Home Account Mortgage Pulse for the Week of May 4, 2009
Mortgage rates are still near historic lows yet hardly any applicants actually qualify for those rates due to a variety of additional points and fees that we’ve covered in this space before. This effect is masked, to some extent, by the fact that these additional costs are generally NOT mentioned in the weekly report of average mortgage rates issued every Thursday by Freddie Mac. Those rates — as low as 4.48 percent in the last report for a 15-year fixed mortgage — generally show just the core rate and not the various adders. So you can have great credit and qualify for that 4.48 rate, but actually GETTING it is something else altogether.
There is also a fight brewing between the government, banks, and mortgage security holders over provisions in new legislation that would immunize loan servicers from lawsuits by investors in mortgage-backed securities. The government wants to encourage loan modifications, allowing these to happen almost automatically in cases of bankruptcy, where they were traditionally not allowed. To date all mortgage modification programs have been aimed mainly at those current on their loans which includes an entire class of homeowners who don’t really need loan modifications to stay in their homes. So the government is doing the right thing, so to speak, but with typical governmental lack of finesse.
The banks hated this idea until they figured out that it would allow them to reconfigure $441 billion in second mortgages THEY hold. Citibank was the first to see this logic. So the banks can improve their positions as loan holders, can improve their positions as loan servicers, but of course the mortgage security investors hate this and the government sits in between. The result of this conflict will only be more delay and confusion in the marketplace, neither of which is good for homeowners. Sorry.
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