Entries Tagged 'Mortgages' ↓

After being in freefall for several years, there are signs that the housing market may have finally reached a point where prices will be flat for some time to come. The recently released Standard & Poor’s/Case-Shiller Home Price index showed that while housing prices continued to decline nationally in the fourth quarter of last year, the declines may be soon coming to an end.

The widely respected Case-Shiller index reported a price fall of 2.5% in Q4 2009, as compared with the same period for 2008. Moreover, prices fell only 1.1% from the third to the fourth quarters last year. While still a decline, the number was a marked improvement from previous quarters. The Case-Shiller index tracks housing prices in 20 cities and nine census divisions across the United States.
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A new study soon to be released by the National Resources Defense Council has found that homeowners with long commute times tend to default on their mortgages at a higher rate than those who work closer to home. The draft report studied 40,000 mortgages in Chicago, Jacksonville, Fl, and San Francisco.

The research looked at homeowner’s income and expenses, their credit record, as well as the loan-to-value ratio of the mortgage. Using a complex formula, the NRDC study found that mortgage foreclosures increased with the number of cars owned by a household. In others words, the neighborhood where more households owned cars were also the same locations that had the highest default rates.

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If you think we’re through with the sub-prime and foreclosure crises in the housing market – prepare yourself. There could be another shoe dropping and that shoe is the looming Option ARM crisis.

Option ARMs are typically 30-year adjustable rate mortgages that initially offer the borrower four monthly payment options: a specified minimum payment, an interest-only payment, a 15-year fully amortizing payment, and a 30-year fully amortizing payment. Option ARMs are also known as “pick-a-payment” or “pay-option” ARMs. Option ARMs are often offered with a very low teaser rate (often as low as 1%) which translates into very low minimum payments for the first year of the ARM.

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Falling home prices around the country have cut the amounts seniors can receive on reverse mortgages from the Federal Housing Administration. The popular FHA program is running a $798 million deficit this fiscal year, forcing the agency to cutback new reverse mortgages.

Analysts say the move amount to a cutback of 10 percent on all new FHA reverse mortgages. Those who have existing FHA reverse loans are not impacted by the change.

The National Reverse Mortgage Lenders Association estimates the policy could prevent more than 1 in 5 applicants from paying down their existing mortgage note with the funds from a new reverse mortgage. The Association says this could lead some seniors to delinquency and foreclosure.

Under the new FHA policy, a $100,000 FHA reverse mortgage would be reduced by $10,000 to $90,000 in proceeds. This reduction would leave many applicants without the money to pay off the balance of their note.

In a reverse mortgage, the bank providers homeowners 62 and older with a lump-sum payment, monthly payments, or a credit line the borrower can draw upon. The reverse mortgage is secured by the equity in the home and is only payable when the owners sell the house.

For the first time in four months rates on 30-year mortgages dipped below 5 percent. According to mortgage company Freddie Mac, the average for 30-year fixed rate loans was 4.94%, down from 5.05% last week.

These low home loan rates, combined with the federal tax credit for first time homebuyers drove up the number of signed home sales contracts for the seventh straight month, the National Association of Realtors reported. The association said that its index of sales agreements rose 6.4 percent from July to 103.8, beating forecasts. The index was 12 percent higher than a year ago, matching similar reporting on home sales from the Case-Shiller home sales index.

The decline in mortgage rates is significant in that the economy appears to be picking up steam, leading many analysts to predict interest rates would start to rise. This clearly hasn’t happened yet, as last week’s rates were the lowest since May when it was 4.91 percent. Mortgage rates hit their record lowest point of 4.78 percent in the spring.