Who is taking advantage of drop in mortgage rates?

While Canadians have enjoyed the lack of foreclosure activity going on in the USA the tightening on refinacing requests could occcur here as well. I feel it is opportune to look at debt consolidation now - before any tighteneing happens.

Neil McJannet

Mortgage Crisis
Monday, 16 August 2010 18:33


By Elizabeth Martinez

Miami, FL-Although several incentives are out there for home buyers to take advantage of, many of these efforts are wasted as other factors are strongly affecting today’s housing market.


Last week, U.S. mortgage rates fell for the eighth consecutive week to a record low of 4.44% after the Federal Reserve said it would buy more government debt to help the economy recover. Help seems to be out there for people to use, but somehow it is always missing those that need the help the most.


When mortgage rates drop, this creates an opportunity for homeowners to lower their monthly loan payments by refinancing their existing loans. Some are taking advantage of this, and are definitely trying to lower their payments. The Mortgage Bankers Association reported last week that 78.1% of all mortgage applications fell under the refinance category, up from 58.7% in April. However, this number still means that there is an amount of homeowners filing out the paperwork who are only getting a rejection letter in response.


When homeowners apply for refinancing, they are subject to many limitations. The mortgage association does not specify how many of those who apply for refinance actually get approved, and mortgage brokers say many homeowners are ineligible. The creation of the Home Affordable Refinance Program (HARP) last year was meant to help homeowners get new loans, but reports indicated that the program has only resulted in a small fraction of the refinancing the government aimed to enable.
"The qualifications are so much stricter," says Dale Robyn Siegel, CEO of Harrison, NY-based Circle Mortgage Group and author of The New Rules for Mortgages. "Banks have realized that even the best of borrowers have lost their jobs. A lot of people are really tapped out."


Among the limitations for homeowners is a range of qualifications that include a higher FICO score of at least 620, a higher down payment and lower monthly debt service ratios. Additionally, banks have started charging higher fees. Furthermore, lenders will probably not give a loan of more than the appraised value of a home. The struggling housing market has left an estimated 15 million U.S. mortgages -- one in five -- worth more than the value of the homes they helped purchase. These all lead to only one conclusion: The 4.44% rate is unfortunately, one that most Americans cannot take advantage of.