Low Mortgage Interest Rates, “Out of Reach?”

Although the average 30-year fixed-rate mortgage has been below 4% almost every week this year, experts say few home owners or buyers qualify for that rate.

Using data from CoreLogic, The Los Angeles Times calculated that about 69% of home owners who had mortgages as the second quarter of this year ended had rates of 5% or higher, and about a third of those owners had rates above 6%.

Fed’s taking steps to encourage lower mortgage rates? Economists say those actions may have limited results if these low rates continue to stay out of reach for many home owners. “The irony is the people who need the help the most have not been helped — the people who are underwater,” says Nobel Prize-winning economist Joseph Stiglitz.

Many industry observers agree that lower mortgage interest rates would free up income for underwater home owners and thus stimulate the economy. Along with the Fed’s recent action, some bills have been introduced into the U.S. Senate with the aim of assisting both home buyers and home owners interested in refinancing, but may linger as the November elections approach.

Source: “Two-thirds of Americans with mortgages pay 5% interest or higher,” The Los Angeles Times (9/18/2012)

Underwater Home Owners Help Lift Home Prices?

Interesting concept to think about. Home owners who owe more on their mortgage than their home is currently worth actually may be helping to drive up home prices in certain markets, suggests CoreLogic in its July MarketPulse report.

These underwater home owners, who can’t afford to take a loss on the sales price of their home, are refusing to sell. As such, inventories are shrinking, giving buyers fewer options to choose from and lifting prices, according to the report.

Housing markets that are seeing some of the highest appreciation are also in states that have some of the highest number of underwater homes, according to CoreLogic.

“Negative equity is keeping many potential sellers out of the market, which keeps a lid on inventory and combined with the reduced flow of REO properties has led to much tighter market conditions for lower priced properties, particularly in the hardest hit markets,” according to CoreLogic in its report.

Source: “CoreLogic: Negative Equity Pushes Prices up in Certain Markets,” HousingWire (7/16/12)

“Troubled Asset Relief Program” is Falling Short!

A “hardest hit” fund to help 18 states that were most battered in the mortgage crisis isn’t meeting its goals of helping underwater home owners, according to a report by the Special Inspector General for the Troubled Asset Relief Program (TARP).

Three percent of the $7.6 billion in the Hardest Hit Housing program has been used by the states since Dec. 31, 2011, but most of those funds so far have gone to help the unemployed and not underwater home owners, according to the report.

According to the report, more than 75 percent of the funds have gone toward shoring up states’ unemployment programs, such as by paying the mortgages of unemployed home owners. But the money was supposed to also be used for loan modifications and principal reductions to help underwater home owners as well, the report says.

The 18 states participating in the hardest hit program were selected due to having the highest number of home owners in negative equity and unemployed.

The Treasury department maintains the fund is serving its purpose. The program provides states the ability to “leverage their unique understanding of the conditions in their communities to create effective, locally-tailored programs,” Timothy Massad, assistant secretary for financial stability, wrote in a letter to Romero about the fund.

Source: “Watchdog Blasts Housing Program for ‘Hardest Hit,’” CNNMoney (4/12/12)