It’s About Time Residence Loans Heading In The Right Direction
It looks like happy days are here again for the home loan borrowers. Interest rates are falling with average fixed rate for 30-year mortgages falling to around 4.75%. Home lending this 2009 ranked fourth highest on record, reaching $2.78 trillion, according to the Mortgage Bankers Association (MBA). This forecast by the MBA was revised upwards from its earlier estimate by more than $800 billion. The nice thing is there are lots of places to look for things like home loan advice.
The higher estimate was prompted by the Federal Reserve’s recent pronouncement on its programs to purchase Treasury bonds and mortgage-backed securities, as well as Fed refinance programs for Fannie Mae and Freddie Mac. This Federal Reserve measures came on the heels of the launching of Homeowner Affordability and Stability Plan by President Barack Obama early this year. There are three components to the Obama plan. First is authorization of $75 billion as subsidy for the restructuring of troubled home loans. Focus on loan restructuring is the second, under which a framework for clear and consistent guidelines shall be developed. Thirdly, the plan calls for overhauling the US bankruptcy laws so that judges are empowered to force mortgage rate reduction by lenders and bankrupt homeowners are allowed to write down principal on mortgages. If you’re having trouble with a home loan just search “foreclosure rescue” on google and you can find a lot of information.
Washington, no matter which administration is in power, has always been sensitive to mortgage foreclosure. The resources expended in foreclosures is an initial concern entailing representation fees for lawyers and bailiffs, surveyor fees plus the time spent in the hearings. Each foreclosure has been estimated to cost the government and parties involved between $50,000 and $80,000. Another is the emotional cost as foreclosures are akin to dispossessing homeowners and family evictions. Subconsciously, foreclosures are also associated with the homeless. Another thing people should really look into is short sale.
On the positive side, home lending and hence homeownership are encouraged by government because the homeowners are expected to look after their property and its locality better than tenants. This is also one of the primary reasons in the bailout measures on troubled mortgages by President Obama as implemented by the Fed recently. Another government incentive for homeownership is to allow taxpayers to claim mortgage interest deductions from their taxable income.
Another stimulus for lenders to disburse home loans to borrowers are the government subsidies to the lending and guarantees of Freddie Mac, Fannie Mae, Ginnie Mae and other similar government agencies. The Fed’s recent funding increase in its purchase programs for treasury bonds and mortgage-backed securities is a reflection of such a stimulus to home lending. Homeownership is likewise fostered by the postponement of capital gains tax which is allowed on all home sale.
Despite these sweeteners, several other things have to happen for home lending and homeownership to really take off. There has to be stabilization in employment in order to realize a real increase in home sales overall, according to industry observers. What is expected is that the funding increase for home lending this year would only go to refinancing home loans estimated at $1.96 trillion this year while purchases would only be at $821 billion. Consequently, home sales are actually expected to decline by 2.5 percent to 4.8 million units, says the MBA.
