Weekly Recap (9/13/10-9/18/10)by Tim Manni
As the economic crisis wages on, I’m curious to know if your thoughts on strategic defaults have changed. Late last year we divided the walking away argument into two categories: emotion and logic. While some borrowers felt as though they had a moral obligation to keep paying their mortgage, others felt as though the decision to walk away is a business decision, nothing else.
The results of a recent survey from the Pew Research Center reveal a similar divide in sentiment. While the majority surveyed still feel that it’s “unacceptable” to walk away, 36% said it was acceptable to walk away “at least under certain circumstances.”
The innovative zero down payment FHA home purchase program was recently introduced by The Lending Company of Phoenix, Arizona. In order to meet the FHA required 3.5% down payment the borrower receives a 2.5% gift from a non-profit organization and the remaining 1% can be gifted from a family member.
But now it seems that 3.5% down is still too high for some potential FHA borrowers. A zero-down FHA loan has been made available to borrowers in one of the states hardest hit by the housing crisis.
Lenders foreclosed on a lot more homes last month — 3 percent more than the month prior and 25 percent more than they did a year ago.
The increasing number of foreclosures was evident in the mixed, cautious responses Fannie Mae received in their latest housing survey.
Are you making monthly payments on an underwater mortgage? Have you been denied a refinance just because you’re underwater — even though you continue to make your monthly payments on time? If so, you’re going to want to read our Value Gap Refinance plan.
Last week we posted some comments and reactions from readers concerning our solution to help underwater borrowers refinance. Since then, the comments haven’t stopped rolling in.
Here are some more comments we’ve received since last week…
A newly constructed credit which seeks to foster immediate market support — producing more sales early in the offer, rather than at the deadline — would arguably have greater benefit for the market as a whole.
A concept might work like this: A year-long tax credit offer, which starts at $12,000 and falls by $1,000 per month until it naturally ends a year down the road. Given the extraordinarily weak sales environment at present, it is likely that some — but relatively few — borrowers will want or be able to take immediate advantage, so the actual cost to the government might be minimal. By the time month 11 is reached, the credit is only worth $2,000, so to the advantage of rushing to get a deal in under the deadline would be slight, and the program would come to a soft end without the huge distortion in demand we have seen from the past two credit expiries.
Interest rates will rise when the economy shows some consistent signs of recovery. Interest rates will rise when “fight to safety” investments become less favorable in the eyes of investors. Interest rates will rise when the yields on those safe investments — such as the 10-year Treasury — aren’t high enough to keep investors interested:
Mortgage rates are of course one of those market interest rates, influenced by the yields on risk-free investments such as Treasury securities. Spreads between Treasuries and mortgages had widened appreciably in recent weeks, owing more to a desire for safety than a disdain for mortgage investments. The yield on the 10-year Treasury has risen by about 15 basis points (0.15%) over the last [few] weeks, but only a little of that increase has passed through to mortgage rates, which hold near record lows.