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
Unsold home inventory shot up 5.9% in February to 3.75 million while the average 30-year fixed-rate mortgage was 6.16% in February according to Freddie Mac.
Existing-home sales 3.9% rise in sales for February. It would take 6.7 months to sell off the excess inventory of homes at the current real estate sales pace.
Subprime woes have left the housing industry in an adjustment phase with borrowers with poor credit defaulting on mortgage loans. Estimates suggest it will cut housing demand by 100,000 to 200,000 units annually.
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.
Good news for those applying for mortgages. Mortgage rates sunk to 6.18% with the benchmark 3-year fixed rate mortgage indicator, ending November 22. The rate had been 6.24% one week earlier and a year ago it stood at 6.8%.
Applications for new home buyers slid 2.8% and applications for all mortgages fell 3.7% for the week of November 17th.
“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
Rising subprime mortgage defaults can add 500,000 homes to the U.S. real estate inventory according to a Bloomberg morning report. Speculation looms for New Century as they consider bankruptcy. In the meanwhile, new mortgage lending is halted at New Centrury.
