Archive for May 18th, 2011

Are Mortgage Interest Rates on the Rise?

Mortgage Interest Rates Report for the 1st Quarter

When the month began, the rates remained the same as that of March end. For a 30-year fixed mortgage rate, the rate increased a bit to 4.87%. This rate does not include points and is compared to the 4.86 percent rate of the prior week. On a 15-year FRM, the median rate is at 4.10%. This is only a slight change from 4.09 percent. Moreover, a one year adjustable mortgage rate declined to 3.22% from its 3.26% performance compared to the previous week.

According to Freddie Mac, the 30 year fixed mortgage rate decreased to 4.63% by the end of the May 12 week. This is below the 4.71% of the previous week and 4.93% of the prior year. Moreover, the 15 year FRM is at 3.82%. This is a decline from the 3.89% of the previous week and 4.30% of the prior year. The average adjustable rate mortgage of the 5 year treasury index hybrid is at 3.41%. This is a decline from 3.47% from last week and 3.95% from the year earlier. In addition, the 1 year Treasury indexed ARM is at the average of 3.11%. Similarly, it shows a decline compared to the 3.14% of last week and 4.02% of last year.

Since the year 2009, Freddie Mac finally made a profit while Fannie Mae kept on sinking with losses amounting to about $6.5 billion in the first quarter of the year. Freddie can go on even without the assistance of the government. On the contrary, Fannie Mae will need around $8.5 billion to be able to keep itself in business. Fannie Mae is down and many homebuyers are avoiding ARMs because of the risks involved. It has potentially higher payments with the possible interest rates in the future according to the chief economist of Freddie Mac Mr. Frank Nothaft.

In the year 2004, the share of adjustable for all loans reached up to 36%. The lowest point is at 2009 when around 2% of the mortgages were ARMs. It is Nothaft’s belief that the increase in shares would reach about 9% this year. An adjustable rate mortgage rate is basically a type of loan with changing interest rates. ARMs usually begin with small monthly payments compared to mortgages of fixed-rates.

Can I reduce My Interest Rate With Loan Modification Programs?

Foreclosure rate is increasing but there are also increasing quantity of homeowners that were able to avoid it by the help of the loan modification program offered by the mortgage lender. Several homeowners are offered the home loan modification program, since lenders receive financial incentives once they offer it.

This program is financed by the government, and it obliges the lending bank to undergo the client on a trial period of three months. If the borrower can give payments on schedule, then the lender will consent the loan modification with reasonable payment. Common loan modifications made at present is financed by the Making Home Affordable Modification Program, developed by the administration of Obama. This agenda did not achieve traction rapidly as expected by the government.

At present, there are more than four hundred thousands home owners registered in three month testing period of the program. Normally, the homeowner will be offered condensed payments within three months, and then the lender will consent on a reduced rate on interest and lesser payment for at least five years. A few homeowners have interest charges as little as two percent.

There are almost one hundred thousand homeowners nationwide that are being assisted by the program since last June. Around fifteen percent of the homeowners are delayed on their payment. This program truly helped in putting calm to the storm of foreclosure. Lenders that are joining in the Home Modification Program, contain on their books around eighty four percent of borrowers who are delayed in their mortgage.

However, these lenders are just helping out less than fifty percent of delinquent borrowers, which is the problem that needs to be attended to faster than later. This program turned out to be a failure since it does not decrease the monthly payment of consumers, which is the major necessity of the homeowners.

A present, the loan modifications made involve reductions in interest rates and reduced monthly payments, extended duration of the loan from thirty to forty year loan and in some infrequent instances homeowners may see a major reduction. Even with the interventions of the government, there are plenty of struggling homeowners who are still not qualified for loan modification because of the increase rate of unemployment and the worsening economy. The home modification program may reduce a payment of homeowners to thirty one percent of their earnings.

Can Loan Modifications Offer Affordable Prices?

A loan modification is a stable adjustment in the conditions of the loan that is intended to help a borrower of becoming a defaulter. Loan modifications are typically used on credits for real property, even though people may petition also for changes to some other kinds of loans like student loans or car loans.

Usually, loan modification entails the retention of the existing lender and re-issuance of the loan after the approval of the loan adjustment. People normally apply for a loan modification, since they have troubles in doing their payments. The odds of getting the approval of the application are increased greatly by talking frankly to the lender prior to the failure of payments of the loan.

The borrower must approach the lender regarding the conditions of the loan in order that modification may be made before he/she becomes in the bad state with the bank or lending institution. However, a few lenders might consent in the renegotiation of the conditions of the credit after the loan is in default already to evade the foreclosure of the property.

The objective of this loan modification is generally to decrease the payments per month of the borrower to price that is affordable. This might be attained by regulating the length of the credit, interest rate or the balance. Loan modification plans are designed usually to lower down the payments that include the property taxes and insurance, to the amount below thirty five percent of the monthly income of the borrower.

To achieve this program, the borrower must provide records of his/her income and evidence of hardships that cause the payments unachievable at their present level. During the process of the loan, the lender may ask inspections of the real estate in addition to credit checks and requiring for supporting necessary documents from the borrower.

It takes time in making loan modifications, and it aids to establish a rapport with the loan officer during the progression of the loan application. Borrowers have to maintain the existing payments or may ask for an extension while the conditions of the modified loan are still working on. Since defaulting in the present loan may cause the rejection of the application of loan modification.

Borrowers must approach their lender right away if they have difficulty in repaying their mortgage. Several lenders are ready to deal with borrowers who ask their help regarding potential concerns before they become a problem.

Can Loan Modifications Create Sense?

Loan modification is a stable adjustment in the conditions of a loan. The main objective of this process is to reduce the payments of the loan to be more affordable to the borrower. This is different from refinancing loan or debt consolidation loan.

The refinancing loan can be prepared when the borrower likes to lock in her/his loan at a lesser interest rate. This procedure will enable him/her to secure into a 3, 5, or 10 year permanent term charge, which indicates his payments remains at the similar level the chosen term expires. The debt consolidation loan permits the homeowner to have the credit card and all other debts to be added to his/her mortgage. The resultant payment is lesser than attempting to create a payment to every creditor separately.

A loan modification does make sense when there was a change in the financial status of the homeowner. The borrower is asked to give proof of the decrease in his/her monthly income. Settling for a loan adjustment signifies that the borrower may avoid foreclosure and can stay in the house.

Any fees, interest, or principal owing to the credit during the modification of the loan is prepared to will possibly be added to the amount of the loan, in order that the lending institution does not have to get a monetary hit. The homeowner must remember that he/she will pay interest on these quantities also. With the new loan, a little portion of the main amount has to be paid for the initial several years, which will increase more to the total costs.

Loan modification creates sense. The lender does not have to do the process of foreclosure and to look for a buyer. No assurance is certain that the lending institution will be capable in recovering the total amount of the principal mortgage if the house is sold once the foreclosure has been done.

A loan modification agreement makes an excellent logic to homeowners also. It is a chance for them to regulate their housing costs in order that will cope with the new financial situation. Any change in the financial status may happen to anybody if they are not capable of working or become unemployed. Coordinating with the lending institution to arrange a feasible payment of the mortgage makes an excellent sense whenever the earning has dropped.