Foreclosures Rule as Mortgage Applications Retreat
July 9th, 2009
Despite strong measures being initiated by the Obama government foreclosures continue to rule as mortgage applications retreat.Last week the number of mortgage applications in the country fell sharply – since February 2009. The index of applications as noted by the Mortgage Bankers Association dropped by 19% coming down to 444.8 in the week that ended on 26th June. In the previous week it was 548.2. The refinancing index fall by 30% – it being the lowest since the last seven months. The index indicating purchases fell by 4.5%.
In May the rate of unemployment was the highest in the last 26 years. Increasing mortgage rates have stopped the homeowners from applying for refinancing. Simultaneously the foreclosure numbers are rising. This is making potential buyers shy away from the market as they are waiting for market prices to further drop. The National Realtors Association said that in May sale contracts rose by 0.1% compared to 6.7% in April.
Brian Bethune of HIS Global Insight said, “The run-up in mortgage rates is exacting a toll in terms of depressing mortgage applications. The economy is in a phase of attempting to find a bottom. Anything that comes in the way of that, like higher rates, is going to mean it takes longer.”
The number of people who said that they have plans to purchase a house within the following six months fell from 2.8% in May to 2.7% in June according to Conference Board in New York.
The rate of home mortgages increased over 5% in the 29th May week – it being the first time in three months. The number of applicants seeking refinancing fell to 46.4% from 54%.
The increase in mortgage rates spell serious trouble for those borrowers who have gone underwater – their loan worth being more than the value of the house. As such they are facing difficulties in refinancing. With interest rates having gone up they are losing the incentive to put up a fight to save their homes. More are opting to walk away from their houses and their loans.
The underwater victims comprise a large section of the defaulters and the steps being taken by Obama, although commendable, will hardly scratch the surface of the problem. The situation is being aggravated by increase in mortgage rates and continued rush of foreclosed houses into the market. With commercial foreclosures threatening the economic climate is gloomy with no signs of sunshine.
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- Increase in Foreclosures Prompting Class Action Legal Suits
- Avoiding Foreclosures by Walking Away From Loans are not Without Problems
- Foreclosure Assistance Being Taken on Tour by Housing Advocate
- Washington Mutual, the Symbol of the Foreclosure Crisis, Continues to be in Trouble
- The Consequences of not Paying Mortgages Can be Grim
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