Mortgage Lending Made Simple

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If you are considering refinancing your mortgage, now may be the time rather than waiting for Fed to lower rates. If you wait, you may be in for a rude surprise. When most people hear that Fed is considering another cut to interest rates, they think that means that mortgage rates will be going down. That may not be the case as explained in this article from CNN Money.

“NEW YORK (CNNMoney.com) — Bond prices fell Thursday after Federal Reserve Chairman Ben Bernanke said the U.S. economy will continue to struggle and suggested that the central bank is willing to cut interest rates further.”

While a Fed rate cut does usually result in a reduction in Consumer Interest Rates, it generally has the opposite effect on Mortgage Rates. Bond Traders see lower interest rates as a stimulus causing Inflation which is BAD for bonds and draws more money out of the Bond Market and into the Stock market. This effectively makes the yields on Bonds increase which drives Mortgage rates higher. With Fed Rate cuts on the horizon, it might be time to go ahead with your refinance plans.

Lenders aren’t humming Jingle Bells when they talk about Jingle Mail. In an article today, CNN reports that so many people have turned their keys in and walked away from their mortgage that they have a new term for it: Jingle Mail. With the decrease in home values and increasing interest rates, many are making the decision to cut their losses and turn those keys back into their lender.CNN reports that

“The trend of walking away is most pronounced among real estate investors, according to Jay Brinkman, an economist with the Mortgage Bankers Association (MBA).

But families are doing it too. “If they have to stretch to make mortgage payments for a home that will not recover its value, then yes, they may walk away,” he said.

Often they chose hybrid adjustable rate mortgages (ARMs) that came with low initial payments. After a few years, interest rates on these loans reset higher. But buyers thought they could count on the increased value of their homes to refinance into affordable, fixed-rate loans.”

CNN also states that there are some who are choosing to pay consumer debts, such as credit cards and auto loans while letting their mortgages fall behind and some who can afford to pay are choosing foreclosure due to the declining value.

You can read the complete article here.

Other Recent Mortgage News:

Time to Refinance?

Effect of Raising the Fannie Mae/Freddie Mac Loan Limits

Legislative Update on FHA Loan Limits

According to Sandra Block from USA Today, the lower interest rates are creating a surge of refinance applications before rates rise.

“Some borrowers may be tempted to hold out in hopes that rates will fall even more. But that’s risky, says Bob Walters, chief economist for Quicken Loans. Long-term mortgage rates are near historic lows, he notes, which means they’re more likely to rise than fall. The Federal Reserve reduced short-term rates by half a point last week and signaled that it might cut rates even more in the next few months. But while Fed cuts typically lead to lower rates for credit cards and car loans, the Fed doesn’t influence long-term mortgage rates. These rates track 10-year Treasury notes, which tend to respond to changes in the economy. “

If you have been considering refinacing your home mortgage loan, now may be the time.