Steady Market
Not much to report on mortgage rates the past few weeks. The benchmark 30-year fixed rate mortgage is hovering around 6% with no points.
The rates on ARM programs aren't that appealing in general. In fact, many lenders are discontinuing any of the very short-term ARMs. Why? Nobody wants to take on market risk over the short-term (the next 12-18 months).
Underwriting guidelines continue to tighten and the changes Fannie Mae has made only adds costs to all but the most squeeky-clean of credit scores.
The big issue that hits all of us continues to be falling home prices.
Earlier on in this credit crisis (see how the media no longer calls is a "contained sub-prime problem?), banks would proceed as normal on delinguent mortgage borrowers and begin to foreclose.
The new reality is that the surging volume of properties moving into foreclosure only floods the market with an inventory of "motivated sellers" at a time when buyers are few and far between. Ouch! But hey, their bankers, right? They'll come out fine.
What they are finding now in their weighing of options is that maybe, just maybe, a different strategy makes more sense. What could it be?
Maybe it'd be better to reduce the principal balances and take the hit now but get these loans back into performing loans (where payment are made in a timely basis) and make the lost money back on the interest.
That's a ton better than amassing the legal fees in addition to the capital loss that will occur selling a glut of properties into this market.
Remember, bankers that lend on mortgages never wanted to be property owners. They were lending against a borrower's ability to repay and just secured it to the real estate for peace of mind security.
Once they threw out the time-tested knowledge of how to assess & price the borrower's ability to repay it all blew up!
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