The pressure is on lenders to modify mortgages but lenders are not giving easy handouts. There are varying degrees of distressed borrowers. Modification only makes sense for a lender if the borrower cannot make payments without it, but will be able to keep up with a lower mortgage payment.
While Washington policy makers are incentivizing lenders to perform mortgage modifications, not every homeowner will receive one. Lenders evaluate the long term potential of repayment on the new loan. Some homeowners will still fall behind on their payments even after receiving the temporary band aid because of income instability and may lose their homes one way or another. A modification that just delays the inevitable is more expensive for the lender. Some homeowners who (may even currently be delinquent but) can catch up without a modification, have asset reserves, or could lower their lifestyle and sacrifice luxury items will find their lender is less than willing to modify the terms of their mortgage.
In a blog written by David G. Kittle, chairman of the Mortgage Bankers Association, "Everybody loses when a home goes to foreclosure. The homeowner loses a home. The bank loses a customer and a significant amount of money by having to take back the home and cover costs of resale, taxes and interest. The community as a whole loses."
We will keep an eye on Washington over the coming months to see how this all plays out.
Interest Rates for Monday, 7/28/2009
Mortgage prices are lower (interest rates rates slightly higher) this morning ahead of this week's large Treasury note auctions, which will take place over this week.
Conforming Conventional 30Yr Fixed 5.500%
Conforming Conventional 15Yr Fixed 4.875%
Conforming Conventional 5/1 IO ARM 4.500%
FHA 30Yr Fixed 5.500%
* Above Conventional rate quotes are as of 7/28/09 on a Conventional $165,000 loan amount, primary residence at 80% loan to value, with a 720 FICO score. APR includes $1,200 in lender fees and 980 in title charges (title charges may vary). FHA Quote assumes a $125,000 loan amount and a 680 FICO score, and a 96.5% LTV. Documentation of income and assets required. No origination or discount points.