Low rates cause mortgage modification applications to surge

applications for mortgage modification have increased dramatically over the past few weeks. Market interest rates for mortgages have been falling, and individuals wisely feel it’s a good time to refinance instead of buy. Housing costs have increased in pockets, but since they’re declining, home sales have not risen very much as individuals are apprehensive in an unsure market. Resource for this article – Applications for mortgage modifications spike with low rates by MoneyBlogNewz.

Home loan activity increases with low rates of interest

Months of low interest rates have caused a spike in home loan activity, according to Bloomberg. During the week ending March 4, mortgage applications went up 15.5 percent which, since June 11, 2010, is the largest increase. This very same week last year was not as profitable. A 6.5 percent decrease was shown. The majority of the activity came from mortgage modifications applications which was 65.5 percent of the home loan applications which is up from the 64.9 percent the week before. The Mortgage Bankers Association does not make a difference between new home and existing home applications. Nevertheless, it reports that the purchase index went up 12.5 percent. The sale of existing homes makes up about 90 percent of all home sales.

Dropping home prices still

Home prices have declined 31 percent since costs peaked in July 2006, and there is rampant speculation that a double dip in real estate is possible. One of the leading proponents of the idea that a double dip is pending is Robert Shiller, co-founder of the Case-Shiller Index, according to CNN. Shiller believes home costs will continue to fall, and the truth that home sales dropped during January 2011 certainly means it is possible. Unfortunately for most middle class prospective home buyers, taking advantage of lower prices is going to become more difficult over the next few years as financing standards are about to change.

Will the 30 year home loan last?

There has been concern shown in the government recently. It wants Freddie Mac and Fannie Mae out. Fannie and Freddie create capital for lenders by purchasing mortgages and selling them to investors, keeping the home loan industry flush with cash for new loans. Should the mortgage houses be done away with, the 30-year fixed mortgage might go with them, according to the NY Times. It is very risky to lend a 30 year loan with fixed interest since the future can hold several things. Staying in a home for 30 years and paying down a loan is something individuals rarely do. Loan providers are likely to be more interested in changing interest with the industry soon. That means adjustable rate mortgages will likely become what is normal in the next 10 or 20 years. Bigger down payments and higher interest rates will probably occur. This is just part of the changing industry.

Articles cited

Bloomberg

bloomberg.com/news/2011-03-09/mortgage-applications-in-u-s-rise-16-biggest-gain-since-june.html

Mortgage Bankers Association

mbaa.org/NewsandMedia/PressCenter/75923.htm

CNN

money.cnn.com/2011/03/03/real_estate/housing_buy_or_not/index.htm

New York Times

nytimes.com/2011/03/04/business/04housing.html?pagewanted=1&_r=1