The US housing market remains shaky as economic uncertainties continue. That is why millions of homeowners are still upside down. Prevailing market trends show that the problem may continue for many years.
Unusual Stabilization of Rates
You know already that the Federal Reserve dumped billions into mortgage which depressed the interest rates. However, all financial bail outs have stopped already. Experts expected that this will cause an unprecedented increase in mortgage interest rates. However, the contrary happened as the market saw a stabilization of interest rates. This is due to the low demand for new mortgages due to the continuing uncertainty of the economy.
Low Demand or Increasing Poverty
The average mortgage rate now is pegged at 5.9 percent and new mortgage is going for 4.75 percent.
The HARP Is a Big Letdown
The US government pushed for the Homeowners Affordable Refinance Plan or HARP. This program seeks to give 2 million homeowners the chance to refinance even if they are upside down. Unfortunately, HARP is not a mandated program and banks refused to participate including those who got TARP money. In the end, the program only helped less than 300,000 homeowners.
Tightening FHA Requirements
The FHA typically has more liberal loan requirements for borrowers. That is why its mortgage programs are so attractive to homeowners who want to refinance their home loans. Unfortunately, the FHA has tightened its requirements and followed the rules applied by commercial lenders. This deprived millions of people to buy homes.
Easing Requirements for Jumbo Loans
There is a paradox in the housing market. Banks and lenders are very quick to tighten the requirements for conventional mortgage loans. However, the requirements for jumbo loans are generally easing. In the past, you need to put up 25 percent down payment on a jumbo loan. Today, the down is only 20 percent. If you have lots of money, you can get a mansion for less.
Loopholes with SAFE
The SAFE mortgage license act seeks to insure that lenders understood the market and provides protection for consumers and homeowners against sharks and unscrupulous lenders. Unfortunately, the act does not apply to everybody. Lending companies and brokers are required to pass a test as mandated by SAFE. However, those who work for the banks are not required to pass the test.
For New Mortgage, FHA Is Still Attractive
FHA is still the most attractive option for those who need new mortgage. The down payment requirement is still affordable at 3.5 percent of the sale price. This is the lowest you can find right now.
People with lots of cash can take advantage of the low home values. Such privilege however can not be enjoyed by upside down homeowners. There are no indications that the current crisis in the housing market will be resolved sooner.