Mortgage Rates Follow Treasury Yields to New Lows

Lingering worries about the European debt crisis continue to drive investors to U.S. government bonds, sending fixed mortgage rates down to another record low.

According to Freddie Mac’s Primary Mortgage Market Survey (PMMS), the 30-year fixed-rate mortgage (FRM) averaged 3.49 percent (0.7 point) for the week ending July 26, down from 3.53 percent the previous week. At the same time in 2011, the 30-year FRM averaged 4.55 percent.

The 15-year fixed averaged 2.80 percent (0.7 point), a drop from 2.83 the week before.

Adjustable rate mortgages (ARMs) actually saw a small boost, with the 5-year ARM averaging 2.74 percent (0.6 point), an increase from 2.69 percent the previous week. The 1-year ARM averaged 2.71 percent (0.5 point), up from 2.69 percent previously.

“Market concerns over the strength of the economic recovery brought long-term Treasury yields to new lows this week, allowing fixed mortgage rates to reach record levels,” said Frank Nothaft, Freddie Mac VP and chief economist. “The Conference Board Leading Economic Index showed the largest monthly decline in June since September 2011. Existing home sales fell to 4.36 million homes (annualized) in June and represented the slowest pace since October 2011. Similarly, new home sales fell in June to their lowest level since January of this year.”

Bankrate also posted record results for the fourth week in a row, with the 30-year fixed falling to 3.75 percent from 3.78 percent the previous week. The 15-year fixed fell to 3.00 percent from 3.04 percent.

According to Bankrate’s data, 5/1-year ARMs averaged 2.89 percent, the same as the week before.

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Short Sale Bill Addresses Slow Approval from 2nd Lien Holders

Rep. Jerry McNerney (D-Stockton) recently introduced a bill to speed up the short sale process by requiring subordinate mortgage lien holders to make a decision on a short sale within 45 days.

McNerney’s bill proposes that if the lender does not make a decision within the given time period, the short sale will be approved on the 46th day.

The bill, titled Fast Help For Homeowners (FHFH) Act, received strong support from the National Association of Realtors (NAR).

“Second mortgage lien holders frequently hold up and cancel the short sale transaction while trying to collect the largest possible payout in exchange for releasing the homeowner’s lien, even though the secondary lien holder often gets nothing if the home ends up going into foreclosure,” said NAR President Moe Veissi, in a statement. “While efforts have been made to improve primary lien holders’ response times, issues still abound with second and subsequent lien holders, and this legislation is a step in the right direction.”

The NAR also stated that its members continue to report delays in completing short sale transactions due to drawn out response times for whether or not an offer was accepted.

In a recent DS News interview with RealtyTrac VP Daren Blomquist, issues with second liens was also noted as problem for servicers when attempting to complete a short sale transaction.

The bill is cosponsored by Reps. Dennis Cardoza (D-California), Tom Rooney (R-Florida), George Miller (D-California), Jim Costa (D-California), Barbara Lee (D-California), and Richard Nugent (R-Florida).

AARP: Older Homeowners Hit Just as Hard by Foreclosure Crisis

A report released Thursday from AARP suggests that older Americans may not have escaped the foreclosure crisis unscathed, as some previously thought.

The report, titled Nightmare on Main Street: Older Americans and the Mortgage Market Crisis, showed that many of the country’s older citizens are taking their mortgage debt with them into retirement. As of December 2011, an estimated 3.5 million older (age 50 and up) mortgage holders were underwater. Approximately 600,000 older homeowners were experiencing foreclosure, and another 625,000 were 90 or more days delinquent.

Between 2007 and 2011, an estimated 1.5 million older homeowners lost their homes. The foreclosure rate on prime loans in 2011 for older borrowers was 2.3 percent, 23 times higher than rate in 2007 (0.1 percent).

Even more worrying was the fact that homeowners age 75 and older showed the fastest rise in mortgage debt and had a higher foreclosure rate than younger members of the 50-plus group (3.2 percent).

“More older Americans are carrying mortgage debt than in the past, and the amount of that debt is also increasing … leading to their worsening situation,” said Debra Whitman, AARP executive vice president for policy. “It’s one thing if your housing value goes down in your 50s. It’s another thing if you’re 75. For some people, it’s not like you can go back to work.”

There are many potential issues unique to older citizens that may be fueling their foreclosure crisis. One such cause is the combination of fixed incomes and higher living costs. Seniors also cited the death of a family member as reason for default.

Adding to the problem is the fact that older Americans are more likely to have a mortgage rate above 8 percent (13 percent of Americans age 50 or older, as opposed to 10 percent of younger homeowners).

The effects of lost home equity and foreclosure can be drastic for an aged population with few-if any-working years left with which to build a cushion for retirement. Home equity is usually a source of money for retirement expenses, so a sudden loss of that equity is a serious concern.

“You may have been working for years toward paying your mortgage, and the security you thought you’d have isn’t there,” said Whitman. “Not only that, the downturn in the market meant savings fell flat. Pensions are going away. It’s really this huge storm of things hitting people right now.”

Minorities saw the worst news, with foreclosure rates on prime fixed-rate mortgage loans hitting 3.9 percent for Hispanics and 3.5 percent for African-Americans in 2011. These figures were about double the rate for white borrowers (1.9 percent).

African-Americans had the highest subprime foreclosure rate among older borrowers in 2007, being overtaken in that statistic by older Hispanics starting in 2008. Hispanics had the largest percentage of delinquent subprime loans (25.9 percent) in 2011, followed closely by Asians (25 percent) and African-Americans (24.9 percent). Older white borrowers had a delinquent percentage of 24.4 percent.

The one piece of good news for older homeowners was that they had a slightly lower overall foreclosure rate (2.9 percent) in 2011 than the younger population (3.5 percent). However, the older group’s rate grew at a faster pace.

Examining the data, AARP’s Public Policy Institute called for more foreclosure mediation programs and expanded access to housing counseling programs. In addition, the group recommended development of rent-to-own programs to help people buy bank-owned or vacant homes, as well as an agreement with all loan servicers to follow practices that would prevent abuse and misconduct leading to foreclosure.

“Regulatory uncertainty in the housing finance system needs to be resolved promptly and must maintain an appropriate balance between consumer protection and access to capital. The foreclosure backlog requires concerted action at the federal, state, and local levels to implement the recent settlements and regulatory actions. Additional efforts need to evaluate and strengthen the current array of assistance programs to meet the needs of struggling homeowners, especially older homeowners,” said the report.