A Mess of Mortgage Paperwork

The amount of foreclosed homes is one thing still weighing down the economy. And many are stuck on the market because banks can’t find the ownership documents.

Why? Turns out Wall Street cut corners when creating mortgage-backed investments—and didn’t want old fashioned paperwork in the way. And now when banks want to evict people they are finding that the legal documents behind mortgages aren’t there.

Even worse, it seems that banks—in order to cover their tracks—hired companies to recreate missing mortgage assignments and provide the legally required signatures of bank vice presidents and notaries.

Now to avoid foreclosures, desperate homeowners are countersuing banks over the document disaster—leaving houses unsold indefinitely and stalling the recovery.

Many foreclosed banks are still stuck on the market because of lost ownership documents.

Mortgage Rates Move Higher As Treasury Yields Increase

Treasury yields have been climbing higher since fall 2010.  As a result, mortgage rates have been moving higher as well—and have topped 5% for the first time in months.   Mortgage rates move in tandem with Treasury yields; specifically 30-year mortgages track 10-year bonds. While rates are currently still near historic lows and very affordable, they are predicted to go up in 2011, perhaps to 6%.

Banks: Credit Restrictions Too High

Banks agree with Realtors that credit is too tight.  In a recent National Association of Realtors podcast, NAR President Ron Phipps discussed his recent meetings with Citibank.  Folks who should be able to get mortgages aren’t getting mortgages…the pendulum has swung too far. 

Things will loosen up again–but no one is sure how soon.

Home mortgage rates low, low, low

Mortgage interest rates tied historic lows this week at about 4 3/4 percent. This rate was for the fixed rate, 30 year, conventional (20% down-payment). Wow. This is down from about 6% a year ago, and 6 1/4 % two years ago. Why are the rates so low? The government is still snapping up the majority of mortgage paper, and is slated to do so through early next year.

Interest rates are tied for historic lows.

Mortgages at new lows

Mortgage interest rates have dipped to historical lows. Last week, three of my mortgage writing friends were quoting par rates (no buydown) below 5% in Eugene. This was for a fixed-rate, conventional, 30 year loan (my favorite).

Principal and interest payments for a $175,000 loan would be in the $900/month range. These days, lenders are wanting credit scores above 680, at least for the best rates.

My title company friends have said business is increasing, which you might expect with refinances. But, with more rigorous standards for loans as well as potential difficulty in getting properties to appraise-out, the tsunami of refinances hasn’t happened yet.

Lower mortgage rates are bound to help stabilize housing prices. When? My guess is by summer of 2009

Interest Rates Have Plummeted.

Interest Rates Have Plummeted.

Fed cuts rates to zero

The Fed cut federal funds target rate to near zero, down ~1%. The rate was 4.25% last December, and 5.25% Dec. 2006

The announced cut affected short term rates, and things tied to the discount rate, like prime-rate and charge card interest. It didn’t effect mortgage interest rates per se but other Fed activities have, namely, purchasing (and announcing the purchase) of treasury notes, bills, and bonds. Mortgage interest rates are at near historic lows.

The Fed’s announcement makes the rate in the United States the lowest in the Western World. Eventually, this will have an inflationary effect and rates will need to rise. Don’t look for this any time soon.

Fed Target Rate

Fed Target Rate