In October, Fred Watt, the director of the FHFA, announced that he plans to allow 3% down payment mortgages for the many financial institutions that Fannie and Freddie guarantee. He states that his intention is to include more minorities and people who had their savings wiped out by the Great Recession re-enter the housing market. This comes at a time when U.S. homeownership rate has fallen to 64.4% from 69.2% in 2004 as blacks, Hispanics, and first-time buyers struggle to qualify for loans. Is this just more huge mortgage mistakes about to happen all over again? Many think so.
Repeating the Same Mortgage Mistakes Again
Some financial industry executives and lawmakers, Republicans in particular, are calling Watt's move an irresponsible opening of credit floodgates that could contribute to the same mortgage mistakes made before, and another economic meltdown. The chairman of the House Financial Services Committee (Jeb Hensarling) stated that Watt's plan returns to the policies that originally caused the housing crash. He went on to say "an invitation by government for industry to return to slipshod and dangerous practices that caused the mortgage meltdown in the first place and wrecked our economy."
The CEO of home builder Toll Brothers, Douglas Yearley, a New York Stock Exchange traded company, called Watt's plan "a really dumb" idea. Paul Wallison, a former Treasury official under Ronald Reagan and currently at the American Enterprise Institute wrote an article critical of Watt's plan that was widely distributed, including being published by the Wall Street Journal. Part of Wallison's article stated, "Since the taxpayers are still standing behind Fannie and Freddie, it's clear who will have to pay the bill when these mortgage mistakes result in defaults in the future."
The director of Housing Finance Policy for the Urban Institute in Washington, Laurie Goodman, believes lowering the down payment requirement and keeping the other rules in place is a good first step in expanding the number of people qualifying for home loans.
One of the important rules that applies to low down payments is the requirement that borrowers obtain private mortgage insurance for any mortgage with less than a 20% down payment.
The goal is to ease lending to people with high credit scores but small savings accounts since credit scores are more important for staying current with a mortgage than the size of the down payment you made to get that mortgage.
What do you think? Is this heading in the direction of making the same mortgage mistakes again that thrust us into the recession in the first place? We'll keep you posted on the progress of this lowering of the down payment requirements.
Columbia SC home equity loans have nearly doubled this year, partly due to the continuous increase in the price of homes. The rise in home values has pulled more and more borrowers out from underwater.
While the share of borrowers that cashed-out some Columbia SC home equity has increased considerably over the past year, the refinance volume has also fallen sharply, resulting in a relatively small amount of equity cashed-out. Nationally, the volume of cash out refi's is roughly $8 billion, which is less than one-tenth of what we saw at the peak in mid-2006.
Columbia SC Home Equity Loans Save on Interest
The good news, to put it into numbers, those that lowered their payment by refinancing into a cheaper mortgage rate will save more than $1.5 billion in interest payments over the next 12 months of their new loan.
On average, that's an interest rate reduction of about 1.3 percentage points — a savings of about 24% On a $200,000 loan, that translates into mortgage interest savings on average of about $2,700 during the next 12 months.
Freddie Mac released these figures recently about Columbia SC home equity:
- Of borrowers who refinanced during the third quarter of 2014, 36% shortened their loan term, a 4% decline from the previous quarter. From 1990 through 2013, on average 28% of borrowers shortened their term.
- About 72% of those who refinanced their first-lien home mortgage maintained approximately the same loan amount or lowered their principal balance by paying in additional money at the closing table, unchanged from the previous quarter. Twenty-eight percent cashed-out some of their Columbia SC home equity, the highest share in five years; the peak on cash-out share was 89% during the second and third quarters of 2006.
We have more articles concerning refinancing and Columbia SC home equity loans in our Columbia SC Mortgage Info section of articles under Columbia SC Real Estate Categories to your right.
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The RealtyTrac U.S. Home Equity and Underwater Report for the third quarter of 2014 released recently shows there were fewer Columbia SC underwater properties. 8.1 million U.S. residential properties were still seriously underwater—where the combined loan amount secured by the property is at least 25 percent higher than the property's estimated market value—representing 15 percent of all properties with a mortgage and an estimated $1.4 trillion in negative equity.
The third quarter negative equity numbers showing Columbia SC underwater properties were down to the lowest level since RealtyTrac began reporting negative equity in the first quarter of 2012.
In the previous quarter nationwide, 9.1 million residential properties representing 17 percent of all properties with a mortgage were seriously underwater, and in the third quarter of 2013, 10.7 million residential properties representing 23 percent of all properties with a mortgage were seriously underwater.
The recent peak in negative equity was in the second quarter of 2012, when 12.8 million U.S. residential properties representing 29 percent of all properties with a mortgage were seriously underwater.
The decrease in Columbia SC underwater properties is promising but the estimated $1.4 trillion in negative equity nationwide means that the flood waters are not receding as quickly across the country as they were before, even though Columbia SC underwater properties are down slightly, corresponding to slowing home price appreciation. Daren Blomquist, vice president at RealtyTrac said, "slower price appreciation means the 8 million homeowners seriously underwater could still have a long road back to positive equity."
Get more tips and articles regarding the Columbia SC housing crisis by checking other articles we have for you in the Columbia SC Real Estate News to your right under our Columbia SC Real Estate Categories.
Columbia SC home equity is rising once again. Home gains over the past two years have restored a lot of money to most homeowner's available fund balance through the value in their home versus what they owe on it. As a result, more and more Columbia SC homeowners are taking out HELOC's (Home Equity Lines of Credit) again.
Through July, some 449 of 884 markets or 48.9 percent of America's housing markets, have reached or exceeded median peak price levels, according to Homes.com.
RealtyTrac recently reported that the 12 months ending in June 2014 a total of 797,865 Home Equity Lines of Credit (HELOCs) were originated nationwide, up 20.6 percent from a year ago and the highest level since the 12 months ending in June 2009.
What Exactly is a Home Equity Line?
Home Equity Lines of Credit are non-purchase loans that are secured by the equity (the appraised market value of a property minus any other loans secured by that property) and can be used by homeowners to fund home improvement projects or other purchases.
This recent rise in HELOC originations indicates an increasing number of homeowners are gaining confidence in the strength of the housing recovery and, more importantly, have regained much of their home equity lost during the housing crisis. Nearly 10 million homeowners nationwide, representing 19 percent of all homeowners with a mortgage, now have at least 50 percent equity in their homes, according to RealtyTrac data. Meanwhile the percentage of homeowners with severe negative equity has decreased from 29 percent in the second quarter of 2012 to 17 percent in the second quarter of this year.
With new loans slowing to a crawl, lenders have been looking for ways to come up with products to offer homeowners who have already refinanced or gotten their primary loan. A Columbia SC home equity loan (HELOC) enables homeowners to leverage additional equity they may have gained since refinancing while still preserving the rock-bottom interest rate on their first position loan.
Knowing your credit score is important. But with the sheer number of different credit score systems out there, are any of them really doing you any good, or are they just a big hindrance?