Mortgage Rate News

Right now, with all of the economic turmoil happening, it is no surprise that people are increasingly worried about their financial situations. And this fear is what prompted this reader question:

With everything going on, I’m starting to think that bankruptcy may be my only option. I only see myself getting deeper and deeper into debt — especially if the economy prevents me from getting another job. Is it time for me to file bankruptcy?

Obviously, I do not know the particulars. But it appears that there is a dire situation in the making here, and that the reader seems desperate. First of all, it is important to realize that bankruptcy is not always the “do over” that it is often painted as. Recent laws have been passed that require you to pay back more of your unsecured debt than before. And it makes it more difficult to file, with penalties if you “waste” the judge’s time with what is considered an insufficient reason for bankruptcy.

Other considerations that you need to weigh before deciding to file for bankruptcy include:

• The credit score impact, and the fact that the record of the bankruptcy remains for seven to ten years.
• Difficulty borrowing. In the present climate, lenders are reluctant to extend credit, and it is even more difficult for those with a bankruptcy.
• There may be impacts on a personal level with regard to relationships and your own mental and emotional health.

It is true that you will not lose your home through a bankruptcy filing, so that is at least protected. Additionally, your IRA is protected from creditors as well when you file for bankruptcy. Bankruptcy should be the action of last resort, so try financial counseling and talking with your creditors before you take such a drastic step.  There are two cases that may mean that you should file for bankruptcy:

1. Your liabilities are greater than your assets. If, every month, the payments just to maintain your debt exceed your income and your total assets, you could have a problem. If — even when everything is liquidated — you would still be in a great deal of debt, you should consider bankruptcy. It may be your only way out.
2. Negotiation has failed. Most creditors will modify your plans, lower your interest rate or settle for a smaller amount than you owe. If, however, your creditors are unreasonable, go ahead and file for bankruptcy.

Tags: home equity loan, IRA, home mortgage loan, bankruptcy,
second mortgage, debt consolidation, economy

Even as Congress continues to wrangle over the $700 billion bailout plan with the White House, mortgage interest rates are already being affected. While the details have yet to be worked out, it is very clear that sometime in the next two weeks to six months a very large amount of money is going to be entering the market. And this causes inflation.

This inflationary reality is explained by Behind the Mortgage:

In borrowing more, the government is (in effect) expanding the money supply; either by literally putting more dollars in circulation, or by creating a perception in world markets that they will, or will have to, in order to repay the debt.

And expanding the supply of dollars is inflationary - More dollars floating around means the dollars the Federal government uses to pay back these debts will be worth less (For evidence of this in action: Just yesterday the dollar recorded its largest ever one day drop.)

This is something that is important to remember, because mortgage interest rates are connected to long term (usually 10 year) Treasury notes. So as government debt, inflation and the money market makes the dollar worth less, investors *need* more greenbacks to recover their return and beat the rate of inflation. The Mortgage Reports Blog connects the dots to what this means for mortgage loan rates:

And lastly, the mortgage market got hit.   Because mortgage bonds are repaid in U.S. dollars, the value of those repayments dropped.  This forced mortgage rates higher because the only way to entice investors to buy devalued mortgage-backed bonds is to offer them with a higher interest rate.

If you’re wondering why conforming mortgage rates are up by 0.750 percent since last week, this is it — it’s because mortgage rates are responding to the expectations of a weaker dollar going forward.  This is the reverse of what happened in August.

So, even though many expect lending standards to loosen up a bit in the coming weeks, it still doesn’t equal a slam-dunk for the consumer. Because now borrowers will be able to get the home mortgage loan, but they will be paying more for it.

The political maneuvers have begun. Rather than just shoving the $700 billion bailout plan through like the Treasury and the rest of the Bush Administration wants, some members of Congress are asking some questions about what the bailout does.

Should it just be for Wall Street? Is there any reason that others can’t get the good effects, too? Perhaps homeowners should be able to get in on the action.

That’s just the argument BloggingStocks offers:

For one thing, people would not have gotten mortgages for homes that they could not afford if the banks did not issue them. Lending standards were so lax that they bordered on the criminally negligent. That’s why it seems horrendously unfair to rescue banks and leave homeowners to fend for themselves. Remember, it takes a village to raise a child and a borrower and a lender to make a mortgage.

What the “let them eat cake” crowd often forgets is that shady mortgage brokers would push people into high-cost adjustable-rate mortgages even if they qualified for a standard 30-year loan. Exactly how many people fit into this category is not clear, but banks need to be held accountable for the lives they have ruined.

Of course, the flip side is to rescue no one from this mess.

While it is tempting to let the “free market” run its course, the problem is that we haven’t really had a free market for decades. It’s slowly become a bit socialized. (And with this bailout we’ve reached the points of almost completely socialized risk.) And the other problem is that there are plenty of other industries (not just finances) that would be affected if Wall Street completely and utterly failed. Letting “market forces” fix this might devastate everyone rather quickly.

But bailing everyone out might do the same thing: devastate everyone. This would be devastation throught the increased national deficit, the need for higher taxes and a general drag on the economy. But perhaps in the bailout scenario the pain goes on longer and we learn nothing, while in the “market forces” scenario the immediate impact is huger and we change our ways.

I don’t know the answer.

But I do know that it seems hypocritical and monstrously unfair to help those with golden parachutes get a cushion from their poor choices, while doing nothing for those without the same sorts of resources.

Tags: homeowners, $700 billion bailout, home mortgage loan, mortgage loan blog,
golden parachutes, Wall Street