| Mortgage Loan Woes |
| By Credit Federal |
Published
05/25/2008
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Home Loan
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Bad News All Around for New Home Loans as well as Mortgage Refinancings
Applications for new home loan mortgages fell to its second lowest level of the year according to the Mortgage Bankers association, while homeowners lost equity as values declined.
According to The National Association of Realtors, home sales fell for the 8th time in 9 months, with the backlog of unsold single family homes rising to the highest level in more than 20 years, and inventories of unsold homes surged 10.5% to 4.55 million units at the end of April.
Rising payments from adjustable rate mortgages, mounting job losses and an epidemic of unaffordable loans have thrown more homeowners into a dire situation: They're no longer able to pay.
So what should you do if you absolutely can't pay your mortgage?
Housing experts and counselors offer a host of suggestions; from trying to reach a deal with your lender, to consulting credit counselors, to walking away without paying the mortgage, to trying to sell, to letting the bank take possession.
It can be hard for a confused homeowner to cut through a thicket of conflicting advice, some of which may be unreliable.
Ask your mortgage lender for help. Because foreclosures generally result in a financial loss, mortgage lenders generally don't want a home to go into foreclosure. Many lenders are willing to work out alternative payment plans with homeowners who have fallen slightly behind or who are struggling to make payments. These steps might include lowering the mortgage rate, extending the life of the loan or letting homeowners make up missed payments through a payment plan.
Lenders are sometimes willing to make concessions to people who are several months behind on payments. But with foreclosures mounting, banks are facing more requests for loan modifications. As a result, some homeowners, even those who have never before failed to make a mortgage payment, might find lenders less flexible than they'd hope.
Outside assistance programs are also an option. The Federal Housing Administration can help subprime borrowers who can afford the starter rate on their subprime mortgages, but not the higher payments once they adjust.
Credit counseling services report doing brisk business helping homeowners by serving as a liaison between mortgage holders and lenders in working out loan modifications.
For those who are two or more months behind on mortgages, lenders may agree to let them repay that money over a 12-month period or to refinance an ARM to a fixed rate at a lower monthly payment.
Glints of Hope:
Rates on 30 year mortgages sink below 6%. Freddie Mac, the mortgage company, reported Thursday that 30 year fixed rate mortgages averaged 5.98% this week. That was down from 6.01% last week. The mortgage rates do not include add on fees known as points. The nationwide average fee for 30 year fixed rate mortgages was 0.5 points. The other mortgage categories surveyed by Freddie Mac all carried a 0.6 point average fee.
Fannie Mae (FNM), the nation's largest source of home financing, said it is lowering the amount of down payments required on mortgages it purchases, even in areas where home prices are falling.
Soon, the new requirements of 3% or 5% will apply nationally to loans on single family primary residences.
That replaces a December policy that required a higher minimum if the loan was for a home in a market with declining real estate prices.
The rule change comes as many in the housing industry call for Fannie Mae and Freddie Mac (FRE), the second largest federally chartered home funding company, to make more affordable housing available.
The two government sponsored, shareholder owned companies buy mortgages, freeing up funds for more lending.
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