Refinancing Boom Ending
The recent run-up in mortgage rates has cooled the recent refinancing boom. Refinancing applications fell 12% last week. Mortgage applications fell 7.2%.
Freddie Mac reports 30-year mortgages averaged 5.59% this week, the highest since November 2008. Adjustable rate mortgages rose to 5.04%.
The Federal Reserve had been buying up Mortgage Backed Securities in order to drive down mortgage rates… a process unlikely to continue.
Mortgage Rates Jump
Thirty-year fixed mortgages jumped to 5.45 % last week, up from a low of 4.85 % in April and threatening to derail any economic recovery. The yield on10-year Treasury notes jumped to 3.9% last week as inflation leary investors demanded higher yields.
In March, the Fed pledged to use up to $1.25 trillion to buy up treasuries and mortgage backed securities through quantitative easing, causing investors to fear future hyper-inflation.
Mortgage Delinquencies Surge
The Federal Reserve reported that home mortgage delinquencies rose to 7.91%, the highest level since the Fed began tracking delinquencies.
Credit card delinquencies, at 6.5%, are also at record highs. Commercial real estate delinquencies are also rising rapidly at 6.4%. The overall delinquency rate of all consumer loans stands at 4.7%, also a record.
Making Home Affordable
Banks accepting new Troubled Asset Relief Program (TARP) funds must also adopt President Obama’s mortgage modification plan says Shaun Donovan, Housing and Urban Development Secretary. Currently, only Fannie Mae and Freddie Mac are participating in the Making Home Affordable program. Some private banks may participate.
The Obama administrations’ Making Home Affordable seeks to bring mortgage payments down to no more than 38 percent of gross income. This is primarily done through lower mortgage rates and extended repayment terms. There is no requirement for lenders to forgive principal.
