Applications boom for mortgage modifications due to low rates

Mortgage applications have risen over the past month, largely thanks to more people applying for mortgage modification. The time is nigh for a good refinancing, as home loan rates are near record lows. Sales of homes increased as well. However, the sales increases have been far more modest, as few people are confident enough to purchase homes with falling values.

Low interest rates fuel spike in home loan activity

Bloomberg states that home loan activity has gone up due to the low interest rates. Mortgage applications rose by 15.5 percent during the week that ended March 4, which is the largest increase in mortgage activity since June 11 of 2010. Home loan applications dropped 6.5 percent during the exact same week in 2010. About 65.5 percent of the mortgage applications were for mortgage modifications though. That is up from the week before when it was 64.9 percent. The purchase index went up 12.5 percent in one week also even though the Mortgage Bankers Association doesn't make a differentiation in the existing and new home applications. Existing homes account for most home sales. Currently 90 percent of home sales were already existing homes.

home costs nevertheless drop

Since the peak in 2006, home prices have gone down 31 percent while several expect a double dip to occur. 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 Jan. 2011 certainly means it is feasible. Getting the lower prices is something most middle class Americans may not be able to do. The standards for financing may soon change.

Freddie and Fannie might take 30 year home loan with them

There has been concern shown in the government lately. It wants Fannie Mae and Freddie Mac out. Freddie and Fannie create capital for loan providers by purchasing mortgages and selling them to investors, keeping the home loan industry flush with money for new loans. Should the home loan houses be done away with, the 30-year fixed home loan 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 many things. Usually individuals will not stay in a home for 30 years. That means the loan will not get paid off. Adjustable rate mortgages may become more normal in the next decade or 2 because lenders will want to be able to change the interest. Bigger down payments and higher rates of interest will most likely take place. This is just part of the changing industry.

Information from

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