Category — Mortgages

The Federal Trade Commission alerts mortgage shoppers to be wary of certain terms in mortgage ads.  For instance, a low “Fixed” Rate: Ads that tout a “fixed” rate may not tell you how long it will be “fixed.” The rate may be fixed for an introductory period only, and that can be as short as 30 days. When you shop for a mortgage, you need to know when and how your rate, and payments, can change. Full Story.

Home prices are falling at an alarming rate and the rate is accelerating. Full Story.

The shear number of homes on the market that have been dumped by speculators is just now being assessed. Many investors purchased multiple units with no money down and no documentation as to their ability to pay. As these empty homes are jettisoned, the prices of neighboring dwellings are depressed.

It’s going to take a year or two for this glut of abandoned homes to be assimilated into the normal mix of real estate investments. In the meantime, prices will continue to decline until the cost of the monthly mortgage is more in line with the cost to rent.

The Feds are touting a temporary freeze on teaser rate loans which are scheduled to reset soon. Full Story. However, the proposed plan excludes those home loans that piggy-backed a second to cover the missing down payment.

Also excluded are the no-doc loans where evidence of income was not required. Excluding these two categories will leave much of the sub-prime loans in jeopardy.

The home loan industry will agree, in principle, to go along with whatever plan is put forth. But in reality, few re-sets will occur.

What’s really needed is strong federal regulation of the financial sector beginning with credit cards and extending to home mortgages.

Past history including the Savings and Loan industry melt down and now the sub-prime problem demonstrates that without federal oversight, Wall Street will do what ever it takes to make a fast buck.

Under the tentative plan, adjustable interest rates would be frozen for some homeowners facing foreclosure before their loans become fixed at a higher level.

Under such a scenario, the investors who bought mortgage securities tied to these sub-prime loans likely would get lower returns than they had bet on. Full story

Many consumers who already have lost their home to foreclosure are dismayed at the government action now to freeze mortgage rates to avoid massive defaults on home loans. One man interviewed in a Reuter’s story put it this way, “They’re trying to keep the you-know-what from hitting the fan until after the election,” he said. “The rhetoric is ‘We’ve got to help homeowners,’ but the reality is it’s designed to help the fat cats, Wall Street. It’s bailing out the lenders.” Full Story.

Of course, the man is right. This is not about helping the little guy, it’s about protecting those who have already made a fortune on an ill conceived mortgage shell game. The culprits hope to avoid scrutiny from State Attorney Generals looking for potential fraudulent activity.

Reports from Reuters show demand for home loans surged as 30-year fixed-rate mortgages, excluding fees, averaged 5.82 percent, down from the previous week and its lowest since the week ended September 16, 2005. Full Story.