Refinance Applications Flooding Lenders
Image via Wikipedia
TGIF! It was an interesting week. The stock market was down. Then it was up; then down again; finally closed the week up slightly. The republicans had a debate. Rick Perry wants to be the next President. And finally some news that we can be upbeat about. Interest rates fell through the floor, and straight to the basement. The 30 year fixed is at 4.32%. And the 15 year fixed set a record at 3.5%.
All this news about interest rates started people talking about refinancing the mortgage. A broker friend said that his phone was ringing off the hook. And lenders are starting to see an increase in the volume of applications.
Now, is this the start of a housing recovery? Well, not so fast. There are two things wrong with this picture. Number one, how many of these applications will be approved for a mortgage? Number two, what will the appraisal say about the value of the house?
I believe that less than half of these application will be approved. Banks are tight on credit. You can’t blame them. Look at all the litigation flying around over “bad loans” and other consumer issues. AIG is suing Bank of America for $10 billion. Bank of America just settled with HUD for $10 million. Bank of America settled a class action suit over fees, for $410 million. Wells Fargo sued by the Justice Department for discriminatory lending. Wells paid $85 million so far. And investors are lining up to get their day in court. Their position is that the banks sold them “bad loans”. So, lenders are looking for squeaky clean loans.
On the issue of appraisals, this could be a nightmare. Homeowners would say that they are aware that house values have plummeted across America. But they would argue with the appraiser about the value of their homes. “No way, my price didn’t drop that much. I spend a lot of time renovating and fixing my house”, they would plea. Because of the drop in value, many homeowners will not be in a position to refinance at these historic low rates.
Let’s pray that we can get some of the foreclosure houses off the market.
For more articles on mortgage news, tips and advice, please visit:
Related articles:
Foreclosures: Squatters rejoice in new found homes.
Loan servicing mistakes every homeowner should look for.
Add comment August 12th, 2011
