Amidst Foreclosures; Mortgage Rates Have Dropped

The US economy is on a tailspin what with unemployment at its peak and people losing jobs thick and fast. Hence, people with even very good credit history are faltering on mortgage payments. Subsequently, foreclosures have become common.

Now the Federal government has come up with a foreclosure prevention scheme to help troubled homeowners. As part of the trillion-dollar scheme, mortgage rates have been dropped. In fact, this is at the lowest level since the ‘40s.

However, the banks are imposing very strict regulations. As a result, many homeowners who could opt for refinance have been left out in the lurch. This credit crunch could ultimately hurt not only property owners but would have broader economic repercussion. Employment and consumer spending have started to improve after two years of intense lows.

It may be mentioned that refinancing could save consumers dollars that they could otherwise spend on other things. That could even be spent on paying debt. The spending of extra cash would spur economic growth. It would also prevent foreclosures in the long run.

Applications for refinance have dropped by 57 per cent. In Ohio, the problem plaguing most homeowners is that they owe a greater amount than what their houses are worth. This situation is not unique to Ohio. When the bubble burst, millions across America were stuck in the rut.

Lenders, on the other hand, say that borrowers who paid very little in cash are not eligible for refinancing. Todd Helpbringer of Helpbringer Mortgage revealed that owners can no longer get 100 per cent of refinancing for a home. Those days are just over. Helpbringer also observed that many homes have a negative equity. But the owners are in good financial condition. They are also current on payments.

Helpbringer said that a person who has a 20 per cent of equity of the value of his house can get a fixed rate mortgage with less than 5 per cent interest rate. He will be refinancing 30 such deals.

Guy Cecala, the publisher of Inside Mortgage Finance magazine says that the government has really brought down mortgage rates but not many can take advantage of that. However, experts believe that such low rates will not last for a long time. That was possible because of the $1.25 trillion program. However, that would expire in March and Federal leaders have said that the program may be scrapped. This has come as a disappointment for many.