Mortgage Rate News

The big news right now is that mortgage interest rates are at lows not seen for decades. For those who have been fiscally responsible, now is the time to reap the rewards. And they could be big. CNN Money offers a look at what someone who has an average home with an average could save — if he or she can refinance with the best mortgage interest rate:

Look - there is opportunity here. 30-year fixed mortgage rates are at 4.6%. Historically, that rate is 8%. And that is significant.

Let’s take a look. 30-year fixed mortgage rates are at 4.6%. If you took out a 30-year fixed loan of $170, 300 (the average cost of a home) at 5%, your monthly payments would be around $915. And at 8% you would pay $1,250. The savings? $335 dollars a month or $4,000 dollars a year.

Getting the best interest rate

Right now, the difficulty is in getting approved. Many banks are reluctant to lend money to those with poor to fair credit. Additionally, the best mortgage interest rate isn’t available to just anyone who wants to refinance. You have to meet the highest qualifications. Here is what is expected if you want the best interest rate on your mortgage refinance:

1. Credit score of at least 720.
2. 20% equity in your home.
3. You can get an even lower rate if you refinance to a shorter term — 15 or 20 years instead of 30.

You can still refinance to a lower rate, even if you do not qualify for the best interest rate. If you have at least a 680 credit score, you can probably still get a reasonably good deal, depending on what your current interest rate is. If have less than 20% equity in your home and good credit, you might be able to take advantage of mortgage programs offered by the government — if your loan is serviced by Freddie Mac or Fannie Mae.

The rule of thumb is that it is worth it to refinance if you have at least a 1% difference in rates. Get your financial information together and do a little shopping around. You may find that you can refinance and save thousands on your home mortgage loan.

Some mortgage bonds are struggling on the market right now. The solution? The United States Treasury thinks that the Federal Reserve should start buying troubled mortgage bonds. The New York Sun reports on the possible move for the Fed to start buying troubled mortgage bonds:

The only tool left may be for the Fed to help facilitate a Resolution Trust Corp.-type agency that would buy bonds backed by home loans, the manager of the world’s biggest bond fund at Pacific Investment Management Co., Bill Gross, said. While purchasing the some of the $6 trillion mortgage securities outstanding would take problem debt off the balance sheets of banks and alleviate the cause of the credit crunch, it would put taxpayers at risk.

Is the government really considering upping the taxpayer burdens already present in this country? It appears to be the case. While the Fed has said it’s not going to do as yet, one never knows. So far, the Federal Reserve under Ben Bernanke has shown that it will do whatever it takes to keep investors happy. And if it means more for taxpayers to worry about, or if it doesn’t truly benefit the pocketbooks of ordinary Americans, so be it.

Additionally, this is adding fuel to the fire in terms of the debate over how involved the Federal Reserve should be in terms of economic manipulation. The entire idea of instilling confidence in the market, and of economic stimulus, is one of manipulation and efforts to guide the economy. And, even though the Federal Reserve doesn’t print and mint money, it still has the authority — and the ability — in this modern age where information is more likely to be currency than actual currency, to “create money out of thin air.”

But, eventually, someone has to pay for it.

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Federal Reserve mortgage bonds, economic stimulus, manipulate economy

The largest mortgage lender in the nation, Countrywide, has been have trouble for quite sometime. Subprime mortgage writedowns have plagued the company, and as the foreclosure rate rises, so do delinquencies on Countrywide home loans. The Motley Fool reports on the bad news for Countrywide:

Last week, the California-based home lender reported a nine-fold jump in delinquencies of at least 90 days in the past year, now totaling 5.4% of its $28.4 billion adjustable-rate mortgage pool. Perhaps more alarming was that 71% of borrowers from that pool chose to make the absolute minimum payment necessary, which doesn’t even cover total interest accrued, thus pushing loan balances higher every month.

Additionally, Countrywide has sustained losses due to home equity lines of credit — to the tune of $704 million in 2007.

But all that will soon be water under the bridge, right? After all, Bank of America has offered to buy Countrywide. But until the deal actually happens, there’s always a chance it will be scuttled. And Bank of America may balk as more mortgage market news, especially concerning Countrywide, rolls in.

If the deal is broken, then it means a very long haul on the road to mortgage market recovery. And those with Countrywide stock could find themselves stuck with large losses. But if it does go through, those who buy Countrywide stock now may be handsomely rewarded.

Disclaimer: I am not an investment professional. Nothing in this piece should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional.

Tags: mortgage loan blog, mortgage market news, home mortgage loan, home equity lines of credit,
Bank of America Countrywide, subprime mortgage writedowns, Countrywide stock news