising property tax payments make many homeowners budgets too tight and they are not able to keep up.
Many banks have promoted hybrid and adjustable mortgage loans some with no and others with low down payments. With delinquent mortgage payments and foreclosures far above year-ago levels, indications are that hard financial times are gaining on many. Ballooning interest rates often surprise those who hold an adjustable-rate or sub-prime mortgage and when it is time to refinance, many are left with no option but foreclosure.
Some banks were, in some cases, even selling houses and forgiving debt. Do some of these banks feel some culpability for some creative loans they have saddled the homebuyer with? If they studied their customers' financial profile, they might never have made those loans. Do these banks fear scrutiny given the strong likelihood that their customers mortgage interest rate would be higher and unaffordable upon the refinance period? It's not unreasonable to expect mortgage rates to return to that double-digit territory as the economy cycles through a downturn.
A hybrid mortgage may be an appropriate choice if one plans to live in their house only for three or four more years. The first years of a hybrid loan are generally charged at a lower rate than traditional fixed-rate loans and if one plans to move and sell the home in a few years, it makes sense. If, for some reason, one don’t sell the home, they’re gambling using any form of a hybrid mortgage loan since it converts to an adjustable rate.
Hard times and rising payments make for tight budgets. If one wants predictability and the security of paying the same interest rate for the life of the loan, a fixed-rate mortgage is the smart choice. Rates are still low, by historical comparisons and given many economic forecasts of a weaker dollar and predictions for higher interest rates, locking in a fixed rate will reward one with peace of mind.
“Mortgage borrowers continue to refinance their mortgages at a higher frequency than historically would have occurred given the rise in mortgage rates over this year,” said Frank Nothaft, Freddie Mac vice president and chief economist.
“But the wide proliferation of adjustable-rate mortgages (ARMs) originated in the past few years that are nearing their first interest-rate adjustment provides borrowers an incentive to refinance into a lower-cost ARM or fixed-rate mortgage. In addition, borrowers who might have considered a prime rate home equity loan for a home improvement or other need are turning to cash-out refinance options now that the prime rate is above 8 percent.
The Cash-Out Refinance Report also revealed that properties refinanced during the third quarter of 2006 experienced a median house-price appreciation of 33 percent during the time since the original loan was made, down from a revised 34 percent in second quarter 2006. For loans refinanced in the third quarter of 2006, the median age of the original loan was 3.4 years, about two months older than the median age of loans refinanced during the second quarter of 2006.
- http://originatortimes.com
Option ARMs remain a viable option in the mortgage environment. Despite the many problems in the mortgage market, lending brokers are still willing to make risky loans - including those that allow borrowers to make monthly payments that don't even cover the interest (so-called 'option ARMs'). Also , as reported in Money New York, still is surprisingly still widely available are 'no-doc' loans, which require no income verification, and mortgages with no downpayment according on the CNN Money report on Apr 14, 2007
Mortgage rates fall once again as the 30- year fixed-rate mortgage rates move down. Rates have fallen for the 10 of the last 11 weeks according to Freddie Mac.
The 5-year adjustable mortgage stayed at 6%. The 1-year ARM averaged 5.46%, which is a 6-month low.
Notwithstanding, mortgage application index soared to its highest level since January. The activity shot up 17% according to the Mortgage Bankers Association.
Meanwhile, job growth is seen as sluggish even as jobless claims fall for the 4th drop in five weeks. Private employers added 78,000 jobs in September. U.S. factory orders were flat in August and CEO’s are gloomy on future of the economy. The Business Council and Conference Board said that 45.6 % of the CEO’s polled expect the economy to worsen over the next 6 months.
Mortgage rates have remaind stable due to the Federal Reserve not raising interest rates. The pre-owned single family home sales market is soft this seaon. Subprime lending and adjustable rate market find many battling foreclosure because of greed for home ownership and premium interest rates. Consumers with poor credit and financial flaws put themselves and their banks in risk.
Prices are going raising as the cost of living goes up. Property values shrinking, wages and the job market is still decent. The burden of local, state and the federal government are spending money like drunken sailors and it's only the American fighting attitude that keeps the working guy/gal able to continue. We all know that consumer inflation is far higher than the 2.1 percent official CPI inflation rate. Politicians are “cooking” the books. Eventually the markets will self-correct, but will we ever get spend-thrift politicians?
Forecasts imply that even if there is a housing recovery, home prices will raise very much. The national median existing home price is making an annual decline. Dampening demand, the national inventory of unsold homes now stands at 7.4 months. A year ago the supply was 4.5 months. Home sellers need to trim prices further as incentive to buyers. The prevailing buyers market is alarmingly close to making the statistic of the first time since the Great Depression that there was a annual national median home price decline.
Mortgage risks are compounding the problems. The Center of Responsible Lending said that 2.2 million subprime home loans have failed or will end in foreclosure. The report said that 19% of subprime mortgages originated in the past two years will end in foreclosure. That is almost one in five subprime loans.
Most loans are not subprime. The MBA (Mortgage Bankers Association in Washington DC) says that recent foreclosure data indicates a 1.05% foreclosure rate with a 3.86 percent jump for subprime loans.
Some agency is twisting the truth. Nevertheless, a home for most families is the greatest financial asset a family has and losing it has a huge impact.
