By: Ed Brophy
Synergy Mortgage
February 12, 2007
For those who missed Part 1 and it's associated comments.
The decrease in property values, combined with prepayment penalties, is making it very challenging for people to get out of adjustable rate loans. Mortgage Brokers and banks are seeing more loans fall through, particularly in markets such as Arizona and California where home values have softened. It just might be the tip of the iceberg taking us back in time to the late 1980's early 1990's.
During the heightened real estate market of recent years, many homeowners refinanced repeatedly to get a better rate, lower their payment, consolidate debt or pull out cash. Today mortgage rates remain relatively attractive, though they have moved up from their recent lows in early December. Most borrowers should be able to take advantage of these rates. The challenges for homeowners continue to increase as lenders tighten standards and the housing market continues to settle.
The challenges facing borrowers become more apparent when opportunities for refinancing are narrowing. Rates on 30-year fixed-rate mortgages dropped to their lowest levels in 14 months in December, but have recently drifted higher. Rates on 30-year fixed-rate loans currently average 6.500% up from 6.200% in early December.
This month, Wells Fargo began reducing by 5% the maximum amount it will lend to certain riskier borrowers in "declining" markets. Those markets, covering more than 150 counties in two dozen states, include parts of California, Florida, Michigan and Ohio.
The change reflects the tighter requirements of investors, I believe all lenders are experiencing the tightening of credit standards. Investors who buy mortgage-backed securities are growing more concerned about credit quality as notice of defaults have increased.
Citi Mortgage last month began requiring that borrowers who take out a "stated-income" loan sign an affidavit attesting to the fact that information about their income in the application is accurate and hasn't been modified by their mortgage broker or loan officer. The change is designed to protect the borrower as well as the lender, because borrowers may have trouble repaying the loan if their income is overstated.
Some borrowers have had to take a mortgage with a higher interest rate because their high debt load makes them a less attractive to the lender.
Ed Brophy
President
Synergy Mortgage
Toll Free: (888) 45-LOAN-5 ext. 1
Direct: (760) 409-9069
E-mail: ewbrophy@synergymortgageloans.com
Web: http://www.synergymortgageloans.com/
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