Mortgage Rate News

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One of the main issues with the economy right now is the fact that the housing market is having so much trouble. And if you are trying to sell your house, you probably know this. Increased foreclosures in the area probably aren’t helping, either. Unfortunately, it is a sad fact that few neighborhoods are unaffected by the foreclosure crisis. Tamsen Butler, over at the Personal Finance Advice blog, points this out about how foreclosure can affect the market value of your home:

Even if you have maintained your home well and have made improvements, a foreclosure which results in a home eventually being sold for less than it is worth can drag down the market values of all the comparable homes within the area.  If a home similar to yours with regards to square footage and other factors is sold for less than it is actually worth then your home’s value may start to creep down as well.  This means you may not be able to sell your home for the amount you think it is actually worth.

Foreclosures aren’t the only problem: Buyer approval is down

Another issue that many sellers are facing (the family across the street in my neighborhood knows all about this) is that potential buyers can’t seem to get the approval they need to get a home mortgage loan. Some sellers have been on the verge of a deal, only to find that their prospective buyers have been turned down for mortgage financing. In some cases, this happens more than once to sellers.

It’s a tough market out there for sellers. The current glut of homes means that buyers have the upper hand, and the fact that mortgage lenders are being extra picky about who they approve is also playing a role. If you don’t have to move, it might be best to stay put for a little while longer.

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Fannie Mae is trying to help refinancing move through with a little more efficiency. One of the tools being used is called the “Desktop Underwriter.” Subprime Blogger has some good information on this new refinancing program:

The “Desktop Underwriter Refi Plus” program is going to expand the criteria for qualifying for a loan.  There will be a reduction of employee information as well as a lower FICO score will be required to qualify for the advertised low rate mortgage loans.  This is a strong effort by Fannie Mae to give more homeowners the opportunity to refinance and get a rate they desire.

One of the cornerstones of foreclosure prevention (followed by some measure of economic recovery) is refinancing. By speeding up the process, it could be helpful. Unfortunately, Subprime Blogger continues, it probably won’t help a lot of people who are having serious problems with qualifying:

Many of the homeowners who were ineligible before will remain ineligible due to the subprime crisis and lenders being strict with their lending practices.  For those that do qualify, it will make the process much quicker as there will not be as much documentation as before.

If you are in a good place to refinance, and are thinking about taking advantage of lower rates, this might be useful. Your waiting time will be reduced. Additionally, if you are right on the edge of qualifying, Desktop Underwriter might nudge things your way. It could also help you get a better interest rate.

In the end, the best thing you can do for your refinancing chances is to make sure that the following items are in order:

• Good loan to value ratio on your home.
• Decent credit score.
• Up to date mortgage loan payments.
• Don’t expect to cash out.

Refinancing can be done, and the rates are pretty low — especially if you refinance to a 15-year loan. If you play it right, you can get a shorter-term loan at a much better interest rate.

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The more we find out about the state of our financial and banking system, the darker things look. And what we’ve been finding out about banking giants and major mortgage lenders has been that they are nowhere near as solvent as we have been thinking. It doesn’t seem as though the trillions already used to prop up the banking system have been working, and yet the government is prepared to spend more — trillions more — if possible.

Indeed, earlier today several government agencies joined forces to issue a statement about the government’s commitment to our banking system. Once again, the government has reaffirmed that it is prepared to do whatever is necessary to buoy up our banking system — even at the risk of turning some banks into the same sort of “zombies” that populated Japan during the “lost decade” of economic stagnation.

Is nationalization an option?

It does appear that nationalization may be an option. Not the sort of nationalization that conjures up images of socialism, but rather the type of nationalization that has the U.S. government owning a significant (or even controlling) stake in some of the banks. Indeed, rumors are circulating that Citi and Bank of America are prime candidates for just that sort of nationalization. Both are on the verge of collapse, and both have been begging the government for assistance.

If the government could buy up some shares of stock, it could help things: Banks would be capitalized and the government would own some potentially valuable stock. And, if the government manages a controlling stake, it could tell the banks how to restructure. But, there are also pitfalls as well, since government control also has the potential to make things worse than they already are.

Bank stocks rallied initially on the news, bringing optimism to the stock market. That has faded, though, and the Dow is down nearly 200 points.

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