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Why the Housing Market Will Not Recover in the Near Future

Today, we here at Loan Mitigation Advocates are going to play the Devil’s Advocate.  This is the first part in a blog series reporting on opposing views of the direction of the housing market.  Our next post will discuss ‘Why the Housing Market Will Recover in the Near Future’.

Here are five reasons why the housing market is in for a long recovery period:

• Restricted Credit
• Home Sale Prices are Less than the Amount Owed by Sellers
• Number of Defaulting Prime Mortgages
• Number of Homes Currently on the Market
• Additional Rounds of Adjustable Rate Mortgages are Scheduled to Reset

Each one of these reasons is damaging to a housing market in itself.  However, when combined, we could be in for a much longer road to recovery than some think.

Restricted Credit
One component that has played a role in a slower housing recovery is the ever-changing lending world.  Lending standards have been tightening over the last few months and a tightening effect will make it more difficult for new borrowers to find loans.  The result will be less demand for homes and, in turn, inventory may increase.

Home Sale Prices Are Less that the Amount Owed by Sellers
More homeowners than ever are selling at a loss. Zillow.com reports that nearly 25% of all homes sold nationwide (in the last year) sold for less than sellers originally paid. Homeowners are walking away with less in their pocket when Read more

Mortgage Rate Update Ending 11/20/08

Bankrate.com conducts a weekly national survey on the interest rates for the five most common consumer banking products.  Here’s this week’s outcome:

• 30 Year Fixed Rate: 6.33 percent with points averaging: 0.37
• 30 Year Fixed Rate Jumbo: 7.62 percent
• 15 Year Fixed Rate: 6.01 percent
• 5/1 ARM (Adjustable): 6.18 percent
• 1 Year ARM (Adjustable): 5.78 percent 

Mortgage rates continued their downward trend. In particular, adjustable-rate mortgages showed the greatest drop. Depite the drop in interest rates, mortgage loan activity declined by 6.2 percent for the week ending Nov. 14, according to the Mortgage Bankers Association.

According to the National Association of Realtors, U.S. home median prices declined by a record 9 percent during the third quarter when compared to the same period in 2007.

The Most “Underwater” Town in America is…

Mountain House, California. Interestingly, Loan Mitigation Advocates happens to be located only 25 minutes from this town. This news is so big that even the NY Times carried a recent story on the unfortunate circumstances facing Mountain House residents. The article states that close to 90 percent of Mountain House homeowners owe more on their mortgages than their houses are worth. This is the highest percentage in the country.

Mountain House is clearly a microcosm of this widespread problem. Many families located in this area and people across the nation are adjusting their spending habits due to the depressing economy and the burden of paying a high mortgage.

“Most people pay very little attention to what their equity stake is if they can make the mortgage,” said First American CoreLogic’s chief economist, Mark Fleming. “They think it’s a bummer if the value has gone down, but they are rooted in their house. When my house is valued at 50 percent less than it was, does this begin to challenge the way I’m going to behave?”

If Mountain House and the impact on the surrounding area are any indication, the answer is Read more

Who is Next in the Quest to Avoid Foreclosures?

JPMorgan Chase & Co is the latest bank to expand its loan modification program. The program will look to assist as many as 400,000 customers in an effort to avoid foreclosures that could reach $70 billion in defaulted loans.

Charlie Scharf, JPMorgan’s chief executive of retail financial services, discussed that the modifications at JPMorgan will range from reducing rates to extending terms to completely replacing products. Modification options will be given to customers based on their current product and needs.

One of the biggest stumbling blocks JPMorgan has found in trying to modify loans is actually getting in touch with customers, Scharf added. It has been our experience at Loan Mitigation Advocates that large banks, like JP Morgan, are currently unequipped to handle the shear volume of inquiries from people in dire financial predicaments. This is exactly where Loan Mitigation Advocates can be of service. We have numerous contacts deep within the banking industry and a proven process to expedite the loan modification process.