Mortgage Loans in 2009
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by: marciafreeman
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Word Count: 464
2008 was not a good one for most homeowners in this country. Many who work in the real estate market are hopeful that 2009 will bring an upswing in their battered sector of the economy. They feel that potential home buyers will be encouraged to take on mortgage loans with the new low interest rates and help reduce the current glut of home inventory. Most financial analysts see it differently, however. They believe the recession is only beginning and that home prices will continue to decline in the coming year. Buyers can currently find some good deals on homes and mortgage loans, which could spur sales in some areas. The excess of inventory exacerbated by increasing foreclosures, however, will likely keep the housing market down. Making matters worse are the mortgage loans at adjustable interest rates that will reset soon. That will likely increase the foreclosure rate and add to the inventory of unsold homes. Some consumers who would like to buy right now are finding that they are not eligible for mortgage loans like they once were. Banks now have much more restrictive lending practices, resulting in less mortgage loans being awarded to applicants than there were prior to the credit crisis.
Current homeowners wonder if it is time to refinance their current mortgage loans under the new low interest rates. Applications for mortgage loans hit the highest level in five years last week. Over 75 percent of those were to refinance current mortgages. But many of those applicants were not approved. According to a lender in Florida, a very small percentage of those who contacted him in the last couple weeks to refinance have actually been approved. Many markets across the country have homeowners who now have larger mortgage loans than the values of their properties, due to the drop in home values. The more restrictive lending practices are leaving these mortgage loan holders out in the cold. To be eligible for refinancing, a consumer must now have an excellent credit score, own at least 20 percent equity in the home and have a low percentage of debt. This is in stark contrast to the lending standards for mortgage loans of just a few years ago.
Many refer to the previous loose lending standards as the wild west. It was as if anyone was approved for mortgage loans, regardless of his credit history. The new lending practices may seem harsh, yet they are essential to repairing the credit industry. We will have to wait and see if the new year will offer a renewed confidence in the credit market, and ample encouragement for consumers to take on new mortgage loans to get the ailing real estate market going again.
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