Home sales reports show market is still very soft
February 26, 2009
Two major reports released this week show that the U.S. housing market is continuing to deteriorate. On Wednesday, the existing home sales report showed a contraction of over six percent, on Thursday the new home sales report showed a decrease of over 10% for the month of January. The combination of these two reports are a clear indication that the U.S. housing market will continue to move lower in the near future. As the jobs market has contracted and consumer confidence has dropped, the housing market has continued to suffer, despite historically low mortgage rates. The government has attempted to prop up the housing market by rolling out a tax rebate of up to $8,000 and working with the Fed to try and keep the secondary mortgage market alive to ensure that mortgage rates remain low. The largest challenge the market faces will be the changes in the mortgage lending area and the additional underwriting restrictions that have arisen following the fallout in mortgage banking. Lenders have tightened their guidelines on both primary residence and investment properties. The ability to qualify for a low interest rate will be greatly influenced by your credit score and the properties loan to value.
Government rolls out new foreclosure relief program
February 18, 2009
President Obama unveiled a new government approach to try and slow down the foreclosure crisis and provide stability to the housing market today. The government is going to try to work with agency lenders (Fannie Mae & Freddie Mac), national banks such as Citigroup, Bank of America, & JP Morgan Chase, plus hundreds of other mortgage lenders and consumers to try to collectively work towards providing a working solution to end the foreclosure epidemic.
The governments main focus will be in helping consumers who no longer have equity in their homes refinance their mortgage at historically low interest rates. The second major component will be incorporating a borrowers debt to income ratios into qualifying for a loan modification. This process will allow consumers who are most likely to face potential home foreclosure over the next twelve months to refinance their homes at a low fixed interest rate for the next five years, even if they do not have equity in their homes. Consumers will also have the opportunity to request a lender to reduce the principle balance of their home mortgage. Ther is no guarantee that the lender will reduce the principle balance, but if they agree to do this they will have the support of the government to help subsidize this potential loss.
The role of Fannie Mae & Freddie Mac will continue to grow as both entities have been approved to increase their respective balance sheets to nearly 900 billion dollars. This increase is designed to help increase the lenders ability to continue purchasing the mortgage loans from banks and offer consumers historically low interest rates to help stabalize home prices and encourage home refinancing.
