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06 Nov 12 Mortgage Lenders Poised for Housing Market Recovery

Once a year, the Mortgage Bankers Association holds their annual convention and they reported their largest turn-out since 2007 as over 3,500 mortgage lenders reportedly attended the event. The common beliefs from this MBA event were that home loan origination will increase in 2013, but mortgage refinancing volumes will likely decrease towards the end of next year. 2012 has been an incredible year for record low rates on FHA, VA, conventional and jumbo mortgage products. The housing sector is beginning to see signs of a recovery in many areas across the country and this gives Realtors and home loan lenders hope that 2013 will be a profitable year.

The biggest problem remains qualifying criteria for home loan programs as many of the applicants have issue with credit or equity requirements. There may not be enough subprime mortgage lenders offering programs that meet the needs of distressed homeowners. The Home Affordable Refinance Program has helped many homeowners that have upside down mortgages, but you have to have a mortgage owned by Fannie Mae or Freddie Mac. Not all underwater home loans are owned by these government entities so there is still a need to find an underwater refinance programs for people that do not have a mortgage owned by Fannie or Freddie. The biggest criticism of the FHA streamline refinance is that borrowers must pay for closing costs out of their pocket. FHA will not allow people to finance closing costs under the streamline program. They will also not permit no-cost loans in which the lender fees are paid by the loan company. Not everyone has $4,000 or $5,000 to pay for the streamline refinance.

Economists for the trade group estimated that modest economic growth, more sales to owner-occupants and a small boost in average home prices will drive a 16% increase in home purchase mortgages, to $585 billion. Meanwhile, home refinance transactions are forecasted to decrease $785 billion, down from an estimated $1.2 trillion this year. The American Action Forum, a public policy group, recently estimated that combined all the new regulations would result in 20% fewer mortgages than otherwise would be made, up to 1 million fewer housing starts over a three-year period and 3.9 million fewer jobs. Renting is roaring. Investors are scooping up distressed suburban homes to turn them into rentals, and the majority of multifamily construction now going on is apartments, not condominiums.

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