Rates on home loans see no relief from Fed cuts

Rates on home loans see no relief from Fed cuts

If the home loan rate has followed the Fed rate, it should be around 3% instead of 6%. At 3% loan rate most mortgages would opt for refinance. Refinance reduces the mortgage payments by the home owners reducing the cash flow to the banks.

Maintaining the mortgage rate near 6% instead of 3% ensures there would be no refinance but foreclosures might continue.

Under foreclosure the bank does not lose. It gets the property back while the ex-home owner loses all the equity built by him/ her over the years. After sometime, the banks do resell the foreclosed property. After all the new buyer prefers cheaper foreclosed property compared to a new home of same size.

Thus the market is selfish and the Fed action in reducing the Fed rate has not trickled down to the public.

Market by itself would not lead to public good. The Government must introduce legislation or the Fed should evolve a policy linking Fed rate cuts to reduction in mortgage rate.

Lower Home loan rates only way out of current mess

Despite the Fed agressivly cutting rates to their current low levels.This rate cut has not been passed on to the buyers of new properties.
If bank loans were available at 3% to 4% it would greatly reduce the foreclosure,s and give a shot in the arm to the housing sector,and consequently the U.S.economy.

( I would like you to put this sugestion of mine to “the vote” for your internet users.)

Isn’t this what got us into the subprime problem to begin with??...
:confused:
Getting Easier to Get Big Loans
Sunday, May 18, 2008; The gears of the mortgage market are starting to unlock for borrowers needing big loans. In expensive markets such as Washington, that covers most people looking to refinance or move up from an entry-level home.

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Just in the past two weeks, interest rates on the new “conforming jumbo” mortgages — for amounts between $417,000 and $729,750 — have come down enough to make a difference to borrowers. And mortgages allowing down payments of just 3 to 5 percent are coming back to the market for borrowers who have good credit. “The bottom line is rates are lower than they were," said Kevin Connelly, a vice president at BB&T.

Last week, for example, BB&T was offering 30-year, fixed-rate mortgages for a conforming loan, which is for $417,000 or less, at 6 percent interest with no points, a type of prepaid interest. A conforming jumbo cost only one-quarter of a percentage point more, 6.25 percent. Loans for amounts beyond $729,750, now called “jumbo jumbo” loans, were at 7.25 percent. That 1-point difference is enough to matter in anyone’s budget: On a $729,000 mortgage, the lower rate saves $484 per month.

Before you jump on one of these loans, though, check out FHA mortgages. Insured by the Federal Housing Administration, these loans are available for as much as $729,750, the same cap as on conforming jumbo loan amounts. FHA’s loan-amount cap has been raised through the end of the year so that the program can be more widely used in expensive areas, including ours.

[url=http://www.washingtonpost.com/wp-dyn/content/article/2008/05/17/AR2008051700162.html:
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Lawmaker Calls Foreclosure of Her Home Improper...

Dem. Congresswoman Battles Foreclosecure on Her Home
WASHINGTON May 24, 2008 - Congresswoman Claims Sale Into Foreclosure of Her California Home Should Not Have Happened

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California Rep. Laura Richardson claimed Friday that her Sacramento, Calif., home was sold into foreclosure without her knowledge and contrary to an agreement with her lender. She said she is like any other American suffering in the mortgage crisis and wants to testify to Congress about her experience as lawmakers craft a foreclosure-prevention bill. In a lengthy interview Friday night with The Associated Press, the Southern California Democrat struck back against several days of negative publicity over reports she defaulted on her mortgage, allowing the house to be sold at auction.

Richardson, who won her seat in a special election last August, acknowledged turmoil in her life in the months after incumbent Rep. Juanita Millender-McDonald’s death in April opened up her Los Angeles-area House seat. Richardson used her money to finance her campaign and fell behind in mortgage payments. But now, Richardson said, she has renegotiated her loan and promised to fully pay it off, along with $9,000 in delinquent property taxes. She insisted she’s not getting special terms because she’s a congresswoman.

