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16 Jan 09 Mortgage Refinancing Activity Skyrockets

In a recent USA Today article, Stephanie Armour examines the home refinancing rush, as ecord low mortgage rates have spurred a surge in homeowners wanting to refinance. According to a report from Mortgage Bankers Association, over 85% of new mortgage activity involved refinancing applications.

 

Mortgage lenders are swamped by the giant wave of mortgage refinancing requests.  Many have shed staff the past couple of years as the housing market slumped. Now they lack the manpower to quickly process refinancing requests.  “Lenders aren’t prepared for the surge,” says Mark Zandi of Moody’s Economy.com.   Some lenders are even hiring more people to accommodate the growing demand for refinancing.

 

In a normal market, refinance loans take 50% to 60% of its business.  Many anticipate  the refinancing boom to continue at a rapid pace.”The refinancing wave could become very large,” Zandi says. “There are millions of people with some equity and good credit scores who are now saying, ‘Let’s refinance.’ Home refinancing will increase substantially.”  Many people can’t take advantage of the lower rates. Among them are millions whose houses have declined so much in value that the homeowners owe more money than their homes are worth.  Ken Schimpf, 61, a retired carpenter in Lancaster, California, bought his home for $330,000.   With similar homes in his area now going for about $240,000, he can’t refinance to get a lower interest rate.”It’s a lost cause,” Schimpf says. “It’s very frustrating.  Most reports indicate that not many borrowers have qualified for Hope for Homeowner, which is FHA’s new loan program that enables borrowers who have no equity to still qualify for a refinance loan.

 

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12 Dec 08 Mortgage Rates Drop to 4.5 Year Low

Mortgage interest rates dropped again this week, following the government’s efforts to assist the troubled housing market.  Government sponsored mortgage lender Freddie Mac said Thursday that fixed rates on 30-year mortgages averaged 5.47% for the week ending Dec. 11. That’s down from 5.53% last week and well below 6.11%, which is where the rate stood at this time last year.  Mortgage interest rates began to fall after November 25th, when the administration announced that it would throw another $800 billion into the financial markets to unfreeze consumer credit and mortgage lending.

Specifically, mortgage rates responded to the Federal Reserve’s announcement that it would purchase up to $500 billion in mortgage loan securities backed by Fannie Mae, Freddie Mac and Ginnie Mae. It will also buy another $100 billion in direct debt issued by those firms.  Mortgage refinancing rates dipped to 5.77% on a 30-year, fixed rate loan the day after the government’s announcement, down from the previous Monday’s 6.06% average, according to Keith Gumbinger, vice president of HSH Associates. And the downward trend has persisted.  “What we’re seeing is a slight continued decline influenced by the Federal Reserve’s announcement to buy half a trillion in mortgage backed securities,” Gumbinger said. “And this continued minor downdraft is also due to the poor economic climate.”

The thirty-year mortgage rate has not been this low since March 25th, 2004 when it averaged 5.40%.  “Following the release of the November employment report, which showed the largest monthly decline in jobs since December 1974, bond yields fell slightly this week allowing fixed mortgage rates room to ease back a little further,” said Frank Nothaft, Freddie Mac vice president and chief economist, in a release on Thursday.  FHA home loan rates declined as well, so more homeowners should now be able to qualify for a refinance loan that features interest rates fixed in the 5% range.

The fifteen year fixed rate mortgage this week averaged 5.20%, which is down from 5.33% last week. A year ago at this time, a 15-year fixed rate loan averaged 5.78%.   The 15-year rate has not been this low since February 7, 2008, when it averaged 5.15%.  Five-year Treasury-indexed hybrid adjustable-rate mortgages averaged 5.82% this week, up from last week when it averaged 5.77%. At this time a year ago, the 5-year ARM averaged 5.89%.

According to the Mortgage Bankers Association, the one-year Treasury-indexed ARM averaged 5.09% this week, up from last week when it averaged 5.02%. Last year, the 1-year ARM averaged 5.50 percent.  “The housing market still hangs in the balance,” Nothaft said in a release. “On a year-over-year basis, after rising in both August and September, pending existing home sales fell 1.0% in October, based on figures from the National Association of Realtors. Meanwhile, conventional mortgage loan applications for home purchases over the week ending December 5th were up 2.0% from four weeks prior, but were still 51% below the same period last year.” Get informed when the interest rates change and get the most updated mortgage rate news online.

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