Can the government help homeowners avert the mortgage crisis? The CMPS Institute, which trains and certifies mortgage advisors, thinks so. It has just sent Congress a detailed proposal calling for government-backed loans to homeowners of up to 20% of the homeowner’s current mortgage balance. The consumer’s first mortgage would stay in place, and the homeowner could not borrow any additional funds until the first loan has been paid off. A homeowner could refinance the first mortgage, though, if a willing lender could be found.
In their press release, Gibran Nicholas, Chairman of the CMPS Institute, says: “If homeowners have no incentive to keep up their mortgage payments, the problems in the housing markets could continue to spread and plunge our country into a deep recession.”
It’s an interesting proposal, and one worth considering. However, two things concern me: 1. The loan would be full recourse, which means it survives even if the borrower must go into foreclosure. On one hand, that prevents this from becoming a government bailout, on the other it could turn homes into “debtor’s prisons” from which consumers cannot escape (much how I view student loans). 2. Is 20% enough to put lenders and investors fears of making mortgage loans at ease? In Florida, where I live, many homeowners are upside down to a much greater degree than that.
I personally believe that the bankruptcy reform proposal that would allow mortgages to be modified by a bankruptcy judge, is the most important and helpful measure that could — and should — be passed right now. The CMPS proposal could potentially compliment it but let’s put first things first and get homeowners the immediate relief they need.
What do you think about mortgage rate for April 2008. Which way would they be trending ??
Thanks for your question! We can’t tell you where mortgage rates are headed this week or this month. It’s always risky to predict what will happen with mortgage rates, and even trickier in this volatile market where the normal rules don’t seem to apply.
What we can tell you is that over the past year, we’ve seen an unprecedented number of changes in lending standards. Loan programs that were around yesterday could be gone by tomorrow. If you are thinking of buying or refinancing, it’s our view that rates are good, and if you can find a good loan, take advantage of it while you can!
“Nate” asks:
Does it makes sense to refinance from a 6.28% rate to a 5.87% rate?
Nate:
There are a number of factors that go into figuring out whether it makes sense to refi, including how long you will likely stay in your home, and the amount of your closing costs.
To determine whether it makes sense to refinance, you’ll need to run a “break even” analysis to find out how long it will take you to recoup your closing costs. Then you will know how long you’ll have to keep your current loan before you start saving money. Your loan officer can do this for you, or you can try an online refinance break even calculator.
Of course, if your current interest rate is an adjustable rate, and you will stay in your house for a while, it may make sense to lock into a fixed rate anyway.
With the FreeRateSearch system, we use the same “rate sheets” that loan officers use to find out what loans are available to borrowers. We don’t have access to all the closing cost information, however. You’ll need to talk with your lender and ask him or her to provide you with a Good Faith Estimate, which includes closing costs, in order to run an accurate break even calculation.
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