Last week, the number of Americans applying for mortgages dropped 13.7 % when compared to the week prior, according to a report released today by the Mortgage Bankers Association (MBA). The study showed refinance mortgage applications fell nearly 17 %, while applications from those looking to purchase a home dipped 7.6 %.
According to Quicken Loans Chief Economist Bob Walters, the decline may be due, in part, to people waiting for the best possible interest rate.
“As we get deeper into the fall season, we find more people focused on pumpkins and apple orchards than on home finances,” Walters said. “However, consumers must be mindful that the first-time homebuyer credit will soon expire and nobody is sure how long the Fed will keep its funds rate at its current level. Consumers waiting and playing the rate game may be in for a fright if they do not take action soon.”
PMI Mortgage Insurance Co. approved 93% of its requests for a mortgage workout through the Home Affordable Refinance Program (HARP).
HARP allows nearly 5m homeowners with loans owned or guaranteed by Fannie Mae (FNM: 1.23 0.00%) or Freddie Mac (FRE: 1.39 0.00%) the opportunity to refinance into more affordable monthly payments.
PMI, the private mortgage insurance company and subsidiary of The PMI Group (PMI: 2.67 0.00%), anticipates a growing support for the program as more servicers complete the complex systems changes needed to implement the program, according to a PMI report. Only current loans qualify for HARP, which represents a transfer of existing mortgage insurance coverage to the refinanced loan.
Probabilities of a workout on PMI-insured loans vary across the country, according to the report. For example, delinquencies in North Carolina are twice as likely to achieve a retention workout than delinquent loans in Florida.
The report also states that by the end of 2009 PMI will have participated in 30 events nationwide to supplement the efforts of its servicers to help families find alternatives to foreclosure. PMI pointed out that more than half of the people who slip into foreclosure never contact their lender to discuss options or ask for help, according to a 2008 study from Freddie Mac.
For the events, PMI seeks out borrowers who have not contacted their lender and navigates them through the loan modification process, according to the report.
In year-to-date 2009 through August, PMI reached out to more than 33,000 distressed borrowers with its initiatives.
? Here’s a mortgage for you. If you are not in a good position to take an equity line of credit on your home, because you have not built enough equity or a poor credit situation is making bankers steer clear of you, altogether, there is another option — the cashout refinance. This loan does what the equity line does in most cases, but it is not an interest-only loan, and it has conventional mortgage terms. The advantage for people without enough equity and less than perfect credit is you can get at what little equity you do have by refinancing to a new conventional mortgage, taking cash out at the close of the loan.
Here’s how it works.
Let’s assume you have a home valued at $110,000. You owe $86,000, and you would like to get $8,000 in cash to pay off two small credit cards with high interest and to do some minor rehab work on you home. With your B credit rating, banks won’t give you 100 percent of your equity or even 95 percent, so an equity line won’t work.
However, you will qualify for a 90 percent cashout refinance loan. In order to keep your costs down, you combine this strategy with another one, an adjustable rate mortgage, and this helps you maintain a low monthly payment.
You need about $4,000 to close the loan (remember it’s a conventional mortgage with all the closing costs — equity loans can be closed with no costs at all). The closing costs, though, will be financed into your new loan, so you don’t have to come out of pocket with any money.
So, you get a new mortgage for $99,000, which pays off your old fixed rate mortgage loan, covers the closing costs and, best of all, leaves you with $9,000 in cash — $1,000 more than you actually need.
The ARM rate is probably one percent less than your old fixed rate, so your payment will stay close to what it was. Plus, you eliminate monthly credit debt, so you have created even more cash! This is just an overview of a very powerful loan.
Mark Barnes is the author of the new novel, The League, the first work of fiction, based on fantasy football. He is also an investment real estate and home loan finance expert. Learn more about his suspense thriller at http://www.sportsnovels.com Get his free mortgage finance course at http://www.winningthemortgagegame.com
