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Mortgage burden dips as interest rate slips

Refinancing a home mortgage is generating big-time benefits for many homeowners.

That was determined in a study by Freddie Mac of refinance transactions in the last quarter of 2012.

“The results of our refinance analysis show homeowners who refinance continue to strengthen their fiscal house,” The Freddie Mac report stated.

During the study period, 84 percent of homeowners who refinanced their first-lien home mortgages either maintained about the same loan amount or lowered their principal balance by paying-in additional money at the closing table. That’s just below the record 85 percent in the fourth quarter of 2011.

The average interest rate reduction was about 1.8 percentage points or a savings of about 33 percent in interest rate, the largest percent reduction recorded in the 27 years of analysis.

The net dollars of home equity converted to cash as part of a refinance, adjusted for consumer-price inflation, remained at a low volume. In the fourth quarter, an estimated $8.1 billion in net home equity was cashed out during the refinance of conventional prime-credit home mortgages.

Property-value change, loan age and rate reduction differed between refinancings under the Home Affordable Refinance Program (HARP) and other refinances, the report noted.


Q: When will the tightened mortgage loan

requirements loosen up?

A: They may be loosening now. Here’s an interesting quotation from the Federal Reserve:

“Credit continues to become somewhat more available throughout the economy. We found a general loosening in the requirements to get commercial and industrial loans, and that underwriting standards for some prime mortgage loans has eased a bit, as well.

“Since the mortgage market continues to be dominated by the rules of Fannie, Freddie and the FHA, we can only surmise that this reflects some easing in portfolio-based lending standards, largely for jumbo mortgages, ARMs and the like.”


Q: Is it true that the FHA is a high-risk entity?

A: Some recent studies point to high-risk factors developing within the Federal Housing Administration. In response to the FHA’s capital woes in the last several years, the Government Accountability Office (GAO) recently revealed it considers the agency to be a “high risk” program.

This is primarily due to its greater vulnerability to fraud, waste, abuse and mismanagement or the need for transformation.

In a 2013 update to its High-Risk Series, the GAO noted that FHA’s single-family loan insurance portfolio has grown from about $300 billion in 2007 to $1.1 trillion in 2012 as the agency continues to edge out the private sector.


Q: To what extent are foreclosures decreasing?

A: RealtyTrac, an information site for foreclosure properties and real estate data, recently released its U.S. Foreclosure Market Report for January 2013.

It shows foreclosure filings – default notices, scheduled auctions and bank repossessions – were reported on 150,864 U.S. properties in January, a decrease of 7 percent from the previous month and down 28 percent from January 2012. The report also shows one in every 869 U.S. housing units with a foreclosure filing during the month.

“The U.S. foreclosure landscape in January was profoundly altered by the effects of new legislation that took effect in California on the first of the year,” said Daren Blomquist, vice president at RealtyTrac.

“Dubbed the Homeowners Bill of Rights, this legislation extends many of the principles in the national mortgage settlement – including a prohibition on so-called dual tracking and requiring a single point of contact for borrowers facing foreclosure – to all mortgage servicers operating in California.”


Q: What’s the new “disparate impact”

housing regulation all about?

A: The administration recently issued regulations formally adopting a “disparate impact” approach to enforcing the Fair Housing Act, it was reported by Real Trends.

“This means that you can be found liable for illegally discriminating in a housing-related matter by following some policy that has a disproportionate effect, even though the policy is nondiscriminatory by its terms, in its application, and in its intent.

“So, for example, if a bank’s lending policy for home loans results in, say, a higher percentage of Asians being accepted than Latinos, then it can be held liable,” the report noted.


WOODARD has been writing about real estate news and trends since 1971 and is the resident storyteller at the Ronald Reagan Presidential Library in Simi Valley, Calif.

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