It looks like happy days are here again for the home loan borrowers. Interest rates are falling with average fixed rate for 30-year mortgages falling to around 4.75%. According to the Mortgage Bankers Association (MBA), home lending could reach $2.78 trillion for 2009, which would be the fourth highest on record. This forecast by the MBA was revised upwards from its earlier estimate by more than $800 billion. The nice thing is there are lots of places to look for things like home loan advice.
The upwards adjustment reflected the recent announcement by the Federal Reserve on its purchase programs for Treasury bonds and mortgaged-backed securities, and on the Fed’s Fannie Mae and Freddie Mac refinance programs. The Federal Reserve’s move dovetails the unveiling early this year of the Homeowner Affordability and Stability Plan by President Barack Obama. There are three components to the Obama plan. First is authorization of $75 billion as subsidy for the restructuring of troubled home loans. The second calls for the establishment of a framework for clear and consistent guidelines for loan restructuring. An overhaul of US bankruptcy laws is the third, seeking to empower judges to force lenders to cut mortgage rates and allow bankrupt homeowners to write down mortgage principals. If you’re having trouble with a home loan just search “foreclosure rescue” on google and you can find a lot of information.
Mortgage foreclosure is a sensitive issue for anybody sitting in Washington. The resources expended in foreclosures is an initial concern entailing representation fees for lawyers and bailiffs, surveyor fees plus the time spent in the hearings. Each foreclosure has been estimated to cost the government and parties involved between $50,000 and $80,000. Another is the emotional cost as foreclosures are akin to dispossessing homeowners and family evictions. Subconsciously, foreclosures are also associated with the homeless. Another thing people should really look into is short sale.
On the positive side, home lending and hence homeownership are encouraged by government because the homeowners are expected to look after their property and its locality better than tenants. This is also one of the primary reasons in the bailout measures on troubled mortgages by President Obama as implemented by the Fed recently. Homeownership in the US is also encouraged by allowing taxpayers to deduct mortgage interest from their taxable income.
Lenders are likewise encouraged to grant home loans to borrowers through the subsidies that the government extends to the guarantees and lending of Fannie Mae, Ginnie Mae, Freddie Mac and other similar institutions. The Fed’s recent funding increase in its purchase programs for treasury bonds and mortgage-backed securities is a reflection of such a stimulus to home lending. Encouraging homeownership is also fostered by allowing postponement of capital gains tax on every home sale.
Despite these sweeteners, several other things have to happen for home lending and homeownership to really take off. There has to be stabilization in employment in order to realize a real increase in home sales overall, according to industry observers. What the current situation is likely to lead to is that much of the funding increase would only go to the refinancing of home loans amounting to $1.96 trillion, leaving purchases at $821 billion. Consequently, home sales are actually expected to decline by 2.5 percent to 4.8 million units, says the MBA.
