According to the Wall Street Journal, the Obama administration is redefining who can qualify for government assisted refinance programs. Apparently the original guidelines were not broad enough to help those most struggling with their loans.
After all, the first rules limited homeowners to having a 105 percent loan to value ration on their homes, yet according to Moody’s Economy.com, almost 30 percent of homeowners are underwater in their mortgages and many by much more than 5 percent. The new limit has been raised to 125 percent.
The revised rules come after only 20,000 borrowers received help under the program from March to June. The administration claimed it would be able to save up to 5 million homes from foreclosure at the outset of the initiative, a figure that was never likely to be achieved with the initial restrictions.
Meanwhile, interest rates are dropping and so are applications for mortgage loans. Freddie Mac announced Thursday that the average rate on a 30-year fixed rate loan fell to 5.32 percent, excluding fees, from 5.42 percent the previous week. Freddie had no explanation for the drop in rates this week, but they were likely due to falling yields on Treasury notes as investors worry that excessive government debt may result in inflation.
And mortgage application volume plummeted 18.9 percent in the latest week, according to the Mortgage Bankers Association Wednesday. Home purchase applications fell by 4.5 percent, but refinance requests plunged down by 30 percent, as mortgage interest rates have risen in recent weeks, much higher than their record lows from the spring.
Not a particularly good week in the mortgage markets, but good things could be just around the corner, right?
Gov’t Expands Homeowner Rescue Plan, While Rates and Mortgage Apps Dip