Your Questions About Mortgage Rates News

Donna asks…

Did I hear correctly – Bush’s plan to help the mortgage crisis?

I just caught the tail end of a CBS Evening News report about George W. Bush’s ‘plan’ to help relieve the mortgage crisis in this country.
If I understood correctly, government-backed refinancing packages would be available, but ONLY to those who own $400,000+ homes – those people with subprime loans and adjustable-rate mortgages wouldn’t qualify for assistance.
Bush said something to the effect that we can’t bail people out who buy homes they can’t afford. Then WHY would we bail out people who buy half-million-dollar homes? It sounds to me like this is just another Bush ‘plan’ to provide welfare for the wealthy and nothing for those who really need the financial assistance. -RKO- 08/31/07

admin answers:

FHASecure, like all FHA products, will be underwritten to ensure the borrowers have the ability to repay the loan, will require escrow for taxes and insurance, and will continue to offer unprecedented foreclosure prevention assistance. The FHA has never permitted and will not include pre-payment penalties or teaser rates that are common in exotic mortgages and have caused much of the current market troubles.

To qualify for FHASecure, eligible homeowners must meet the following five criteria:

A history of on-time mortgage payments before the borrower’s teaser rates expired and loans reset;
Interest rates must have or will reset between June 2005 and December 2009;
Three percent cash or equity in the home;
A sustained history of employment; and
Sufficient income to make the mortgage payment.
“FHASecure is designed for families who are good borrowers but were steered into high-cost loans with teaser rates,” said Assistant Secretary for Housing-FHA Commissioner Brian Montgomery. “These homeowners, many of whom are minorities, need a safe, affordable mortgage product that will help build wealth. All FHA borrowers pay mortgage insurance premiums to offset claims to the FHA insurance fund and ultimately prevent risk to the taxpayer.”

FHASecure will also bring much-needed liquidity to the mortgage market. FHA anticipates more lenders will offer FHA-insured loans, pool them, and securitize them with the Government National Mortgage Association (Ginnie Mae), which has the full faith and credit of the U.S. Government. This guarantee makes Ginnie Mae’s mortgage-backed securities the safest on the market and helps to channel greater capital into the housing market, benefiting U.S. Homeowners.

Michael asks…

Mortgage rate to interest rate?

If the fed does drop the interest rate to zero as some news agencies have suggested, would that have a direct correlation to the mortgage rate? what if the prime rate were to drop, would mortgage rate decrease as well? thank you

admin answers:

It is not likely to effect us. The feds dropped the rate to encourage the banks to lend money out, making it easier for them to not loose their shirts.

It is important to our economy to get money flowing again. A few people really screwed it up, and pretty much brought everything to a halt. It is more important to lend money to businesses then mortgages, but it should make more money available for mortgages as well.

Mary asks…

About mortgage foreclosures?

This is not typically a question I would ask in an open forum like this. Eventhough mortgage forclosure has been one of the biggest stories in the news I have to ask due to my lack of knowledge and understanding on the topic. How much does change in mortgage rates have to do with the recent foreclosure phenomenon? What is the relationship between real-estate and mortgage increases? What ultimately lead to the foreclosures of so many families with in such a short period of time?

admin answers:

First of all, the price of houses comparied to medium family income has gone up. Housing markets are stable when the medium house sells for three times the medium family income. When it goes higher, like in California, people half to streach more. If anything happens, they will miss a payment and things go downhill from there.

The second thing has been mortgage approval. I remember a banker telling me I did not quilify because my mortgage would be 29% of my gross pay. I pointed out I had no student loans or car loans, and he reluctantly agreed. In the last eight years, you could put any numbers you wanted on your form, they did not check. I found out that a speculator purchased 10 houses in my neigborhood using liar loans. All went to forclosuer.
That of course, put every house in the subdivsion underwater with fair market values 10% lower than 6 years ago. So if you have to move, or loose your job, or have a divorce, you can no sell the house for what you owe. And more houses are forclosed, and market values drop more.
Throughout this, banks have refused to manage risk. A bank could have taken a 5% haircut up front, but time and time again, they go for the 30% hair cut.
Now banks know they could loose money, the have tightend up requirements, and there are 20% fewer qualified buyers, so prices continue to drift lower.
Eventually, the hard core cash buyers will start to buy, and thing will even out. But that may be a year from now.

Now what is going on with the banks is a whole other story.

Carol asks…

Is there anybody out there facing foreclosure?

I keep hearing about it on the news. Foreclosure rates are up, way up, and this is closely tied to the global economic crisis. NPR is talking about it all the time, but mostly, they’re talking to economists and relaying the news on Wall Street. I would like to hear about it from the perspective of somebody who has lost their property because of one of these adjustable rate mortgages. What are you going through? I’ve been in situations before where I just wasn’t sure I could pay my rent, so I think I could relate.

admin answers:

Back in the 90’s there was a lot of adjustable rate temporary loans too. My ex-boyfriend and I bought a house with one of these loans because of our poor credit. You’re supposed to fix your credit and then refinance within two years or the interest rate would keep skyrocketing. I left him and our home in the meantime and he never bothered to refinance so the Sheriff came knocking at his door one day and seized the house. I think the interest payment jumped up from 500 month to 1500. It wasn’t the lender’s fault. All loans have detailed disclosures. I think that most people in trouble today just figured they could fix their credit and get a better loan before the rate adjusted.

Sandy asks…

What do you think about the credit crunch?

How long do u think it will last? How high do you think mortgage rates will go and when do you think they will start to come down? What effect does the fact that only 56% of mortgages were agreed by the banks last month in the UK compared to the same period last year? Also, what about fuel prices, the BBC news last night said to expect a 40% rise in fuel bills by the end of the year, how much of a disgrace is this?

And finally, is there any ways that we can minimise the effects of the credit crunch?

admin answers:

In reality, there is no way of knowing how long this will last, and seeing as there is no defined way of measuring ‘the crunch’ itself, you won’t actually know when it’s over. It’s more of an adjustment than an actual event.
In the case of the existing scenario, it is primarily about the problems with the sub-prime mortgage market impacting on the reserves available for lending – but it is accentuated by rising prices (especially fuel) and static wages. It is also ‘fueled’ by the general acceptance of credit as a way of life and persistent overspending on credit.
The rising fuel bills are not a ‘disgrace’ as the fuel companies are not making a killing on it, they are just passing on the advancing costs to the consumers. Mortgage rates are linked to the Bank of England base rate which is currently stable. The problem with lending is that the financial institutions have suffered from overselling mortgages in a declining market, and they don’t have the capital reserves to lend out. House prices are fairly stable, it’s just that houses are not selling… This tells us that first time buyers are finding it more difficult to get mortgages, now I have to say that compared the the situation where 100% mortgages were freely available in a falling market – that’s actually NOT such a bad thing. The people in trouble will be those that took the 100% mortgages and find themselves unable to meet the payments.
What can we do? Well, we can make budgets and NOT spend more than we earn, pay off our debts so that we are financially healthy – this will have the impact of slowing down the economy and people are going to lose jobs… This is inevitable.
How long will it last? Put it this way, how long have governments been trying to stave off the inevitable (just so they wouldn’t get the blame and lose the next election?). I estimate they have been trying to ‘fix’ this for two to three years – I would not be surprised if it takes two or three years for the economy to be able to rise again.
Don’t be fooled, our economy works on rises and falls, the only time there is a problem is when government tries to intervene to prolong a rise when it should let the fall happen.
I think I’ve said enough – more advice and info here:
http://www.thecreditcruncher.com

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