“I’m Laura Richardson. I’m an American, I’m a single woman who had four employment changes in less than four months," Richardson said. “I had to figure out just like every other American how I could restructure the obligations that I had with the income I had." Richardson bought the 1,600-square-foot home in Sacramento’s desirable Curtis Park neighborhood for $535,500 in January 2007. It was sold at auction earlier this month to a Sacramento mortgage lender who paid $388,000, according to the Sacramento County Recorder’s Office. A default notice sent to Richardson in March put her unpaid balance at $578,384.

More [url:
http://abcnews.go.com/Business/wireStory?id=4922765[/url]

See also:

U.S. not yet half way through home mortgage trouble: Seidman
Fri May 23, 2008 (William Seidman is the former chairman of the Resolution Trust Corp., the agency Congress set up in the 1980s to clean up the savings-and-loan lending mess. He’s also a former chairman of the FDIC. He spoke with Reuters this week on the housing rescue plan taking shape in Congress and on the state of banking in the United States.)

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How important is this Senate housing rescue plan?

The Senate plan will certainly be some help. It will take a part of the problem in the financial system and perhaps cure 25 percent of it. It isn’t an answer to all the problems we have.

Were you expecting to see a lot more, at least coming from Washington?

I think it’s as much as they can do with the subprime mortgage issue. The real job will be to get the financial system back on its feet and that’s going to be largely a private sector exercise, I think, with a substantial number of bank failures.

Where are we on that curve now?

Generally banks start to fail about a year after the events which cause the trouble. We’re probably about seven or eight months down that year. So before the end of the year, we’ll probably see a number of bank failures, particularly in Florida, Texas, California, Nevada, where the housing boom was.

More [url:
http://www.reuters.com/article/reutersEdge/idUSBAU37100520080523[/url]

Investment banks still under the credit crunch...
:eek:
Credit crisis still looms over Wall Street
Sat., June. 7, 2008 - Analysis: Comments from financial firm chiefs may be too optimistic

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The chief executives at the world’s biggest financial institutions might have been a bit too optimistic by declaring we may be nearing the end of the global credit crisis. Morgan Stanley’s John Mack said in April it had reached its eighth inning or “maybe top of the ninth” of a baseball game. Goldman Sachs' Lloyd Blankfein compared it to football’s “third or fourth quarter." Richard Fuld at Lehman Brothers and Merrill Lynch’s John Thain were also more upbeat about the future.

Just as Wall Street started to look safer for investors, another wave of anxiety about the financial industry, inflation and the economy dragged down stocks this past week. Investors continue to worry that the pain might not be over for financial companies — and that the market as a whole will suffer until investment banks release quarterly results later this month.

“Financials have become the kid that brings home a bad report card," said Chris Johnson, president of Johnson Research Group in Cincinnati. “Once they bring home C’s and D’s, you watch that kid closely week to week. If they bring home A’s, you only really care once a quarter."

[url=http://www.msnbc.msn.com/id/25018647/:
Cash shortage fears[/url]

Foreclosures spike...
:eek:
Foreclosure filings up 120%
July 25, 2008: 220,000 homes were lost to bank repossessions in the second quarter, and the annual forecast for 2008 will have to be revised upward.

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As foreclosures continue to soar, 220,000 homes were lost to bank repossessions in the second quarter, according to a housing market report Friday issued by RealtyTrac. That’s nearly triple the number from the same period in 2007. A total of 739,714 foreclosure filings were recorded during that three-month period, up 14% from the first quarter, and 121% from the same period in 2007. That means that one of every 171 U.S. households received a filing, which include notices of default, auction sale notices and bank repossessions.

“Most areas of the country are seeing at least some increase in foreclosure activity," said James Saccadic, CEO of RealtyTrac, an online marketer of foreclosed homes. “Forty-eight of 50 states and 95 out of the nation’s 100 largest metro areas experienced year-over-year increases in foreclosure activity." Because foreclosure filings are growing so quickly, RealtyTrac will have to reevaluate its foreclosure forecast for the year, according to spokesman Rick Sharga.

“We’ve been saying foreclosures will total 1.9 million to 2 million this year," he said. “But midway through the year, we’re already at 1.4 million so we’re going to be raising our projections." And there is more bad news: Bank repossessions are up as a proportion of total filings, representing 30% of the notices issued during the quarter, up from 24% a year ago.

[url=http://money.cnn.com/2008/07/25/real_estate/foreclosure_figures_up_again/index.htm:
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